39–006 

109TH CONGRESS REPT. 109–171 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

FEDERAL HOUSING FINANCE REFORM ACT OF 2005 

JULY 14, 2005.—Ordered to be printed 

Mr. OXLEY, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL AND DISSENTING VIEWS 

[To accompany H.R. 1461] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 1461) to reform the regulation of certain housing-related 

Government-sponsored enterprises, and for other purposes, having 

considered the same, report favorably thereon with an amendment 

and recommend that the bill as amended do pass. 

CONTENTS 

Page 

Amendment .............................................................................................................. 2 

Purpose and Summary ............................................................................................ 81 

Background and Need for Legislation .................................................................... 85 

Hearings ................................................................................................................... 88 

Committee Consideration ........................................................................................ 89 

Committee Votes ...................................................................................................... 89 

Committee Oversight Findings ............................................................................... 94 

Performance Goals and Objectives ......................................................................... 94 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 94 

Committee Cost Estimate ....................................................................................... 94 

Congressional Budget Office Estimate ................................................................... 95 

Federal Mandates Statement ................................................................................. 103 

Advisory Committee Statement .............................................................................. 103 

Constitutional Authority Statement ...................................................................... 103 

Applicability to Legislative Branch ........................................................................ 103 

Exchange of Committee Correspondence ............................................................... 103 

Section-by-Section Analysis of the Legislation ...................................................... 104 

Changes in Existing Law Made by the Bill, as Reported ..................................... 121 

Additional and Dissenting Views ........................................................................... 299 

2 

AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Federal Housing Finance Reform 

Act of 2005’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: 

Sec. 1. Short title and table of contents. 

Sec. 2. Definitions. 

TITLE I—REFORM OF REGULATION OF ENTERPRISES AND FEDERAL HOME LOAN BANKS 

Subtitle A—Improvement of safety and soundness 

Sec. 101. Establishment of the Federal Housing Finance Agency. 

Sec. 102. Duties and authorities of Director. 

Sec. 103. Housing Finance Oversight Board. 

Sec. 104. Authority to require reports by regulated entities. 

Sec. 105. Disclosure of charitable contributions by enterprises. 

Sec. 106. Assessments. 

Sec. 107. Examiners and accountants. 

Sec. 108. Prohibition and withholding of executive compensation. 

Sec. 109. Reviews of regulated entities. 

Sec. 110. Regulations and orders. 

Sec. 111. Risk-based capital requirements. 

Sec. 112. Minimum and critical capital levels. 

Sec. 113. Review of and authority over enterprise assets and liabilities. 

Sec. 114. Corporate governance of enterprises. 

Sec. 115. Required registration under Securities Exchange Act of 1934. 

Sec. 116. Financial Institutions Examination Council. 

Sec. 117. Guarantee fee study. 

Sec. 118. Conforming amendments. 

Subtitle B—Improvement of mission supervision 

Sec. 121. Transfer of program and activities approval and housing goal oversight. 

Sec. 122. Review by Director of new programs and activities of enterprises. 

Sec. 123. Conforming loan limits. 

Sec. 124. Annual housing report regarding regulated entities. 

Sec. 125. Revision of housing goals. 

Sec. 126. Duty to serve underserved markets. 

Sec. 127. Monitoring and enforcing compliance with housing goals. 

Sec. 128. Affordable housing fund. 

Sec. 129. Consistency with mission. 

Sec. 130. Enforcement. 

Sec. 131. Conforming amendments. 

Subtitle C—Prompt corrective action 

Sec. 141. Capital classifications. 

Sec. 142. Supervisory actions applicable to undercapitalized regulated entities. 

Sec. 143. Supervisory actions applicable to significantly undercapitalized regulated entities. 

Sec. 144. Authority over critically undercapitalized regulated entities. 

Sec. 145. Conforming amendments. 

Subtitle D—Enforcement actions 

Sec. 161. Cease-and-desist proceedings. 

Sec. 162. Temporary cease-and-desist proceedings. 

Sec. 163. Prejudgment attachment. 

Sec. 164. Enforcement and jurisdiction. 

Sec. 165. Civil money penalties. 

Sec. 166. Removal and prohibition authority. 

Sec. 167. Criminal penalty. 

Sec. 168. Subpoena authority. 

Sec. 169. Conforming amendments. 

Subtitle E—General provisions 

Sec. 181. Presidentially appointed directors of enterprises. 

Sec. 182. Report on portfolio operations, safety and soundness, and mission of enterprises. 

Sec. 183. Conforming and technical amendments. 

Sec. 184. Study of alternative secondary market systems. 

Sec. 185. Effective date. 

TITLE II—FEDERAL HOME LOAN BANKS 

Sec. 201. Definitions. 

Sec. 202. Directors. 

Sec. 203. Federal Housing Finance Agency oversight of Federal Home Loan Banks. 

Sec. 204. Joint activities of banks. 

Sec. 205. Sharing of information between Federal Home Loan Banks. 

Sec. 206. Reorganization of banks and voluntary merger. 

Sec. 207. Securities and Exchange Commission disclosure. 

Sec. 208. Community financial institution members. 

Sec. 209. Technical and conforming amendments. 

Sec. 210. Study of affordable housing program use for long-term care facilities. 

Sec. 211. Effective date. 

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TITLE III—TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY OF OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, FEDERAL HOUSING FINANCE BOARD, AND DEPARTMENT OF 

HOUSING AND URBAN DEVELOPMENT 

Subtitle A—Office of Federal Housing Enterprise Oversight 

Sec. 301. Abolishment of OFHEO. 

Sec. 302. Continuation and coordination of certain regulations. 

Sec. 303. Transfer and rights of employees of OFHEO. 

Sec. 304. Transfer of property and facilities. 

Subtitle B—Federal Housing Finance Board 

Sec. 321. Abolishment of the Federal Housing Finance Board. 

Sec. 322. Continuation and coordination of certain regulations. 

Sec. 323. Transfer and rights of employees of the Federal Housing Finance Board. 

Sec. 324. Transfer of property and facilities. 

Subtitle C—Department of Housing and Urban Development 

Sec. 341. Termination of enterprise-related functions. 

Sec. 342. Continuation and coordination of certain regulations. 

Sec. 343. Transfer and rights of employees. 

Sec. 344. Transfer of appropriations, property, and facilities. 

SEC. 2. DEFINITIONS. 

Section 1303 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4502) is amended— 

(1) in paragraph (7), by striking ‘‘an enterprise’’ and inserting ‘‘a regulated entity’’; 

(2) by striking ‘‘the enterprise’’ each place such term appears (except in paragraphs (4) and (18)) and inserting ‘‘the regulated entity’’; 

(3) in paragraph (5), by striking ‘‘Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development’’ and inserting 

‘‘Federal Housing Finance Agency’’; 

(4) in each of paragraphs (8), (9), (10), and (19), by striking ‘‘Secretary’’ each 

place that term appears and inserting ‘‘Director’’; 

(5) in paragraph (13), by inserting ‘‘, with respect to an enterprise,’’ after 

‘‘means’’; 

(6) by redesignating paragraphs (16) through (19) as paragraphs (20) through 

(23), respectively; 

(7) by striking paragraphs (14) and (15) and inserting the following new paragraphs: 

‘‘(18) REGULATED ENTITY.—The term ‘regulated entity’ means— 

‘‘(A) the Federal National Mortgage Association and any affiliate thereof; 

‘‘(B) the Federal Home Loan Mortgage Corporation and any affiliate 

thereof; and 

‘‘(C) each Federal home loan bank. 

‘‘(19) REGULATED ENTITY-AFFILIATED PARTY.—The term ‘regulated entity-affiliated party’ means— 

‘‘(A) any director, officer, employee, or controlling stockholder of, or agent 

for, a regulated entity; 

‘‘(B) any shareholder, affiliate, consultant, or joint venture partner of a 

regulated entity, and any other person, as determined by the Director (by 

regulation or on a case-by-case basis) that participates in the conduct of the 

affairs of a regulated entity; and 

‘‘(C) any independent contractor for a regulated entity (including any attorney, appraiser, or accountant); and 

‘‘(D) any not-for-profit corporation that receives its principal funding, on 

an ongoing basis, from any regulated entity.’’; 

(8) by redesignating paragraphs (8) through (13) as paragraphs (12) through 

(17), respectively; and 

(9) by inserting after paragraph (7) the following new paragraph: 

‘‘(11) FEDERAL HOME LOAN BANK.—The term ‘Federal home loan bank’ means 

a bank established under the authority of the Federal Home Loan Bank Act.’’; 

(10) by redesignating paragraphs (2) through (7) as paragraphs (5) through 

(10), respectively; and 

(11) by inserting after paragraph (1) the following new paragraphs: 

‘‘(2) AGENCY.—The term ‘Agency’ means the Federal Housing Finance Agency. 

‘‘(3) AUTHORIZING STATUTES.—The term ‘authorizing statutes’ means— 

‘‘(A) the Federal National Mortgage Association Charter Act; 

‘‘(B) the Federal Home Loan Mortgage Corporation Act; and 

‘‘(C) the Federal Home Loan Bank Act. 

‘‘(4) BOARD.—The term ‘Board’ means the Housing Finance Oversight Board 

established under section 1313B.’’. 

4 

TITLE I—REFORM OF REGULATION OF ENTERPRISES AND FEDERAL HOME LOAN BANKS 

Subtitle A—Improvement of Safety and Soundness 

SEC. 101. ESTABLISHMENT OF THE FEDERAL HOUSING FINANCE AGENCY. 

(a) IN GENERAL.—The Housing and Community Development Act of 1992 (12 

U.S.C. 4501 et seq.) is amended by striking sections 1311 and 1312 and inserting 

the following: 

‘‘SEC. 1311. ESTABLISHMENT OF THE FEDERAL HOUSING FINANCE AGENCY. 

‘‘(a) ESTABLISHMENT.—There is established the Federal Housing Finance Agency, 

which shall be an independent agency of the Federal Government. 

‘‘(b) GENERAL SUPERVISORY AND REGULATORY AUTHORITY.— 

‘‘(1) IN GENERAL.—Each regulated entity shall, to the extent provided in this 

title, be subject to the supervision and regulation of the Agency. 

‘‘(2) AUTHORITY OVER FANNIE MAE, FREDDIE MAC, AND FEDERAL HOME LOAN

BANKS.—The Director of the Federal Housing Finance Agency shall have general supervisory and regulatory authority over each regulated entity and shall 

exercise such general regulatory authority, including such duties and authorities set forth under section 1313 of this Act, to ensure that the purposes of this 

Act, the authorizing statutes, and any other applicable law are carried out. 

‘‘(c) SAVINGS PROVISION.—The authority of the Director to take actions under subtitles B and C shall not in any way limit the general supervisory and regulatory 

authority granted to the Director. 

‘‘SEC. 1312. DIRECTOR. 

‘‘(a) ESTABLISHMENT OF POSITION.—There is established the position of the Director of the Federal Housing Finance Agency, who shall be the head of the Agency. 

‘‘(b) APPOINTMENT; TERM.— 

‘‘(1) APPOINTMENT.—The Director shall be appointed by the President, by and 

with the advice and consent of the Senate, from among individuals who are citizens of the United States, have a demonstrated understanding of financial management or oversight, and have a demonstrated understanding of capital markets, including the mortgage securities markets and housing finance. 

‘‘(2) TERM AND REMOVAL.—The Director shall be appointed for a term of 5 

years and may be removed by the President only for cause. 

‘‘(3) VACANCY.—A vacancy in the position of Director that occurs before the 

expiration of the term for which a Director was appointed shall be filled in the 

manner established under paragraph (1), and the Director appointed to fill such 

vacancy shall be appointed only for the remainder of such term. 

‘‘(4) SERVICE AFTER END OF TERM.—An individual may serve as the Director 

after the expiration of the term for which appointed until a successor has been 

appointed. 

‘‘(5) TRANSITIONAL PROVISION.—Notwithstanding paragraphs (1) and (2), the 

Director of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development shall serve as the Director until a 

successor has been appointed under paragraph (1). 

‘‘(c) DEPUTY DIRECTOR OF THE DIVISION OF ENTERPRISE REGULATION.— 

‘‘(1) IN GENERAL.—The Agency shall have a Deputy Director of the Division 

of Enterprise Regulation, who shall be appointed by the Director from among 

individuals who are citizens of the United States, have a demonstrated understanding of financial management or oversight and of mortgage securities markets and housing finance. 

‘‘(2) FUNCTIONS.—The Deputy Director of the Division of Enterprise Regulation shall have such functions, powers, and duties with respect to the oversight 

of the enterprises as the Director shall prescribe. 

‘‘(d) DEPUTY DIRECTOR OF THE DIVISION OF FEDERAL HOME LOAN BANK REGULATION.— 

‘‘(1) IN GENERAL.—The Agency shall have a Deputy Director of the Division 

of Federal Home Loan Bank Regulation, who shall be appointed by the Director 

from among individuals who are citizens of the United States, have a demonstrated understanding of financial management or oversight and of the Federal Home Loan Bank System and housing finance. 

‘‘(2) FUNCTIONS.—The Deputy Director of the Division of Federal Home Loan 

Bank Regulation shall have such functions, powers, and duties with respect to 

the oversight of the Federal home loan banks as the Director shall prescribe. 

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‘‘(e) DEPUTY DIRECTOR FOR HOUSING.— ‘‘(1) IN GENERAL.—The Agency shall have a Deputy Director for Housing, who 

shall be appointed by the Director from among individuals who are citizens of 

the United States, and have a demonstrated understanding of the housing markets and housing finance. 

‘‘(2) FUNCTIONS.—The Deputy Director for Housing shall have such functions, 

powers, and duties with respect to the oversight of the housing mission and 

goals of the enterprises, and with respect to oversight of the housing mission 

of the Federal home loan banks, as the Director shall prescribe. 

‘‘(f) LIMITATIONS.—The Director and each of the Deputy Directors may not— 

‘‘(1) have any direct or indirect financial interest in any regulated entity or 

regulated entity-affiliated party; 

‘‘(2) hold any office, position, or employment in any regulated entity or regulated entity-affiliated party; or 

‘‘(3) have served as an executive officer or director of any regulated entity, or 

regulated entity-affiliated party, at any time during the 3-year period ending on 

the date of appointment of such individual as Director or Deputy Director.’’. 

(b) APPOINTMENT OF DIRECTOR.—Notwithstanding any other provision of law or 

of this Act, the President may, any time after the date of the enactment of this Act, 

appoint an individual to serve as the Director of the Federal Housing Finance Agency, as such office is established by the amendment made by subsection (a). This subsection shall take effect on the date of the enactment of this Act. 

SEC. 102. DUTIES AND AUTHORITIES OF DIRECTOR. 

(a) IN GENERAL.—The Housing and Community Development Act of 1992 (12 

U.S.C. 4513) is amended by striking section 1313 and inserting the following new 

sections: 

‘‘SEC. 1313. DUTIES AND AUTHORITIES OF DIRECTOR. 

‘‘(a) DUTIES.— ‘‘(1) PRINCIPAL DUTIES.—The principal duties of the Director shall be— 

‘‘(A) to oversee the operations of each regulated entity; and 

‘‘(B) to ensure that— 

‘‘(i) each regulated entity operates in a safe and sound manner, including maintenance of adequate capital and internal controls; 

‘‘(ii) the operations and activities of each regulated entity foster liquid, efficient, competitive, and resilient national housing finance markets that minimize the cost of housing finance (including activities relating to mortgages on housing for low- and moderate- income families 

involving a reasonable economic return that may be less than the return earned on other activities); 

‘‘(iii) each regulated entity complies with this title and the rules, regulations, guidelines, and orders issued under this title and the authorizing statutes; and 

‘‘(iv) each regulated entity carries out its statutory mission only 

through activities that are consistent with this title and the authorizing 

statutes. 

‘‘(2) SCOPE OF AUTHORITY.—The authority of the Director shall include the authority— 

‘‘(A) to review and, if warranted based on the principal duties described 

in paragraph (1), reject any acquisition or transfer of a controlling interest 

in an enterprise; and 

‘‘(B) to exercise such incidental powers as may be necessary or appropriate to fulfill the duties and responsibilities of the Director in the supervision and regulation of each regulated entity. 

‘‘(b) DELEGATION OF AUTHORITY.—The Director may delegate to officers or employees of the Agency, including each of the Deputy Directors, any of the functions, powers, or duties of the Director, as the Director considers appropriate. 

‘‘(c) LITIGATION AUTHORITY.— 

‘‘(1) IN GENERAL.—In enforcing any provision of this title, any regulation or 

order prescribed under this title, or any other provision of law, rule, regulation, 

or order, or in any other action, suit, or proceeding to which the Director is a 

party or in which the Director is interested, and in the administration of 

conservatorships and receiverships, the Director may act in the Director’s own 

name and through the Director’s own attorneys. 

‘‘(2) SUBJECT TO SUIT.—Except as otherwise provided by law, the Director 

shall be subject to suit (other than suits on claims for money damages) by a 

regulated entity or director or officer thereof with respect to any matter under 

this title or any other applicable provision of law, rule, order, or regulation 

under this title, in the United States district court for the judicial district in 

6 

which the regulated entity has its principal place of business, or in the United 

States District Court for the District of Columbia, and the Director may be 

served with process in the manner prescribed by the Federal Rules of Civil Procedure. 

‘‘SEC. 1313A. PRUDENTIAL MANAGEMENT AND OPERATIONS STANDARDS. 

‘‘(a) STANDARDS.—The Director shall establish standards, by regulation, guideline, 

or order, for each regulated entity relating to— 

‘‘(1) adequacy of internal controls and information systems taking into account the nature and scale of business operations; 

‘‘(2) independence and adequacy of internal audit systems; 

‘‘(3) management of credit and counterparty risk, including systems to identify concentrations of credit risk and prudential limits to restrict exposure of the 

regulated entity to a single counterparty or groups of related counterparties; 

‘‘(4) management of interest rate risk exposure; 

‘‘(5) management of market risk, including standards that provide for systems 

that accurately measure, monitor, and control market risks and, as warranted, 

that establish limitations on market risk; 

‘‘(6) adequacy and maintenance of liquidity and reserves; 

‘‘(7) management of any asset and investment portfolio; 

‘‘(8) investments and acquisitions by a regulated entity, to ensure that they 

are consistent with the purposes of this Act and the authorizing statutes; 

‘‘(9) maintenance of adequate records, in accordance with consistent accounting policies and practices that enable the Director to evaluate the financial condition of the regulated entity; 

‘‘(10) issuance of subordinated debt by that particular regulated entity, as the 

Director considers necessary; 

‘‘(11) overall risk management processes, including adequacy of oversight by 

senior management and the board of directors and of processes and policies to 

identify, measure, monitor, and control material risks, including reputational 

risks, and for adequate, well-tested business resumption plans for all major systems with remote site facilities to protect against disruptive events; and 

‘‘(12) such other operational and management standards as the Director determines to be appropriate. 

‘‘(b) FAILURE TO MEET STANDARDS.— 

‘‘(1) PLAN REQUIREMENT.— 

‘‘(A) IN GENERAL.—If the Director determines that a regulated entity fails 

to meet any standard established under subsection (a)— 

‘‘(i) if such standard is established by regulation, the Director shall 

require the regulated entity to submit an acceptable plan to the Director within the time allowed under subparagraph (C); and 

‘‘(ii) if such standard is established by guideline, the Director may require the regulated entity to submit a plan described in clause (i). 

‘‘(B) CONTENTS.—Any plan required under subparagraph (A) shall specify 

the actions that the regulated entity will take to correct the deficiency. If 

the regulated entity is undercapitalized, the plan may be a part of the capital restoration plan for the regulated entity under section 1369C. 

‘‘(C) DEADLINES FOR SUBMISSION AND REVIEW.—The Director shall by regulation establish deadlines that— 

‘‘(i) provide the regulated entities with reasonable time to submit 

plans required under subparagraph (A), and generally require a regulated entity to submit a plan not later than 30 days after the Director 

determines that the entity fails to meet any standard established under 

subsection (a); and 

‘‘(ii) require the Director to act on plans expeditiously, and generally 

not later than 30 days after the plan is submitted. 

‘‘(2) REQUIRED ORDER UPON FAILURE TO SUBMIT OR IMPLEMENT PLAN.—If a 

regulated entity fails to submit an acceptable plan within the time allowed 

under paragraph (1)(C), or fails in any material respect to implement a plan accepted by the Director, the following shall apply: 

‘‘(A) REQUIRED CORRECTION OF DEFICIENCY.—The Director shall, by order, 

require the regulated entity to correct the deficiency. 

‘‘(B) OTHER AUTHORITY.—The Director may, by order, take one or more 

of the following actions until the deficiency is corrected: 

‘‘(i) Prohibit the regulated entity from permitting its average total assets (as such term is defined in section 1316(b)) during any calendar 

quarter to exceed its average total assets during the preceding calendar 

quarter, or restrict the rate at which the average total assets of the entity may increase from one calendar quarter to another. 

7 

‘‘(ii) Require the regulated entity— 

‘‘(I) in the case of an enterprise, to increase its ratio of core capital to assets. 

‘‘(II) in the case of a Federal home loan bank, to increase its ratio 

of total capital (as such term is defined in section 6(a)(5) of the 

Federal Home Loan Bank Act (12 U.S.C. 1426(a)(5)) to assets. 

‘‘(iii) Require the regulated entity to take any other action that the 

Director determines will better carry out the purposes of this section 

than any of the actions described in this subparagraph 

‘‘(3) MANDATORY RESTRICTIONS.—In complying with paragraph (2), the Director shall take one or more of the actions described in clauses (i) through (iii) 

of paragraph (2)(B) if— 

‘‘(A) the Director determines that the regulated entity fails to meet any 

standard prescribed under subsection (a); 

‘‘(B) the regulated entity has not corrected the deficiency; and 

‘‘(C) during the 18-month period before the date on which the regulated 

entity first failed to meet the standard, the entity underwent extraordinary 

growth, as defined by the Director. 

‘‘(c) OTHER ENFORCEMENT AUTHORITY NOT AFFECTED.—The authority of the Director under this section is in addition to any other authority of the Director.’’. 

(b) INDEPENDENCE IN CONGRESSIONAL TESTIMONY AND RECOMMENDATIONS.—Section 111 of Public Law 93–495 (12 U.S.C. 250) is amended by striking ‘‘the Federal 

Housing Finance Board’’ and inserting ‘‘the Director of the Federal Housing Finance 

Agency’’. 

SEC. 103. HOUSING FINANCE OVERSIGHT BOARD. 

(a) IN GENERAL.—Title XIII of the Housing and Community Development Act of 

1992 (12 U.S.C. 4501 et seq.) is amended by inserting after section 1313A, as added 

by section 102 of this Act, the following new section: 

‘‘SEC. 1313B. HOUSING FINANCE OVERSIGHT BOARD. 

‘‘(a) IN GENERAL.—There is established the Housing Finance Oversight Board. 

‘‘(b) DUTIES.— ‘‘(1) IN GENERAL.—The Board shall advise the Director with respect to overall 

strategies and policies in carrying out the duties of the Director under this title, 

at the request of the Director and at the initiative of the Board, and shall carry 

out such functions as otherwise provided by law. 

‘‘(2) LIMITATION.—The Director may not delegate to the Board any of the functions, powers, or duties of the Director. 

‘‘(c) COMPOSITION.—The Board shall be comprised of 5 members, as follows: 

‘‘(1) One member shall be the Director, who shall serve as the Chairperson 

of the Board. 

‘‘(2) One member shall be the Secretary of the Treasury or the designee of 

the Secretary. 

‘‘(3) One member shall be the Secretary of Housing and Urban Development 

or the designee of the Secretary. 

‘‘(4) Two members shall be appointed by the President, by and with the advice 

and consent of the Senate, who shall include— 

‘‘(A) one individual who has extensive experience and expertise in the 

capital markets (including debt markets), the secondary mortgage market, 

and mortgage-backed securities; and 

‘‘(B) one individual who has extensive experience and expertise in mortgage finance (including single family and multifamily housing mortgage finance), development of affordable housing, and economic development and 

revitalization. 

‘‘(d) TERMS AND VACANCIES.— 

‘‘(1) TERMS.—Each member of the Board pursuant to paragraph (4) shall be 

appointed for a term of 3 years, and may be removed by the President only for 

cause. 

‘‘(2) VACANCIES.—A member of the Board appointed to fill a vacancy occurring 

before the expiration of the term for which the member’s predecessor was appointed shall be appointed only for the remainder of that term. A member of 

the Board may serve after the expiration of the member’s term until a successor 

has been appointed. 

‘‘(e) PROHIBITION OF ADDITIONAL COMPENSATION.—Notwithstanding any other provision of law, members of Board pursuant to paragraphs (1), (2), and (3) shall not 

receive additional compensation by reason of service on the Board. 

‘‘(f) LIMITATIONS.—Each member of the Board may not— 

‘‘(1) have any direct or indirect financial interest in any regulated entity or 

regulated entity-affiliated party; or 

8 

‘‘(2) hold any office, position, or employment in any regulated entity or regulated entity-affiliated party. 

‘‘(g) FULL-TIME MEMBERS AND STAFF.— 

‘‘(1) FULL-TIME MEMBERS.—The members of the Board pursuant to subsection 

(c)(4) shall serve on a full-time basis. 

‘‘(2) STAFF.—The staff of the Board shall be appointed subject to the provisions of title 5, United States Code, governing appointments in the competitive 

service, and shall be paid in accordance with the provisions of chapter 51 and 

subchapter III of chapter 53 of that title relating to classification and General 

Schedule pay rates, except that each member of the Board pursuant to paragraph (4) may appoint one staff member without regard to the such provisions 

governing appointments in the competitive service and such staff members may 

be paid by the Board without regard to the such provisions relating to classification and General Schedule pay rates. 

‘‘(h) MEETINGS.— 

‘‘(1) IN GENERAL.—The Board shall meet upon notice by the Director, but in 

no event shall the Board meet less frequently than once every 3 months. 

‘‘(2) SPECIAL MEETINGS.—Any member of the Board may, upon giving written 

notice to the Director, require a special meeting of the Board, which shall be 

convened by the Director within 30 days after such notice. 

‘‘(i) TESTIMONY.—On an annual basis, the Board shall testify before Congress regarding— 

‘‘(1) the safety and soundness of the regulated entities; 

‘‘(2) any material deficiencies in the conduct of the operations of the regulated 

entities; 

‘‘(3) the overall operational status of the regulated entities; 

‘‘(4) an evaluation of the performance of the regulated entities in carrying out 

their respective missions; 

‘‘(5) operations, resources, and performance of the Agency and the Board; and 

‘‘(6) such other matters relating to the Agency, the Board, and the regulated 

entities, and their fulfillment of their missions, as the Board determines appropriate. 

‘‘(j) COSTS.—Costs of the Board, including staff, shall be paid by the Agency as 

a cost and expense of the Agency. 

‘‘(k) EXEMPTION.—Notwithstanding any other provision of law, the provisions of 

section 552b of title 5, United States Code, shall not apply to the Board.’’. 

(b) ANNUAL REPORT OF THE DIRECTOR.—Section 1319B(a) of the Housing and 

Community Development Act of 1992 (12 U.S.C. 4521 (a)) is amended— 

(1) in paragraph (3), by striking ‘‘and’’ at the end; and 

(2) by striking paragraph (4) and inserting the following new paragraphs: 

‘‘(4) an assessment of the Board with respect to— 

‘‘(A) the safety and soundness of the regulated entities; 

‘‘(B) any material deficiencies in the conduct of the operations of the regulated entities; 

‘‘(C) the overall operational status of the regulated entities; 

‘‘(D) an evaluation of the performance of the regulated entities in carrying 

out their missions, including compliance of the enterprises with the housing 

goals under subpart B of part 2 of this subtitle and compliance of the Federal home loan banks with the community investment and affordable housing programs under subsections (i) and (j) of section 10 of the Federal Home 

Loan Bank Act; 

‘‘(E) an evaluation of the performance of the Agency in fulfilling its duties 

and responsibilities under law; and 

‘‘(F) such other matters relating to the Board and the fulfillment of its 

duties as the Board considers appropriate; 

‘‘(5) operations, resources, and performance of the Agency; and 

‘‘(6) such other matters relating to the Agency and its fulfillment of its mission.’’. 

SEC. 104. AUTHORITY TO REQUIRE REPORTS BY REGULATED ENTITIES. 

Section 1314 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4514) is amended— 

(1) in the section heading, by striking ‘‘ENTERPRISES’’ and inserting ‘‘REGULATED ENTITIES’’; 

(2) in subsection (a)— 

(A) in the subsection heading, by striking ‘‘Special Reports and Reports 

of Financial Condition’’ and inserting ‘‘Regular and Special Reports’’; 

(B) in paragraph (1)— 

9 

(i) in the paragraph heading, by striking ‘‘FINANCIAL CONDITION’’ and 

inserting ‘‘REGULAR REPORTS’’; and 

(ii) by striking ‘‘reports of financial condition and operations’’ and inserting ‘‘regular reports on the condition (including financial condition), 

management, activities, or operations of the regulated entity, as the Director considers appropriate’’; and 

(C) in paragraph (2), after ‘‘submit special reports’’ insert ‘‘on any of the 

topics specified in paragraph (1) or such other topics’’; and 

(3) by adding at the end the following new subsection: 

‘‘(c) REPORTS OF FRAUDULENT FINANCIAL TRANSACTIONS.— 

‘‘(1) REQUIREMENT TO REPORT.—The Director shall require a regulated entity 

to submit to the Director a timely report upon discovery by the regulated entity 

that it has purchased or sold a fraudulent loan or financial instrument or suspects a possible fraud relating to a purchase or sale of any loan or financial instrument. The Director shall require the regulated entities to establish and 

maintain procedures designed to discover any such transactions. 

‘‘(2) PROTECTION FROM LIABILITY FOR REPORTS.— 

‘‘(A) IN GENERAL.—If a regulated entity makes a report pursuant to paragraph (1), or a regulated entity-affiliated party makes, or requires another 

to make, such a report, and such report is made in a good faith effort to 

comply with the requirements of paragraph (1), such regulated entity or 

regulated entity-afffiliated party shall not be liable to any person under any 

law or regulation of the United States, any constitution, law, or regulation 

of any State or political subdivision of any State, or under any contract or 

other legally enforceable agreement (including any arbitration agreement), 

for such report or for any failure to provide notice of such report to the person who is the subject of such report or any other person identified in the 

report. 

‘‘(B) RULE OF CONSTRUCTION.—Subparagraph (A) shall not be construed 

as creating— 

‘‘(i) any inference that the term ‘person’, as used in such subparagraph, may be construed more broadly than its ordinary usage so as 

to include any government or agency of government; or 

‘‘(ii) any immunity against, or otherwise affecting, any civil or criminal action brought by any government or agency of government to enforce any constitution, law, or regulation of such government or agency.’’. 

SEC. 105. DISCLOSURE OF CHARITABLE CONTRIBUTIONS BY ENTERPRISES. 

Section 1314 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4514), as amended by the preceding provisions of this Act, is further amended by 

adding at the end the following new subsection: 

‘‘(d) DISCLOSURE OF CHARITABLE CONTRIBUTIONS BY ENTERPRISES.— 

‘‘(1) REQUIRED DISCLOSURE.—The Director shall, by regulation, require each 

enterprise to submit a report annually, in a format designated by the Director, 

containing the following information: 

‘‘(A) TOTAL VALUE.—The total value of contributions made by the enterprise to nonprofit organizations during its previous fiscal year. 

‘‘(B) SUBSTANTIAL CONTRIBUTIONS.—If the value of contributions made by 

the enterprise to any nonprofit organization during its previous fiscal year 

exceeds the designated amount, the name of that organization and the 

value of contributions. 

‘‘(C) SUBSTANTIAL CONTRIBUTIONS TO INSIDER-AFFILIATED CHARITIES.— 

Identification of each contribution whose value exceeds the designated 

amount that were made by the enterprise during the enterprise’s previous 

fiscal year to any nonprofit organization of which a director, officer, or controlling person of the enterprise, or a spouse thereof, was a director or 

trustee, the name of such nonprofit organization, and the value of the contribution. 

‘‘(2) DEFINITIONS.—For purposes of this subsection— 

‘‘(A) the term ‘designated amount’ means such amount as may be designated by the Director by regulation, consistent with the public interest 

and the protection of investors for purposes of this subsection; and 

‘‘(B) the Director may, by such regulations as the Director deems necessary or appropriate in the public interest, define the terms officer and 

controlling person. 

‘‘(3) PUBLIC AVAILABILITY.—The Director shall make the information submitted pursuant to this subsection publicly available.’’. 

10 

SEC. 106. ASSESSMENTS. 

Section 1316 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4516) is amended— 

(1) by striking subsection (a) and inserting the following new subsection: 

‘‘(a) ANNUAL ASSESSMENTS.—The Director shall establish and collect from the regulated entities annual assessments in an amount not exceeding the amount sufficient to provide for reasonable costs and expenses of the Agency, including— 

‘‘(1) the expenses of any examinations under section 1317 of this Act and 

under section 20 of the Federal Home Loan Bank Act; 

‘‘(2) the expenses of obtaining any reviews and credit assessments under section 1319; and 

‘‘(3) such amounts in excess of actual expenses for any given year as deemed 

necessary by the Director to maintain a working capital fund in accordance with 

subsection (e).’’; 

(2) in subsection (b)— 

(A) in the subsection heading, by striking ‘‘ENTERPRISES’’ and inserting 

‘‘REGULATED ENTITIES’’ ; 

(B) by realigning paragraph (2) two ems from the left margin, so as to 

align the left margin of such paragraph with the left margins of paragraph 

(1); 

(C) in paragraph (1)— 

(i) by striking ‘‘Each enterprise’’ and inserting ‘‘Each regulated entity’’; 

(ii) by striking ‘‘each enterprise’’ and inserting ‘‘each regulated entity’’; and 

(iii) by striking ‘‘both enterprises’’ and inserting ‘‘all of the regulated 

entities’’; and 

(D) in paragraph (3)— 

(i) in subparagraph (B), by striking ‘‘subparagraph (A)’’ and inserting 

‘‘clause (i)’’; 

(ii) by redesignating subparagraphs (A), (B), and (C) as clauses (i), (ii) 

and (ii), respectively, and realigning such clauses, as so redesignated, 

so as to be indented 6 ems from the left margin; 

(iii) by striking the matter that precedes clause (i), as so redesignated, and inserting the following: 

‘‘(3) DEFINITION OF TOTAL ASSETS.—For purposes of this section, the term 

‘total assets’ means as follows: 

‘‘(A) ENTERPRISES.—With respect to an enterprise, the sum of—’’; and 

(iv) by adding at the end the following new subparagraph: 

‘‘(B) FEDERAL HOME LOAN BANKS.—With respect to a Federal home loan 

bank, the total assets of the Bank, as determined by the Director in accordance with generally accepted accounting principles.’’. 

(3) by striking subsection (c) and inserting the following new subsection: 

‘‘(c) INCREASED COSTS OF REGULATION.— 

‘‘(1) INCREASE FOR INADEQUATE CAPITALIZATION.—The semiannual payments 

made pursuant to subsection (b) by any regulated entity that is not classified 

(for purposes of subtitle B) as adequately capitalized may be increased, as necessary, in the discretion of the Director to pay additional estimated costs of regulation of the regulated entity. 

‘‘(2) ADJUSTMENT FOR ENFORCEMENT ACTIVITIES.—The Director may adjust the 

amounts of any semiannual assessments for an assessment under subsection (a) 

that are to be paid pursuant to subsection (b) by a regulated entity, as necessary in the discretion of the Director, to ensure that the costs of enforcement 

activities under subtitle B and C for a regulated entity are borne only by such 

regulated entity. 

‘‘(3) ADDITIONAL ASSESSMENT FOR DEFICIENCIES.—If at any time, as a result 

of increased costs of regulation of a regulated entity that is not classified (for 

purposes of subtitle B) as adequately captitalized or as the result of supervisory 

or enforcement activities under subtitle B or C for a regulated entity, the 

amount available from any semiannual payment made by such regulated entity 

pursuant to subsection (b) is insufficient to cover the costs of the Agency with 

respect to such entity, the Director may make and collect from such regulated 

entity an immediate assessment to cover the amount of such deficiency for the 

semiannual period. If, at the end of any semiannual period during which such 

an assessment is made, any amount remains from such assessment, such remaining amount shall be deducted from the assessment for such regulated entity for the following semiannual period.’’. 

(4) in subsection (d), by striking ‘‘If’’ and inserting ‘‘Except with respect to 

amounts collected pursuant to subsection (a)(3), if’’; and 

11 

(5) by striking subsections (e) through (g) and inserting the following new 

subsections: 

‘‘(e) WORKING CAPITAL FUND.—At the end of each year for which an assessment 

under this section is made, the Director shall remit to each regulated entity any 

amount of assessment collected from such regulated entity that is attributable to 

subsection (a)(3) and is in excess of the amount the Director deems necessary to 

maintain a working capital fund. 

‘‘(f) TREATMENT OF ASSESSMENTS.— ‘‘(1) DEPOSIT.—Amounts received by the Director from assessments under this 

section may be deposited by the Director in the manner provided in section 

5234 of the Revised Statutes (12 U.S.C. 192) for monies deposited by the Comptroller of the Currency. 

‘‘(2) NOT GOVERNMENT FUNDS.—The amounts received by the Director from 

any assessment under this section shall not be construed to be Government or 

public funds or appropriated money. 

‘‘(3) NO APPORTIONMENT OF FUNDS.—Notwithstanding any other provision of 

law, the amounts received by the Director from any assessment under this section shall not be subject to apportionment for the purpose of chapter 15 of title 

31, United States Code, or under any other authority. 

‘‘(4) USE OF FUNDS.—The Director may use any amounts received by the Director from assessments under this section for compensation of the Director and 

other employees of the Agency and for all other expenses of the Director and 

the Agency. 

‘‘(5) AVAILABILITY OF OVERSIGHT FUND AMOUNTS.—Notwithstanding any other 

provision of law, any amounts remaining in the Federal Housing Enterprises 

Oversight Fund established under this section (as in effect before the effective 

date under section 185 of the Federal Housing Finance Reform Act of 2005), and 

any amounts remaining from assessments on the Federal Home Loan banks 

pursuant to section 18(b) of the Federal Home Loan Bank Act (12 U.S.C. 

1438(b)), shall, upon such effective date, be treated for purposes of this subsection as amounts received from assessments under this section. 

‘‘(g) BUDGET AND FINANCIAL MANAGEMENT.— 

‘‘(1) FINANCIAL OPERATING PLANS AND FORECASTS.—The Director shall provide 

to the Director of the Office of Management and Budget copies of the Director’s 

financial operating plans and forecasts as prepared by the Director in the ordinary course of the Agency’s operations, and copies of the quarterly reports of 

the Agency’s financial condition and results of operations as prepared by the Director in the ordinary course of the Agency’s operations. 

‘‘(2) FINANCIAL STATEMENTS.—The Agency shall prepare annually a statement 

of assets and liabilities and surplus or deficit; a statement of income and expenses; and a statement of sources and application of funds. 

‘‘(3) FINANCIAL MANAGEMENT SYSTEMS.—The Agency shall implement and 

maintain financial management systems that comply substantially with Federal 

financial management systems requirements, applicable Federal accounting 

standards, and that uses a general ledger system that accounts for activity at 

the transaction level. 

‘‘(4) ASSERTION OF INTERNAL CONTROLS.—The Director shall provide to the 

Comptroller General an assertion as to the effectiveness of the internal controls 

that apply to financial reporting by the Agency, using the standards established 

in section 3512 (c) of title 31, United States Code. 

‘‘(5) RULE OF CONSTRUCTION.—This subsection may not be construed as implying any obligation on the part of the Director to consult with or obtain the consent or approval of the Director of the Office of Management and Budget with 

respect to any reports, plans, forecasts, or other information referred to in paragraph (1) or any jurisdiction or oversight over the affairs or operations of the 

Agency. 

‘‘(h) AUDIT OF AGENCY.— 

‘‘(1) IN GENERAL.—The Comptroller General shall annually audit the financial 

transactions of the Agency in accordance with the U.S. generally accepted government auditing standards as may be prescribed by the Comptroller General 

of the United States. The audit shall be conducted at the place or places where 

accounts of the Agency are normally kept. The representatives of the Government Accountability Office shall have access to the personnel and to all books, 

accounts, documents, papers, records (including electronic records), reports, 

files, and all other papers, automated data, things, or property belonging to or 

under the control of or used or employed by the Agency pertaining to its financial transactions and necessary to facilitate the audit, and such representatives 

shall be afforded full facilities for verifying transactions with the balances or 

securities held by depositaries, fiscal agents, and custodians. All such books, acVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00011 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
12 

counts, documents, records, reports, files, papers, and property of the Agency 

shall remain in possession and custody of the Agency. The Comptroller General 

may obtain and duplicate any such books, accounts, documents, records, working papers, automated data and files, or other information relevant to such 

audit without cost to the Comptroller General and the Comptroller General’s 

right of access to such information shall be enforceable pursuant to section 

716(c) of title 31, United States Code. 

‘‘(2) REPORT.—The Comptroller General shall submit to the Congress a report 

of each annual audit conducted under this subsection. The report to the Congress shall set forth the scope of the audit and shall include the statement of 

assets and liabilities and surplus or deficit, the statement of income and expenses, the statement of sources and application of funds, and such comments 

and information as may be deemed necessary to inform Congress of the financial operations and condition of the Agency, together with such recommendations with respect thereto as the Comptroller General may deem advisable. A 

copy of each report shall be furnished to the President and to the Agency at 

the time submitted to the Congress. 

‘‘(3) ASSISTANCE AND COSTS.—For the purpose of conducting an audit under 

this subsection, the Comptroller General may, in the discretion of the Comptroller General, employ by contract, without regard to section 5 of title 41, 

United States Code, professional services of firms and organizations of certified 

public accountants for temporary periods or for special purposes. Upon the request of the Comptroller General, the Director of the Agency shall transfer to 

the Government Accountability Office from funds available, the amount requested by the Comptroller General to cover the full costs of any audit and report conducted by the Comptroller General. The Comptroller General shall credit funds transferred to the account established for salaries and expenses of the 

Government Accountability Office, and such amount shall be available upon receipt and without fiscal year limitation to cover the full costs of the audit and 

report.’’. 

SEC. 107. EXAMINERS AND ACCOUNTANTS. 

(a) EXAMINATIONS.—Section 1317 of the Housing and Community Development 

Act of 1992 (12 U.S.C. 4517) is amended—— 

(1) in subsection (a), by adding after the period at the end the following: 

‘‘Each examination under this subsection of a regulated entity shall include a 

review of the procedures required to be established and maintained by the regulated entity pursuant to section 1314(c) (relating to fraudulent financial transactions) and the report regarding each such examination shall describe any 

problems with such procedures maintained by the regulated entity.’’; 

(2) in subsection (b)— 

(A) by inserting ‘‘of a regulated entity’’ after ‘‘under this section’’; and 

(B) by striking ‘‘to determine the condition of an enterprise for the purpose of ensuring its financial safety and soundness’’ and inserting ‘‘or appropriate’’ ; and 

(3) in subsection (c)— 

(A) in the second sentence, by inserting ‘‘to conduct examinations under 

this section’’ before the period; and 

(B) in the third sentence, by striking ‘‘from amounts available in the Federal Housing Enterprises Oversight Fund’’. 

(b) ENHANCED AUTHORITY TO HIRE EXAMINERS AND ACCOUNTANTS.—Section 1317 

of the Housing and Community Development Act of 1992 (12 U.S.C. 4517) is amended by adding at the end the following new subsection: 

‘‘(g) APPOINTMENT OF ACCOUNTANTS, ECONOMISTS, SPECIALISTS, AND EXAMINERS.— 

‘‘(1) APPLICABILITY.—This section applies with respect to any position of examiner, accountant, specialist in financial markets, specialist in technology, and 

economist at the Agency, with respect to supervision and regulation of the regulated entities, that is in the competitive service. 

‘‘(2) APPOINTMENT AUTHORITY.—The Director may appoint candidates to any 

position described in paragraph (1)— 

‘‘(A) in accordance with the statutes, rules, and regulations governing appointments in the excepted service; and 

‘‘(B) notwithstanding any statutes, rules, and regulations governing appointments in the competitive service.’’. 

(c) REPEAL.—Section 20 of the Federal Home Loan Bank Act (12 U.S.C. 1440) is 

amended— 

(1) in the section heading, by striking ‘‘REPORTS’’ and inserting ‘‘GAO AUDITS’’; 

13 

(2) in the third sentence, by striking ‘‘the Board and’’ each place such term 

appears; and 

(3) by striking the first two sentences and inserting the following: ‘‘The Federal home loan banks shall be subject to examinations by the Director to the 

extent provided in section 1317 of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 U.S.C. 4517).’’. 

SEC. 108. PROHIBITION AND WITHHOLDING OF EXECUTIVE COMPENSATION. 

(a) IN GENERAL.—Section 1318 of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4518) is amended— 

(1) in the section heading, by striking ‘‘OF EXCESSIVE’’ and inserting ‘‘AND

WITHHOLDING OF EXECUTIVE’’; 

(2) by redesignating subsection (b) as subsection (d); and 

(3) by inserting after subsection (a) the following new subsections: 

‘‘(b) FACTORS.—In making any determination under subsection (a), the Director 

may take into consideration any factors the Director considers relevant, including 

any wrongdoing on the part of the executive officer, and such wrongdoing shall include any fraudulent act or omission, breach of trust or fiduciary duty, violation of 

law, rule, regulation, order, or written agreement, and insider abuse with respect 

to the regulated entity. The approval of an agreement or contract pursuant to section 309(d)(3)(B) of the Federal National Mortgage Association Charter Act (12 

U.S.C. 1723a(d)(3)(B)) or section 303(h)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1452(h)(2)) shall not preclude the Director from making any 

subsequent determination under subsection (a). 

‘‘(c) WITHHOLDING OF COMPENSATION.—In carrying out subsection (a), the Director 

may require a regulated entity to withhold any payment, transfer, or disbursement 

of compensation to an executive officer, or to place such compensation in an escrow 

account, during the review of the reasonableness and comparability of compensation.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) FANNIE MAE.—Section 309(d) of the Federal National Mortgage Association 

Charter Act (12 U.S.C. 1723a(d)) is amended by adding at the end the following 

new paragraph: 

‘‘(4) Notwithstanding any other provision of this section, the corporation shall not 

transfer, disburse, or pay compensation to any executive officer, or enter into an 

agreement with such executive officer, without the approval of the Director, for matters being reviewed under section 1318 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4518).’’. 

(2) FREDDIE MAC.—Section 303(h) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1452(h)) is amended by adding at the end the following 

new paragraph: 

‘‘(4) Notwithstanding any other provision of this section, the Corporation shall not 

transfer, disburse, or pay compensation to any executive officer, or enter into an 

agreement with such executive officer, without the approval of the Director, for matters being reviewed under section 1318 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4518).’’. 

(3) FEDERAL HOME LOAN BANKS.—Section 7 of the Federal Home Loan Bank 

Act (12 U.S.C. 1427) is amended by adding at the end the following new subsection: 

‘‘(l) WITHHOLDING OF COMPENSATION.—Notwithstanding any other provision of 

this section, a Federal home loan bank shall not transfer, disburse, or pay compensation to any executive officer, or enter into an agreement with such executive 

officer, without the approval of the Director, for matters being reviewed under section 1318 of the Federal Housing Enterprises Financial Safety and Soundness Act 

of 1992 (12 U.S.C. 4518).’’. 

SEC. 109. REVIEWS OF REGULATED ENTITIES. 

Section 1319 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4519) is amended— 

(1) by striking the section designation and heading and inserting the following: 

‘‘SEC. 1319. REVIEWS OF REGULATED ENTITIES.’’; and 

(2) by inserting after ‘‘any entity’’ the following: ‘‘that the Director considers 

appropriate, including an entity’’. 

SEC. 110. REGULATIONS AND ORDERS. 

Section 1319G of the Housing and Community Development Act of 1992 (12 

U.S.C. 4526) is amended— 

(1) by striking subsection (a) and inserting the following new subsection: 

14 

‘‘(a) AUTHORITY.—The Director shall issue any regulations, guidelines, and orders 

necessary to carry out the duties of the Director under this title and each of the 

authorizing statutes to ensure that the purposes of this title and such Acts are accomplished.’’; 

(2) in subsection (b), by inserting ‘‘, this title, or any of the authorizing statutes’’ after ‘‘under this section’’; and 

(3) by striking subsection (c). 

SEC. 111. RISK-BASED CAPITAL REQUIREMENTS. 

(a) IN GENERAL.—Section 1361 of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4611) is amended to read as follows: 

‘‘SEC. 1361. RISK-BASED CAPITAL LEVELS FOR REGULATED ENTITIES. 

‘‘(a) IN GENERAL.— 

‘‘(1) ENTERPRISES.—The Director shall, by regulation, establish risk-based 

capital requirements for the enterprises to ensure that the enterprises operate 

in a safe and sound manner, maintaining sufficient capital and reserves to support the risks that arise in the operations and management of the enterprises. 

‘‘(2) FEDERAL HOME LOAN BANKS.—The Director shall establish risk-based capital standards under section 6 of the Federal Home Loan Bank Act for the Federal home loan banks. 

‘‘(b) CONFIDENTIALITY OF INFORMATION.—Any person that receives any book, 

record, or information from the Director or a regulated entity to enable the riskbased capital requirements established under this section to be applied shall— 

‘‘(1) maintain the confidentiality of the book, record, or information in a manner that is generally consistent with the level of confidentiality established for 

the material by the Director or the regulated entity; and 

‘‘(2) be exempt from section 552 of title 5, United States Code, with respect 

to the book, record, or information. 

‘‘(c) NO LIMITATION.—Nothing in this section shall limit the authority of the Director to require other reports or undertakings, or take other action, in furtherance of 

the responsibilities of the Director under this Act.’’. 

(b) FEDERAL HOME LOAN BANKS RISK-BASED CAPITAL.—Section 6(a)(3) of the Federal Home Loan Bank Act (12 U.S.C. 1426(a)(3)) is amended— 

(1) by striking subparagraph (A) and inserting the following new subparagraph: 

‘‘(A) RISK-BASED CAPITAL STANDARDS.—The Director shall, by regulation, 

establish risk-based capital standards for the Federal home loan banks to 

ensure that the Federal home loan banks operate in a safe and sound manner, with sufficient permanent capital and reserves to support the risks 

that arise in the operations and management of the Federal home loans 

banks.’’; and 

(2) in subparagraph (B), by striking ‘‘(A)(ii)’’ and inserting ‘‘(A)’’. 

SEC. 112. MINIMUM AND CRITICAL CAPITAL LEVELS. 

(a) MINIMUM CAPITAL LEVEL.—Section 1362 of the Housing and Community Development Act of 1992 (12 U.S.C. 4612) is amended— 

(1) in subsection (a), by striking ‘‘IN GENERAL’’ and inserting ‘‘ENTERPRISES’’ 

; and 

(2) by striking subsection (b) and inserting the following new subsections: 

‘‘(b) FEDERAL HOME LOAN BANKS.—For purposes of this subtitle, the minimum 

capital level for each Federal home loan bank shall be the minimum capital required to be maintained to comply with the leverage requirement for the bank established under section 6(a)(2) of the Federal Home Loan Bank Act (12 U.S.C. 

1426(a)(2)). 

‘‘(c) ESTABLISHMENT OF REVISED MINIMUM CAPITAL LEVELS.—Notwithstanding 

subsections (a) and (b) and notwithstanding the capital classifications of the regulated entities, the Director may, by regulations issued under section 1319G(b), establish a minimum capital level for the enterprises, for the Federal home loan 

banks, or for both the enterprises and the banks, that is higher than the level specified in subsection (a) for the enterprises or the level specified in subsection (b) for 

the Federal home loan banks, to the extent needed to ensure that the regulated entities operate in a safe and sound manner. 

‘‘(d) AUTHORITY TO REQUIRE TEMPORARY INCREASE.—Notwithstanding subsections 

(a) and (b) and any minimum capital level established pursuant to subsection (c), 

the Director may, by order, increase the minimum capital level for a regulated entity for such period as the Director may provide if the Director— 

‘‘(1) makes any of the determinations specified in subparagraphs (A) through 

(C) of section 1364(c)(1); or 

15 

‘‘(2) determines that the regulated entity has violated any of the prudential 

management and operations standards established pursuant to section 1313A 

and, as a result of such violation, is operating in an unsafe and unsound manner. 

‘‘(e) AUTHORITY TO ESTABLISH ADDITIONAL CAPITAL AND RESERVE REQUIREMENTS

FOR PARTICULAR PROGRAMS.—The Director may, at any time by order or regulation, 

establish such capital or reserve requirements with respect to any program or activity of a regulated entity as the Director considers appropriate to ensure that the 

regulated entity operates in a safe and sound manner, with sufficient capital and 

reserves to support the risks that arise in the operations and management of the 

regulated entity. 

‘‘(f) PERIODIC REVIEW.—The Director shall periodically review the amount of core 

capital maintained by the enterprises, the amount of capital retained by the Federal 

home loan banks, and the minimum capital levels established for such regulated entities pursuant to this section. The Director may, by regulations issued under section 1319G(b), adjust the minimum capital levels as necessary, based on the Director’s review.’’. 

(b) CRITICAL CAPITAL LEVELS.— 

(1) IN GENERAL.—Section 1363 of the Housing and Community Development 

Act of 1992 (12 U.S.C. 4613) is amended— 

(A) by striking ‘‘For’’ and inserting ‘‘(a) Enterprises.—For’’; and 

(B) by adding at the end the following new subsection: 

‘‘(b) FEDERAL HOME LOAN BANKS.— 

‘‘(1) IN GENERAL.—For purposes of this subtitle, the critical capital level for 

each Federal home loan bank shall be such amount of capital as the Director 

shall, by regulation require. 

‘‘(2) CONSIDERATION OF OTHER CRITICAL CAPITAL LEVELS.—In establishing the 

critical capital level under paragraph (1) for the Federal home loan banks, the 

Director shall take due consideration of the critical capital level established 

under subsection (a) for the enterprises, with such modifications as the Director 

determines to be appropriate to reflect the difference in operations between the 

banks and the enterprises.’’. 

(2) REGULATIONS.—Not later than the expiration of the 180-day period beginning on the effective date under section 185, the Director of the Federal Housing Finance Agency shall issue regulations pursuant to section 1363(b) of the 

Housing and Community Development Act of 1992 (as added by paragraph (1) 

of this subsection) establishing the critical capital level under such section. 

SEC. 113. REVIEW OF AND AUTHORITY OVER ENTERPRISE ASSETS AND LIABILITIES. 

Subtitle B of title XIII of the Housing and Community Development Act of 1992 

(12 U.S.C. 4611 et seq.) is amended— 

(1) by striking the subtitle designation and heading and inserting the following: 

‘‘Subtitle B—Required Capital Levels for Regulated Entities, Special Enforcement Powers, and 

Reviews of Assets and Liabilities’’; and 

(2) by adding at the end the following new section: 

‘‘SEC. 1369E. REVIEWS OF ENTERPRISE ASSETS AND LIABILITIES. 

‘‘(a) IN GENERAL.—The Director shall conduct, on a periodic basis, a review of the 

on-balance sheet and off-balance sheet assets and liabilities of each enterprise. 

‘‘(b) AUTHORITY TO REQUIRE DISPOSITION OR ACQUISITION.—Pursuant to such a review and notwithstanding the capital classifications of the enterprises, the Director 

may by order require an enterprise, under such terms and conditions as the Director 

determines to be appropriate, to dispose of or acquire any asset or liability, if the 

Director determines that such action is consistent with the safe and sound operation 

of the enterprise or with the purposes of this Act or any of the authorizing statutes.’’. 

SEC. 114. CORPORATE GOVERNANCE OF ENTERPRISES. 

The Housing and Community Development Act of 1992 is amended by inserting 

before section 1323 (12 U.S.C. 4543) the following new section: 

‘‘SEC. 1322A. CORPORATE GOVERNANCE OF ENTERPRISES. 

‘‘(a) BOARD OF DIRECTORS.— 

16 

‘‘(1) INDEPENDENCE.—A majority of seated members of the board of directors 

of each enterprise shall be independent board members, as defined under rules 

set forth by the New York Stock Exchange, as such rules may be amended from 

time to time. 

‘‘(2) FREQUENCY OF MEETINGS.—To carry out its obligations and duties under 

applicable laws, rules, regulations, and guidelines, the board of directors of an 

enterprise shall meet at least eight times a year and not less than once a calendar quarter. 

‘‘(3) NON-MANAGEMENT BOARD MEMBER MEETINGS.—The non-management directors of an enterprise shall meet at regularly scheduled executive sessions 

without management participation. 

‘‘(4) QUORUM; PROHIBITION ON PROXIES.—For the transaction of business, a 

quorum of the board of directors of an enterprise shall be at least a majority 

of the seated board of directors and a board member may not vote by proxy. 

‘‘(5) INFORMATION.—The management of an enterprise shall provide a board 

member of the enterprise with such adequate and appropriate information that 

a reasonable board member would find important to the fulfillment of his or her 

fiduciary duties and obligations. 

‘‘(6) ANNUAL REVIEW.—At least annually, the board of directors of each enterprise shall review, with appropriate professional assistance, the requirements of 

laws, rules, regulations, and guidelines that are applicable to its activities and 

duties. 

‘‘(b) COMMITTEES OF BOARDS OF DIRECTORS.— 

‘‘(1) FREQUENCY OF MEETINGS.—Any committee of the board of directors of an 

enterprise shall meet with sufficient frequency to carry out its obligations and 

duties under applicable laws, rules, regulations, and guidelines. 

‘‘(2) REQUIRED COMMITTEES.—Each enterprise shall provide for the establishment, however styled, of the following committees of the board of directors: 

‘‘(A) Audit committee. 

‘‘(B) Compensation committee. 

‘‘(C) Nominating/corporate governance committee. 

Such committees shall be in compliance with the charter, independence, composition, expertise, duties, responsibilities, and other requirements set forth 

under section 10A(m) of the Securities Exchange Act of 1934 (15 U.S.C. 78j1(m)), with respect to the audit committee, and under rules issued by the New 

York Stock Exchange, as such rules may be amended from time to time. 

‘‘(c) COMPENSATION.— 

‘‘(1) IN GENERAL.—The compensation of board members, executive officers, 

and employees of an enterprise— 

‘‘(A) shall not be in excess of that which is reasonable and appropriate; 

‘‘(B) shall be commensurate with the duties and responsibilities of such 

persons, 

‘‘(C) shall be consistent with the long-term goals of the enterprise; 

‘‘(D) shall not focus solely on earnings performance, but shall take into 

account risk management, operational stability and legal and regulatory 

compliance as well; and 

‘‘(E) shall be undertaken in a manner that complies with applicable laws, 

rules, and regulations. 

‘‘(2) REIMBURSEMENT.—If an enterprise is required to prepare an accounting 

restatement due to the material noncompliance of the enterprise, as a result of 

misconduct, with any financial reporting requirement under the securities laws, 

the chief executive officer and chief financial officer of the enterprise shall reimburse the enterprise as provided under section 304 of the Sarbanes-Oxley Act 

of 2002 (15 U.S.C. 7243). This provision does not otherwise limit the authority 

of the Agency to employ remedies available to it under its enforcement authorities. 

‘‘(d) CODE OF CONDUCT AND ETHICS.— 

‘‘(1) IN GENERAL.—An enterprise shall establish and administer a written code 

of conduct and ethics that is reasonably designed to assure the ability of board 

members, executive officers, and employees of the enterprise to discharge their 

duties and responsibilities, on behalf of the enterprise, in an objective and impartial manner, and that includes standards required under section 406 of the 

Sarbanes-Oxley Act of 2002 (15 U.S.C. 7264) and other applicable laws, rules, 

and regulations. 

‘‘(2) REVIEW.—Not less than once every three years, an enterprise shall review 

the adequacy of its code of conduct and ethics for consistency with practices appropriate to the enterprise and make any appropriate revisions to such code. 

‘‘(e) CONDUCT AND RESPONSIBILITIES OF BOARD OF DIRECTORS.—The board of directors of an enterprise shall be responsible for directing the conduct and affairs of 

17 

the enterprise in furtherance of the safe and sound operation of the enterprise and 

shall remain reasonably informed of the condition, activities, and operations of the 

enterprise. The responsibilities of the board of directors shall include having in 

place adequate policies and procedures to assure its oversight of, among other matters, the following: 

‘‘(1) Corporate strategy, major plans of action, risk policy, programs for legal 

and regulatory compliance and corporate performance, including prudent plans 

for growth and allocation of adequate resources to manage operations risk. 

‘‘(2) Hiring and retention of qualified executive officers and succession planning for such executive officers. 

‘‘(3) Compensation programs of the enterprise. 

‘‘(4) Integrity of accounting and financial reporting systems of the enterprise, 

including independent audits and systems of internal control. 

‘‘(5) Process and adequacy of reporting, disclosures, and communications to 

shareholders, investors, and potential investors. 

‘‘(6) Extensions of credit to board members and executive officers. 

‘‘(7) Responsiveness of executive officers in providing accurate and timely reports to Federal regulators and in addressing the supervisory concerns of Federal regulators in a timely and appropriate manner. 

‘‘(f) PROHIBITION OF EXTENSIONS OF CREDIT.—An enterprise may not directly or 

indirectly, including through any subsidiary, extend or maintain credit, arrange for 

the extension of credit, or renew an extension of credit, in the form of a personal 

loan to or for any board member or executive officer of the enterprise, as provided 

by section 13(k) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(k)). 

‘‘(g) CERTIFICATION OF DISCLOSURES.—The chief executive officer and the chief financial officer of an enterprise shall review each quarterly report and annual report 

issued by the enterprise and such reports shall include certifications by such officers 

as required by section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241). 

‘‘(h) CHANGE OF AUDIT PARTNER.—An enterprise may not accept audit services 

from an external auditing firm if the lead or coordinating audit partner who has 

primary responsibility for the external audit of the enterprise, or the external audit 

partner who has responsibility for reviewing the external audit has performed audit 

services for the enterprise in each of the five previous fiscal years. 

‘‘(i) COMPLIANCE PROGRAM.— 

‘‘(1) REQUIREMENT.—Each enterprise shall establish and maintain a compliance program that is reasonably designed to assure that the enterprise complies 

with applicable laws, rules, regulations, and internal controls. 

‘‘(2) COMPLIANCE OFFICER.—The compliance program of an enterprise shall be 

headed by a compliance officer, however styled, who reports directly to the chief 

executive officer of the enterprise. The compliance officer shall report regularly 

to the board of directors or an appropriate committee of the board of directors 

on compliance with and the adequacy of current compliance policies and procedures of the enterprise, and shall recommend any adjustments to such policies 

and procedures that the compliance officer considers necessary and appropriate. 

‘‘(j) RISK MANAGEMENT PROGRAM.— 

‘‘(1) REQUIREMENT.—Each enterprise shall establish and maintain a risk management program that is reasonably designed to manage the risks of the operations of the enterprise. 

‘‘(2) RISK MANAGEMENT OFFICER.—The risk management program of an enterprise shall be headed by a risk management officer, however styled, who reports 

directly to the chief executive officer of the enterprise. The risk management officer shall report regularly to the board of directors or an appropriate committee 

of the board of directors on compliance with and the adequacy of current risk 

management policies and procedures of the enterprise, and shall recommend 

any adjustments to such policies and procedures that the risk management officer considers necessary and appropriate. 

‘‘(k) COMPLIANCE WITH OTHER LAWS.— 

‘‘(1) DEREGISTERED OR UNREGISTERED COMMON STOCK.—If an enterprise 

deregisters or has not registered its common stock with the Securities and Exchange Commission under the Securities Exchange Act of 1934, the enterprise 

shall comply or continue to comply with sections 10A(m) and 13(k) of the Securities Exchange Act of 1934 (15 U.S.C. 78j-1(m), 78m(k)) and sections 302, 304, 

and 406 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7243, 7264), subject 

to such requirements as provided by subsection (l) of this section. 

‘‘(2) REGISTERED COMMON STOCK.—An enterprise that has its common stock 

registered with the Securities and Exchange Commission shall maintain such 

registered status, unless it provides 60 days prior written notice to the Director 

stating its intent to deregister and its understanding that it will remain subject 

to the requirements of the sections of the Securities Exchange Act of 1934 and 

18 

the Sarbanes-Oxley Act of 2002, subject to such requirements as provided by 

subsection (l) of this section. 

‘‘(l) OTHER MATTERS.—The Director may from time to time establish standards, 

by regulation, order, or guideline, regarding such other corporate governance matters of the enterprises as the Director considers appropriate. 

‘‘(m) MODIFICATION OF STANDARDS.—In connection with standards of Federal or 

State law (including the Revised Model Corporation Act) or New York Stock Exchange rules that are made applicable to an enterprise by section 1710.10 of the Director’s rules (12 C.F.R. 1710.10) and by subsections (a), (b), (g), (i), (j), and (k) of 

this section, the Director, in the Director’s sole discretion, may modify the standards 

contained in this section or in part 1710 of the Director’s rules (12 U.S.C. Part 1710) 

in accordance with section 553 of title 5, United States Code, and upon written notice to the enterprise.’’. 

SEC. 115. REQUIRED REGISTRATION UNDER SECURITIES EXCHANGE ACT OF 1934. 

The Housing and Community Development Act of 1992 is amended by adding 

after section 1322A, as added by the preceding provisions of this Act, the following 

new section: 

‘‘SEC. 1322B. REQUIRED REGISTRATION UNDER SECURITIES EXCHANGE ACT OF 1934. 

‘‘(a) IN GENERAL.—Each regulated entity shall register at least one class of the 

capital stock of such regulated entity, and maintain such registration with the Securities and Exchange Commission, under the Securities Exchange Act of 1934. 

‘‘(b) ENTERPRISES.—Each enterprise shall comply with sections 14 and 16 of the 

Securities Exchange Act of 1934.’’. 

SEC. 116. FINANCIAL INSTITUTIONS EXAMINATION COUNCIL. 

The Federal Financial Institutions Examination Council Act of 1978 is amended— 

(1) in section 1003 (12 U.S.C. 3302)— 

(A) in paragraph (1), by inserting ‘‘Director of the Federal Housing Finance Agency,’’ after ‘‘Supervision,’’; and 

(B) in paragraph (3), by striking ‘‘or a credit union;’’ and inserting ‘‘a 

credit union, or a regulated entity (as such term is defined in section 1303 

of the Housing and Community Development Act of 1992 (12 U.S.C. 

4502)).’’; 

(2) in section 1004 (12 U.S.C. 3303)— 

(A) in paragraph (4), by inserting a semicolon at the end; 

(B) by redesignating paragraph (5) as paragraph (6); and 

(C) by inserting after paragraph (4) the following new paragraph: 

‘‘(5) the Director of the Federal Housing Finance Agency; and’’; and 

(3) in section 1006(d) (12 U.S.C. 3305(d)), by striking ‘‘and employees of the 

Federal Housing Finance Board’’. 

SEC. 117. GUARANTEE FEE STUDY. 

(a) IN GENERAL.—The Comptroller General of the United States, in consultation 

with the heads of the federal banking agencies and the Director of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development, shall, not later than one year after the date of the enactment of this Act, 

submit to the Congress a study concerning the pricing, transparency and reporting 

of the Federal National Mortgage Association, the Federal Home Loan Mortgage 

Corporation, and the Federal home loan banks with regard to guarantee fees and 

concerning analogous practices, transparency and reporting requirements (including 

advances pricing practices by the Federal Home Loan Banks) of other participants 

in the business of mortgage purchases and securitization. 

(b) FACTORS.—The study required by this section shall examine various factors 

such as credit risk, counterparty risk considerations, economic value considerations, 

and volume considerations used by the regulated entities (as such term is defined 

in section 1303 of the Housing and Community Development Act of 1992) included 

in the study in setting the amount of fees they charge. 

(c) CONTENTS OF REPORT.—The report required under subsection (a) shall identify 

and analyze— 

(1) the factors used by each enterprise (as such term is defined in section 

1303 of the Housing and Community Development Act of 1992) in determining 

the amount of the guarantee fees it charges; 

(2) the total revenue the enterprises earn from guarantee fees; 

(3) the total costs incurred by the enterprises for providing guarantees; 

(4) the average guarantee fee charged by the enterprises; 

(5) an analysis of how and why the guarantee fees charged differ from such 

fees charged during the previous year; 

(6) a breakdown of the revenue and costs associated with providing guarantees, based on product type and risk classifications; and 

19 

(7) other relevant information on guarantee fees with other participants in 

the mortgage and securitization business. 

(d) PROTECTION OF INFORMATION.—Nothing in this section may be construed to require or authorize the Government Accounting Office, in connection with the study 

mandated by this section, to disclose information of the enterprises or other organization that is confidential or proprietary. 

SEC. 118. CONFORMING AMENDMENTS. 

(a) 1992 Act.—Part 1 of subtitle A of title XIII of the Housing and Community 

Development Act of 1992 (12 U.S.C. 4511 et seq.), as amended by the preceding provisions of this Act, is further amended— 

(1) by striking ‘‘an enterprise’’ each place such term appears in such part (except in sections 1313(a)(2)(A), 1313A(b)(2)(B)(ii)(I), and 1316(b)(3)) and inserting 

‘‘a regulated entity’’; 

(2) by striking ‘‘the enterprise’’ each place such term appears in such part (except in section 1316(b)(3)) and inserting ‘‘the regulated entity’’; 

(3) by striking ‘‘the enterprises’’ each place such term appears in such part 

(except in sections 1312(c)(2), 1312(e)(2), and 1319B(a)(4)(D)) and inserting ‘‘the 

regulated entities’’; 

(4) by striking ‘‘each enterprise’’ each place such term appears in such part 

and inserting ‘‘each regulated entity’’; 

(5) by striking ‘‘Office’’ each place such term appears in such part (except in 

sections 1312(b)(5), 1315(b), and 1316(g), and section 1317(c)) and inserting 

‘‘Agency’’; 

(6) in section 1315 (12 U.S.C. 4515)— 

(A) in subsection (a)— 

(i) in the subsection heading, by striking ‘‘Office Personnel’’ and inserting ‘‘In General’’; and 

(ii) by striking ‘‘The’’ and inserting ‘‘Subject to titles III and IV of the 

Federal Housing Finance Reform Act of 2005, the’’; 

(B) by striking subsections (d) and (f); and 

(C) by redesignating subsection (e) as subsection (d); 

(7) in section 1319A (12 U.S.C. 4520)— 

(A) by striking ‘‘(a) In General.—Each enterprise’’ and inserting ‘‘Each 

regulated entity’’; and 

(B) by striking subsection (b); 

(8) in section 1319B (12 U.S.C. 4521), by striking ‘‘Committee on Banking, Finance and Urban Affairs’’ each place such term appears and inserting ‘‘Committee on Financial Services’’; and 

(9) in section 1319F (12 U.S.C. 4525), striking all that follows ‘‘United States 

Code’’ and inserting ‘‘, the Agency shall be considered an agency responsible for 

the regulation or supervision of financial institutions.’’. 

(b) AMENDMENTS TO FANNIE MAE CHARTER ACT.—The Federal National Mortgage 

Association Charter Act (12 U.S.C. 1716 et seq.) is amended— 

(1) by striking ‘‘Director of the Office of Federal Housing Enterprise Oversight 

of the Department of Housing and Urban Development’’ each place such term 

appears, and inserting ‘‘Director of the Federal Housing Finance Agency’’, in— 

(A) section 303(c)(2) (12 U.S.C. 1718(c)(2)); 

(B) section 309(d)(3)(B) (12 U.S.C. 1723a(d)(3)(B)); and 

(C) section 309(k)(1); and 

(2) in section 309— 

(A) in subsections (d)(3)(A) and (n)(1), by striking ‘‘Banking, Finance and 

Urban Affairs’’ each place such term appears and inserting ‘‘Financial Services’’; and 

(B) in subsection (m)— 

(i) in paragraph (1), by striking ‘‘Secretary’’ the second place such 

term appears and inserting ‘‘Director’’; and 

(ii) in paragraph (2), by striking ‘‘Secretary’’ the second place such 

term appears and inserting ‘‘Director’’; and 

(iii) by striking ‘‘Secretary’’ each other place such term appears and 

inserting ‘‘Director of the Federal Housing Finance Agency’’; and 

(C) in subsection (n), by striking ‘‘Secretary’’ each place such term appears and inserting ‘‘Director of the Federal Housing Finance Agency’’; and 

(c) AMENDMENTS TO FREDDIE MAC ACT.—The Federal Home Loan Mortgage Corporation Act is amended— 

(1) by striking ‘‘Director of the Office of Federal Housing Enterprise Oversight 

of the Department of Housing and Urban Development’’ each place such term 

appears, and inserting ‘‘Director of the Federal Housing Finance Agency’’, in— 

(A) section 303(b)(2) (12 U.S.C. 1452(b)(2)); 

20 

(B) section 303(h)(2) (12 U.S.C. 1452(h)(2)); and 

(C) section 307(c)(1) (12 U.S.C. 1456(c)(1)); 

(2) in sections 303(h)(1) and 307(f)(1) (12 U.S.C. 1452(h)(1), 1456(f)(1)), by 

striking ‘‘Banking, Finance and Urban Affairs’’ each place such term appears 

and inserting ‘‘Financial Services’’; 

(3) in section 306(i) (12 U.S.C. 1455(i))— 

(A) by striking ‘‘1316(c)’’ and inserting ‘‘306(c)’’; and 

(B) by striking ‘‘section 106’’ and inserting ‘‘section 1316’’; and 

(4) in section 307 (12 U.S.C. 1456))— 

(A) in subsection (e)— 

(i) in paragraph (1), by striking ‘‘Secretary’’ the second place such 

term appears and inserting ‘‘Director’’; and 

(ii) in paragraph (2), by striking ‘‘Secretary’’ the second place such 

term appears and inserting ‘‘Director’’; and 

(iii) by striking ‘‘Secretary’’ each other place such term appears and 

inserting ‘‘Director of the Federal Housing Finance Agency’’; and 

(B) in subsection (f), by striking ‘‘Secretary’’ each place such term appears 

and inserting ‘‘Director of the Federal Housing Finance Agency’’. 

Subtitle B—Improvement of Mission Supervision 

SEC. 121. TRANSFER OF PROGRAM AND ACTIVITIES APPROVAL AND HOUSING GOAL OVERSIGHT. 

Part 2 of subtitle A of title XIII of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4541 et seq.) is amended— 

(1) by striking the designation and heading for the part and inserting the following: 

‘‘PART 2—PROGRAM AND ACTIVITIES APPROVAL BY DIRECTOR, CORPORATE GOVERNANCE, AND ESTABLISHMENT OF HOUSING GOALS’’; and 

(2) by striking sections 1321 and 1322. 

SEC. 122. REVIEW BY DIRECTOR OF NEW PROGRAMS AND ACTIVITIES OF ENTERPRISES. 

(a) IN GENERAL.—Part 2 of subtitle A of title XIII of the Housing and Community 

Development Act of 1992 is amended by inserting before section 1323 (12 U.S.C. 

4543) the following new section: 

‘‘SEC. 1321. REVIEW AND APPROVAL BY DIRECTOR OF NEW PROGRAMS AND BUSINESS ACTIVITIES OF ENTERPRISES. 

‘‘(a) LIMITATION ON AUTHORITY TO UNDERTAKE PROGRAMS AND ACTIVITIES.—An 

enterprise may not undertake any new program, including a pilot program, or any 

new business activity except in accordance with the procedures set forth in this section and orders and regulations issued under this section. 

‘‘(b) NEW PROGRAMS.— 

‘‘(1) PRIOR APPROVAL REQUIREMENT.—An enterprise may not commence any 

new program before it has obtained the approval of the Director, pursuant to 

this subsection, for the new program. 

‘‘(2) APPLICATION.—The Director shall, by order or regulation, require that an 

enterprise shall, to obtain a determination by the Director regarding approval 

of a new program by the enterprise, submit to the Director a written application 

for the new program in a format as prescribed by the Director. 

‘‘(3) NOTICE.—Immediately upon receipt of a complete application for a new 

program, the Director shall cause to be published in the Federal Register notice 

of the receipt of such application and of the period for public comment pursuant 

to paragraph (4) regarding such new program, and a description of the new program proposed by the application. 

‘‘(4) PUBLIC COMMENT PERIOD.—During the 30-day period beginning upon publication pursuant to paragraph (3) of a notice regarding such an application, the 

Director shall receive public comments regarding the new program. 

‘‘(5) DETERMINATION.—Not less than 15 days after the conclusion of the public 

comment period pursuant to paragraph (4) regarding an application but not 

more than 30 days after the conclusion of such comment period, the Director 

shall approve, conditionally approve, or reject such program, in writing. 

‘‘(6) STANDARD FOR APPROVAL.—The Director may approve, or conditionally 

approve, a new program of an enterprise only if the Director determines, taking 

21 

into consideration any relevant information and comments received during the 

public comment period, that such new program— 

‘‘(A) does not contravene and is not inconsistent with the purposes of this 

title, the Federal National Mortgage Association Charter Act, or the Federal Home Loan Mortgage Corporation Act, as such purposes are determined taking into consideration the definitions of the terms ‘mortgage loan 

origination’ and ‘secondary mortgage market’ pursuant to section 1303; 

‘‘(B) is not otherwise inconsistent with the safety and soundness of the 

enterprise; and 

‘‘(C) is in the public interest. 

‘‘(7) LIMITATION.—The Director, in implementing this subsection, may not prevent an enterprise from continuing to offer the automated loan underwriting 

system in existence on the date of the enactment of the Federal Housing Finance Reform Act of 2005 or continuing to engage in counseling and education 

activities. 

‘‘(c) NEW BUSINESS ACTIVITIES.— ‘‘(1) AUTHORITY OF DIRECTOR TO PROHIBIT NEW BUSINESS ACTIVITIES.—The Director shall have authority to prohibit any new business activity by an enterprise if the Director determines, in writing, that such activity— 

‘‘(A) contravenes or is inconsistent with the purposes of this title, the Federal National Mortgage Association Charter Act, or the Federal Home Loan 

Mortgage Corporation Act; 

‘‘(B) is otherwise inconsistent with the safety and soundness of the enterprise; or 

‘‘(C) is not in the public interest. 

‘‘(2) NOTIFICATION OF NEW BUSINESS ACTIVITIES.—An enterprise that undertakes any new business activity shall provide written notice of the activity to 

the Director and may commence the new business activity only in accordance 

with paragraph (4). 

‘‘(3) DIRECTOR DETERMINATION OF APPLICABLE PROCEDURE.— 

‘‘(A) TIMING.—Immediately upon receipt of any notice under paragraph 

(2) regarding a new business activity, the Director shall undertake a determination under subparagraph (B) of this paragraph regarding the new business activity. 

‘‘(B) DETERMINATION AND TREATMENT AS NEW PROGRAM.—If the Director 

determines that any new business activity consists of, relates to, or involves 

any new program— 

‘‘(i) the Director shall notify the enterprise of the determination; 

‘‘(ii) the new business activity described in the notice shall be considered a new program for purposes of this section; and 

‘‘(iii) the Director shall prohibit the enterprise from carrying out the 

activity except to the extent that approval for the activity is obtained 

pursuant to subsection (b). 

‘‘(4) COMMENCEMENT.—An enterprise may commence a new business activity— 

‘‘(A) if the Director issues a written approval regarding such new business 

activity, immediately upon such issuance or at such other time as provided 

by the Director in such letter; or 

‘‘(B) if, during the 30-day period beginning upon receipt by the Director 

of notice pursuant to paragraph (2) regarding a new business activity, the 

Director has not issued to the enterprise a written approval or denial of the 

new business activity, upon the expiration of such 30-day period. 

‘‘(d) APPROVAL AND CONDITIONAL APPROVAL.—The Director may at any time conditionally approve the undertaking of a particular new program or new business activity by an enterprise and set forth the terms and conditions that apply to the program or activity with which the enterprise shall comply if it undertakes the new 

program or activity. Such approval may, in the discretion of the Director, be in the 

form of a written agreement between the enterprise and the Director and shall be 

subject to such terms and conditions therein. Such a written agreement or conditional approval shall be enforceable under subtitle C. 

‘‘(e) DETERMINATION AND TREATMENT OF ACTIVITY AS NEW BUSINESS ACTIVITY.— 

If the Director determines that any activity of an enterprise consists of, relates to, 

or involves any new business activity— 

‘‘(1) the Director shall notify the enterprise of the determination; 

‘‘(2) such activity shall be considered a new business activity for purposes of 

this section; and 

‘‘(3) the Director shall prohibit the enterprise from carrying out the activity 

except to the extent that approval for the activity is obtained pursuant to subsection (c). 

22 

‘‘(f) EFFECT ON OTHER AUTHORITIES.— 

‘‘(1) EXAMINATIONS.—Nothing in this section may be construed to limit, in any 

manner, any other authority or right the Director may have under other provisions of law to conduct an examination of an enterprise. 

‘‘(2) REQUESTS FOR INFORMATION.—Nothing in this section may be construed 

to limit the right of the Director at any time to request additional information 

from an enterprise concerning any business activity. 

‘‘(3) NO IMPLIED RIGHT OF ACTION.—This section shall not create any private 

right of action against an enterprise or any director or executive officer of an 

enterprise, or impair any private right of action under other applicable law. 

‘‘(4) NO LIMITATION.—Nothing in this section may be construed to restrict the 

general supervisory and regulatory authority of the Director over all programs, 

products, activities, or business operations of any kind. 

‘‘(g) REPORT ON PROGRAMS AND BUSINESS ACTIVITIES.—Not later than the expiration of the 180-day period beginning on the effective date under section 185 of the 

Federal Housing Finance Reform Act of 2005, each enterprise shall submit to the 

Director a report identifying and describing each program and business activity of 

the enterprise engaged in or existing as of the submission of the report. 

‘‘(h) REGULATIONS.—The Director shall by order or regulation issue rules and procedures to implement this section, including in the discretion of the Director, such 

definitions, interpretations, forms, and other guidances as the Director considers appropriate.’’. 

(b) DEFINITIONS.—Section 1303 of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4502), as amended by section 2 of this Act, is further amended— 

(1) by redesignating paragraphs (17) through (23) as paragraphs (20) through 

(26), respectively; 

(2) by inserting after paragraph (16) the following new paragraph: 

‘‘(19) NEW BUSINESS ACTIVITY.—The term ‘new business activity’ means, with 

respect to an enterprise, a business activity that— 

‘‘(A) is materially changed or materially different from any of the business activities that the enterprise was engaging in on the effective date 

under section 185 of the Federal Housing Finance Reform Act of 2005; and 

‘‘(B) the enterprise has not previously obtained authorization, pursuant to 

the provisions of section 1321(c), to offer, undertake, transact, conduct, or 

engage in.’’; 

(3) by redesignating paragraphs (15) and (16) as paragraphs (17) and (18), respectively; 

(4) by inserting after paragraph (14) the following new paragraph: 

‘‘(16) MORTGAGE MARKETS.—The terms ‘mortgage loan origination’ and ‘secondary mortgage market’ shall have such meanings as the Director shall, by 

regulation, prescribe consistent with the Federal National Mortgage Association 

Charter Act and the Federal Home Loan Mortgage Corporation Act. The Director shall issue such regulations not later than the expiration of the 12-month 

period beginning on the effective date under section 185 of the Federal Housing 

Finance Reform Act of 2005, and the Director shall review such regulations on 

a periodic basis.’’; 

(5) by redesignating paragraphs (5) through (14) as paragraphs (6) through 

(15), respectively; and 

(6) by inserting after paragraph (4) the following new paragraph: 

‘‘(5) BUSINESS ACTIVITY.—The term ‘business activity’ means, with respect to 

an enterprise, any offering, undertaking, transacting, conducting, or engaging 

in any conduct, activity, or product by the enterprise, as the Director shall provide.’’. 

(c) CONFORMING AMENDMENTS.— 

(1) FANNIE MAE.—Section 302(b)(6) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(b)(6)) is amended— 

(A) by striking ‘‘new program (as such term is’’ and inserting ‘‘new program or new business activity (as such terms are’’; and 

(B) by striking ‘‘before obtaining the approval of the Secretary under section 1322’’ and inserting ‘‘except in accordance with section 1321’’. 

(2) FREDDIE MAC.—Section 305(c) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(c)) is amended— 

(A) by striking ‘‘new program (as such term is’’ and inserting ‘‘new program or new business activity (as such terms are’’; and 

(B) by striking ‘‘before obtaining the approval of the Secretary under section 1322’’ and inserting ‘‘except in accordance with section 1321’’. 

SEC. 123. CONFORMING LOAN LIMITS. 

(a) FANNIE MAE.— 

23 

(1) GENERAL LIMIT.—Section 302(b)(2) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(b)(2)) is amended by striking the 7th and 

8th sentences and inserting the following new sentences: ‘‘Such limitations shall 

not exceed $359,650 for a mortgage secured by a single-family residence, 

$460,400 for a mortgage secured by a 2-family residence, $556,500 for a mortgage secured by a 3-family residence, and $691,600 for a mortgage secured by 

a 4-family residence, except that such maximum limitations shall be adjusted 

effective January 1 of each year beginning after the effective date under section 

185 of the Federal Housing Finance Reform Act of 2005, subject to the limitations in this paragraph. Each adjustment shall be made by adding to or subtracting from each such amount (as it may have been previously adjusted) a 

percentage thereof equal to the percentage increase or decrease, during the 

most recent 12-month or fourth-quarter period ending before the time of determining such annual adjustment, in the housing price index maintained by the 

Director of the Federal Housing Finance Agency (pursuant to section 1322 of 

the Housing and Community Development Act of 1992 (12 U.S.C. 4541)).’’. 

(2) HIGH-COST AREA LIMIT.—Section 302(b)(2) of the Federal National Mortgage Association Charter Act is (12 U.S.C. 1717(b)(2)) is amended by adding 

after the period at the end the following: ‘‘Such foregoing limitations shall also 

be increased with respect to properties of a particular size located in any area 

for which the median price for such size residence exceeds the foregoing limitation for such size residence, to the lesser of 150 percent of such foregoing limitation for such size residence or the amount that is equal to the median price in 

such area for such size residence, except that, subject to the order, if any, issued 

by the Director of the Federal Housing Finance Agency pursuant to section 

123(d)(3) of the Federal Housing Finance Reform Act of 2005, such increase 

shall apply only with respect to mortgages on which are based securities issued 

and sold by the corporation.’’ 

(b) FREDDIE MAC.— 

(1) GENERAL LIMIT.— Section 305(a)(2) of the Federal Home Loan Mortgage 

Corporation Act (12 U.S.C. 1454(a)(2)) is amended by striking the 6th and 7th 

sentences and inserting the following new sentences: ‘‘Such limitations shall not 

exceed $359,650 for a mortgage secured by a single-family residence, $460,400 

for a mortgage secured by a 2-family residence, $556,500 for a mortgage secured 

by a 3-family residence, and $691,600 for a mortgage secured by a 4-family residence, except that such maximum limitations shall be adjusted effective January 1 of each year beginning after the effective date under section 185 of the 

Federal Housing Finance Reform Act of 2005, subject to the limitations in this 

paragraph. Each adjustment shall be made by adding to or subtracting from 

each such amount (as it may have been previously adjusted) a percentage thereof equal to the percentage increase or decrease, during the most recent 12- 

month or fourth-quarter period ending before the time of determining such annual adjustment, in the housing price index maintained by the Director of the 

Federal Housing Finance Agency (pursuant to section 1322 of the Housing and 

Community Development Act of 1992 (12 U.S.C. 4541)).’’. 

(2) HIGH-COST AREA LIMIT.—Section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act is amended by adding after the period at the end the following: ‘‘Such foregoing limitations shall also be increased with respect to properties of a particular size located in any area for which the median price for 

such size residence exceeds the foregoing limitation for such size residence, to 

the lesser of 150 percent of such foregoing limitation for such size residence or 

the amount that is equal to the median price in such area for such size residence, except that, subject to the order, if any, issued by the Director of the 

Federal Housing Finance Agency pursuant to section 123(d)(3) of the Federal 

Housing Finance Reform Act of 2005, such increase shall apply only with respect to mortgages on which are based securities issued and sold by the Corporation.’’ 

(c) HOUSING PRICE INDEX.—Subpart A of part 2 of subtitle A of title XIII of the 

Housing and Community Development Act of 1992 (as amended by the preceding 

provisions of this Act) is amended by inserting after section 1321 (as added by section 122 of this Act) the following new section: 

‘‘SEC. 1322. HOUSING PRICE INDEX. 

‘‘(a) IN GENERAL.—The Director shall establish and maintain a method of assessing the national average 1-family house price for use for adjusting the conforming 

loan limitations of the enterprises. In establishing such method, the Director shall 

take into consideration the monthly survey of all major lenders conducted by the 

Federal Housing Finance Agency to determine the national average 1-family house 

price, the House Price Index maintained by the Office of Federal Housing Enterprise 

24 

Oversight of the Department of Housing and Urban Development before the effective date under section 185 of the Federal Housing Finance Reform Act of 2005, any 

appropriate house price indexes of the Bureau of the Census of the Department of 

Commerce, and any other indexes or measures that the Director considers appropriate. 

‘‘(b) GAO AUDIT.— ‘‘(1) IN GENERAL.—At such times as are required under paragraph (2), the 

Comptroller General of the United States shall conduct an audit of the methodology established by the Director under subsection (a) to determine whether the 

methodology established is an accurate and appropriate means of measuring 

changes to the national average 1-family house price. 

‘‘(2) TIMING.—An audit referred to in paragraph (1) shall be conducted and 

completed not later than the expiration of the 180-day period that begins upon 

each of the following dates: 

‘‘(A) ESTABLISHMENT.—The date upon which such methodology is initially 

established under subsection (a) in final form by the Director. 

‘‘(B) MODIFICATION OR AMENDMENT.—Each date upon which any modification or amendment to such methodology is adopted in final form by the Director. 

‘‘(3) REPORT.—Within 30 days of the completion of any audit conducted under 

this subsection, the Comptroller General shall submit a report detailing the results and conclusions of the audit to the Director, the Committee on Financial 

Services of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs of the Senate.’’. 

(d) CONDITIONS ON CONFORMING LOAN LIMIT FOR HIGH-COST AREAS.— 

(1) STUDY.—The Director of the Federal Housing Finance Agency shall conduct a study under this subsection during the six-month period beginning on 

the effective date under section 185 of this Act. 

(2) ISSUES.—The study under this subsection shall determine— 

(A) the effect that restricting the conforming loan limits for high-cost 

areas only to mortgages on which are based securities issued and sold by 

the Federal National Mortgage Association and the Federal Home Loan 

Mortgage Corporation (as provided in the last sentence of section 302(b)(2) 

of the Federal National Mortgage Association Charter Act and the last sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation 

Act, pursuant to the amendments made by subsections (a)(2) and (b)(2) of 

this section) would have on the cost to borrowers for mortgages on housing 

in such high-cost areas; 

(B) the effects that such restrictions would have on the availability of 

mortgages for housing in such high-cost areas; and 

(C) the extent to which the Federal National Mortgage Association and 

the Federal Home Loan Mortgage Corporation will be able to issue and sell 

securities based on mortgages for housing located in such high-cost areas. 

(3) DETERMINATION.— 

(A) IN GENERAL.—Not later than the expiration of the six-month period 

specified in paragraph (1), the Director of the Federal Housing Finance 

Agency shall make a determination, based on the results of the study under 

this subsection, of whether the restriction of conforming loan limits for 

high-cost areas only to mortgages on which are based securities issued and 

sold by the Federal National Mortgage Association and the Federal Home 

Loan Mortgage Corporation (as provided in the amendments made by subsections (a)(2) and (b)(2) of this section) will result in an increase in the cost 

to borrowers for mortgages on housing in such high-cost areas. 

(B) ORDER.— If such determination is that costs to borrowers on housing 

in such high-cost areas will be increased by such restrictions, the Director 

may issue an order terminating such restrictions, in whole or in part. 

(4) PUBLICATION.— Not later than the expiration of the six-month period specified in paragraph (1), the Director of the Federal Housing Finance Agency shall 

cause to be published in the Federal Register— 

(A) a report that— 

(i) describes the study under this subsection; and 

(ii) sets forth the conclusions of the study regarding the issues to be 

determined under paragraph (2); and 

(B) notice of the determination of the Director under paragraph (3); and 

(C) the order of the Director under paragraph (3). 

(5) DEFINITION.—For purposes of this subsection, the term ‘‘conforming loan 

limits for high-cost areas’’ means the dollar amount limitations applicable under 

the section 302(b)(2) of the Federal National Mortgage Association Charter Act 

and section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (as 

25 

amended by subsections (a) and (b) of this section) for areas described in the 

last sentence of such sections (as so amended). 

(e) REGULAR ADJUSTMENT OF CONFORMING LOAN LIMITS.— (1) ADJUSTMENT FOR YEAR INTERVENING BEFORE EFFECTIVE DATE.—Notwithstanding section 302(b)(2) of the Federal National Mortgage Association Charter 

Act and section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act, 

as amended by this section, the maximum dollar amount limitations in such 

sections shall be adjusted on the effective date under section 185 of this Act, 

and the limitations as so adjusted shall be immediately effective, so that the 

limitations under such sections applicable to the year in which such effective 

date occurs are equal to the limitations in effect under such sections immediately before such effective date. 

(2) FURTHER ADJUSTMENTS.—After such effective date, the dollar amount limitations as adjusted pursuant to paragraph (1) shall be considered ‘‘such amount 

(as it may have been previously adjusted’’ for purposes of section 302(b)(2) of 

the Federal National Mortgage Association Charter Act and section 305(a)(2) of 

the Federal Home Loan Mortgage Corporation Act. 

SEC. 124. ANNUAL HOUSING REPORT REGARDING REGULATED ENTITIES. 

(a) IN GENERAL.—The Housing and Community Development Act of 1992 is 

amended by striking section 1324 (12 U.S.C. 4544) and inserting the following new 

section: 

‘‘SEC. 1324. ANNUAL HOUSING REPORT REGARDING REGULATED ENTITIES. 

‘‘(a) IN GENERAL.—After reviewing and analyzing the reports submitted under section 309(n) of the Federal National Mortgage Association Charter Act, section 307(f) 

of the Federal Home Loan Mortgage Corporation Act, and section 10(j)(11) of the 

Federal Home Loan Bank Act (12 U.S.C. 1430(j)(11)), the Director shall submit a 

report, not later than October 30 of each year, to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate, on the activities of each regulated entity. 

‘‘(b) CONTENTS.—The report shall— 

‘‘(1) discuss the extent to which— 

‘‘(A) each enterprise is achieving the annual housing goals established 

under subpart B of this part; 

‘‘(B) each enterprise is complying with section 1337; 

‘‘(C) each Federal home loan bank is complying with section 10(j) of the 

Federal Home Loan Bank Act; and 

‘‘(D) each regulated entity is achieving the purposes of the regulated entity established by law; 

‘‘(2) aggregate and analyze relevant data on income to assess the compliance 

by each enterprise with the housing goals established under subpart B; 

‘‘(3) aggregate and analyze data on income, race, and gender by census tract 

and other relevant classifications, and compare such data with larger demographic, housing, and economic trends; 

‘‘(4) examine actions that— 

‘‘(A) each enterprise has undertaken or could undertake to promote and 

expand the annual goals established under subpart B and the purposes of 

the enterprise established by law; and 

‘‘(B) each Federal home loan bank has taken or could undertake to promote and expand the community investment program and affordable housing program of the bank established under section subsections (i) and (j) of 

section 10 of the Federal Home Loan Bank Act; 

‘‘(5) examine the primary and secondary multifamily housing mortgage markets and describe— 

‘‘(A) the availability and liquidity of mortgage credit; 

‘‘(B) the status of efforts to provide standard credit terms and underwriting guidelines for multifamily housing and to securitize such mortgage 

products; and 

‘‘(C) any factors inhibiting such standardization and securitization; 

‘‘(6) examine actions each regulated entity has undertaken and could undertake to promote and expand opportunities for first-time homebuyers; 

‘‘(7) describe any actions taken under section 1325(5) with respect to originators found to violate fair lending procedures; 

‘‘(8) discuss and analyze existing conditions and trends, including conditions 

and trends relating to pricing, in the housing markets and mortgage markets; 

and 

‘‘(9) identify the extent to which each enterprise is involved in mortgage purchases and secondary market activities involving subprime loans (as identified 

in accordance with the regulations issued pursuant to section 124(b) of the FedVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00025 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
26 

eral Housing Finance Reform Act of 2005) and compare the characteristics of 

subprime loans purchased and securitized by the enterprises to other loans purchased and securitized by the enterprises 

‘‘(c) DATA COLLECTION AND REPORTING.— 

‘‘(1) IN GENERAL.—To assist the Director in analyzing the matters described 

in subsection (b) and establishing the methodology described in section 1322, 

the Director shall conduct, on a monthly basis, a survey of mortgage markets 

in accordance with this subsection. 

‘‘(2) DATA POINTS.—Each monthly survey conducted by the Director under 

paragraph (1) shall collect data on— 

‘‘(A) the characteristics of individual mortgages that are eligible for purchase by the enterprises and the characteristics of individual mortgages 

that are not eligible for purchase by the enterprises including, in both 

cases, information concerning— 

‘‘(i) the price of the house that secures the mortgage; 

‘‘(ii) the loan-to-value ratio of the mortgage, which shall reflect any 

secondary liens on the relevant property; 

‘‘(iii) the terms of the mortgage; 

‘‘(iv) the creditworthiness of the borrower or borrowers; and 

‘‘(v) whether the mortgage, in the case of a conforming mortgage, was 

purchased by an enterprise; and 

‘‘(B) such other matters as the Director determines to be appropriate. 

‘‘(3) PUBLIC AVAILABILITY.—The Director shall make any data collected by the 

Director in connection with the conduct of a monthly survey available to the 

public in a timely manner, provided that the Director may modify the data released to the public to ensure that the data is not released in an identifiable 

form. 

‘‘(4) DEFINITION.—For purposes of this subsection, the term ‘identifiable form’ 

means any representation of information that permits the identity of a borrower 

to which the information relates to be reasonably inferred by either direct or 

indirect means.’’. 

(b) STANDARDS FOR SUBPRIME LOANS.—The Director shall, not later than one year 

after the effective date under section 185, by regulations issued under section 1316G 

of the Housing and Community Development Act of 1992, establish standards by 

which mortgages purchased and mortgages purchased and securitized shall be characterized as subprime for the purpose of, and only for the purpose of, complying 

with the reporting requirement under section 1324(b)(9) of such Act. 

SEC. 125. REVISION OF HOUSING GOALS. 

(a) HOUSING GOALS.—The Housing and Community Development Act of 1992 is 

amended by striking sections 1331 through 1334 (12 U.S.C. 4561–4) and inserting 

the following new sections: 

‘‘SEC. 1331. ESTABLISHMENT OF HOUSING GOALS. 

‘‘(a) IN GENERAL.—The Director shall establish, effective for the first year that begins after the effective date under section 185 of the Federal Housing Finance Reform Act of 2005 and each year thereafter, annual housing goals, with respect to 

the mortgage purchases by the enterprises, as follows: 

‘‘(1) SINGLE FAMILY HOUSING GOALS.—Three single-family housing goals under 

section 1332. 

‘‘(2) MULTIFAMILY SPECIAL AFFORDABLE HOUSING GOALS.—A multifamily special affordable housing goal under section 1333. 

‘‘(b) ELIMINATING INTEREST RATE DISPARITIES.— 

‘‘(1) IN GENERAL.—In establishing and implementing the housing goals under 

this subpart, the Director shall require the enterprises to disclose appropriate 

information to allow the Director to assess if there are any disparities in interest rates charged on mortgages to borrowers who are minorities as compared 

with borrowers of similar creditworthiness who are not minorities, as evidenced 

in reports pursuant to the Home Mortgage Disclosure Act of 1975. 

‘‘(2) REPORT AND REMEDY.—Upon a finding by the Director, pursuant to the 

information provided by an enterprise in paragraph (1), that a pattern of disparities in interest rates exists, the Director shall— 

‘‘(A) submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs 

of the Senate a report detailing the disparities; and 

‘‘(B) require the enterprise to take such action as the Director deems appropriate pursuant to this Act to remedy the interest rate disparities identified. 

27 

‘‘(3) PROTECTION OF IDENTITY.—In carrying out this subsection, the Director 

shall ensure that no information is made public that would reasonably allow 

identification, directly or indirectly, of an individual borrower. 

‘‘(c) TIMING.—The Director shall establish an annual deadline by which the Director shall establish the annual housing goals under this subpart for each year, taking 

into consideration the need for the enterprises to reasonably and sufficiently plan 

their operations and activities in advance, including operations and activities necessary to meet such annual goals. 

‘‘SEC. 1332. SINGLE-FAMILY HOUSING GOALS. 

‘‘(a) IN GENERAL.—The Director shall establish an annual goal for the purchase 

by each enterprise of conventional, conforming, single-family, owner-occupied, purchase money mortgages financing housing for each of the following categories of 

families: 

‘‘(1) Low-income families. 

‘‘(2) Families that reside in low-income areas. 

‘‘(3) Very low-income families. 

‘‘(b) DETERMINATION OF COMPLIANCE.—The Director shall determine, for each year 

that the housing goal under this section is in effect pursuant to section 1331(a), 

whether each enterprise has complied with the single-family housing goal established under this section for such year. An enterprise shall be considered to be in 

compliance with such a goal for a year only if— 

‘‘(1) for each of the types of families described in subsection (a), the percentage of the number of conventional, conforming, single-family, owner-occupied, 

purchase money mortgages purchased by each enterprise in such year that 

serve such families, meets or exceeds 

‘‘(2) the target for the year for such type of family that is established under 

subsection (c). 

‘‘(c) ANNUAL TARGETS.— 

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), for each of the types 

of families described in subsection (a), the target under this subsection for a 

year shall be the average percentage, for the three years that most recently precede such year and for which information under the Home Mortgage Disclosure 

Act of 1975 is publicly available, of the number of conventional, conforming, single-family, owner-occupied, purchase money mortgages originated in such year 

that serves such type of family, as determined by the Director using the information obtained and determined pursuant to paragraphs (3) and (4). 

‘‘(2) AUTHORITY TO INCREASE TARGETS.— 

‘‘(A) IN GENERAL.—The Director may, for any year, establish by regulation, for any or all of the types of families described in subsection (a), percentage targets that are higher than the percentages for such year determined pursuant to paragraph (1), to reflect expected changes in market performance related to such information under the Home Mortgage Disclosure 

Act of 1975. 

‘‘(B) FACTORS.—In establishing any targets pursuant to subparagraph (A), 

the Director shall consider the following factors: 

‘‘(i) National housing needs. 

‘‘(ii) Economic, housing, and demographic conditions. 

‘‘(iii) The performance and effort of the enterprises toward achieving 

the housing goals under this section in previous years. 

‘‘(iv) The size of the conventional mortgage market serving each of 

the types of families described in subsection (a) relative to the size of 

the overall conventional mortgage market. 

‘‘(v) The need to maintain the sound financial condition of the enterprises. 

‘‘(3) HMDA INFORMATION.—The Director shall annually obtain information 

submitted in compliance with the Home Mortgage Disclosure Act of 1975 regarding conventional, conforming, single-family, owner-occupied, purchase 

money mortgages originated and purchased for the previous year. 

‘‘(4) CONFORMING MORTGAGES.—In determining whether a mortgage is a conforming mortgage for purposes of this paragraph, the Director shall consider the 

original principal balance of the mortgage loan to be the principal balance as 

reported in the information referred to in paragraph (3), as rounded to the nearest thousand dollars. 

‘‘(d) NOTICE OF DETERMINATION AND ENTERPRISE COMMENT.— 

‘‘(1) NOTICE.—Within 30 days of making a determination under subsection (b) 

regarding a compliance of an enterprise for a year with the housing goal established under this section and before any public disclosure thereof, the Director 

shall provide notice of the determination to the enterprise, which shall include 

28 

an analysis and comparison, by the Director, of the performance of the enterprise for the year and the targets for the year under subsection (c). 

‘‘(2) COMMENT PERIOD.—The Director shall provide each enterprise an opportunity to comment on the determination during the 30-day period beginning 

upon receipt by the enterprise of the notice. 

‘‘(e) USE OF BORROWER INCOME.—In monitoring the performance of each enterprise pursuant to the housing goals under this section and evaluating such performance (for purposes of section 1336), the Director shall consider a mortgagor’s income 

to be such income at the time of origination of the mortgage. 

‘‘SEC. 1333. MULTIFAMILY SPECIAL AFFORDABLE GOAL. 

‘‘(a) ESTABLISHMENT.— ‘‘(1) IN GENERAL.—The Director shall establish, by regulation, an annual goal 

for the purchase by each enterprise of each of the following types of mortgages 

on multifamily housing: 

‘‘(A) Mortgages that finance dwelling units for very low-income families. 

‘‘(B) Mortgages that finance dwelling units assisted by the low-income 

housing tax credit under section 42 of the Internal Revenue Code of 1986. 

‘‘(2) ADDITIONAL REQUIREMENTS FOR SMALLER PROJECTS.—The Director shall 

establish, within the goal under this section, additional requirements for the 

purchase by each enterprise of mortgages described in paragraph (1) for multifamily housing projects of a smaller or limited size, which may be based on the 

number of dwelling units in the project or the amount of the mortgage, or both, 

and shall include multifamily housing projects of such smaller sizes as are typical among such projects that serve rural areas. 

‘‘(3) FACTORS.—In establishing the goal under this section relating to mortgages on multifamily housing for an enterprise, the Director shall consider— 

‘‘(A) national multifamily mortgage credit needs; 

‘‘(B) the performance and effort of the enterprise in making mortgage 

credit available for multifamily housing in previous years; 

‘‘(C) the size of the multifamily mortgage market; 

‘‘(D) the ability of the enterprise to lead the industry in making mortgage 

credit available, especially for underserved markets, such as for small multifamily projects of 5 to 50 units, multifamily properties in need of rehabilitation, and multifamily properties located in rural areas; and 

‘‘(E) the need to maintain the sound financial condition of the enterprise. 

‘‘(b) UNITS FINANCED BY HOUSING FINANCE AGENCY BONDS.—The Director shall 

give full credit toward the achievement of the multifamily special affordable housing 

goal under this section (for purposes of section 1336) to dwelling units in multifamily housing that otherwise qualifies under such goal and that is financed by taxexempt or taxable bonds issued by a State or local housing finance agency, but only 

if— 

‘‘(1) such bonds are secured by a guarantee of the enterprise; or 

‘‘(2) are not investment grade and are purchased by the enterprise. 

‘‘(c) USE OF TENANT INCOME OR RENT.—The Director shall monitor the performance of each enterprise in meeting the goals established under this section and shall 

evaluate such performance (for purposes of section 1336) based on— 

‘‘(1) the income of the prospective or actual tenants of the property, where 

such data are available; or 

‘‘(2) where the data referred to in paragraph (1) are not available, rent levels 

affordable to low-income and very low-income families. 

A rent level shall be considered to be affordable for purposes of this subsection for 

an income category referred to in this subsection if it does not exceed 30 percent 

of the maximum income level of such income category, with appropriate adjustments 

for unit size as measured by the number of bedrooms. 

‘‘(d) DETERMINATION OF COMPLIANCE.—The Director shall, for each year that the 

housing goal under this section is in effect pursuant to section 1331(a), determine 

whether each enterprise has complied with such goal and the additional requirements under subsection (a)(2). 

‘‘SEC. 1334. DISCRETIONARY ADJUSTMENT OF HOUSING GOALS. 

‘‘(a) AUTHORITY.—An enterprise may petition the Director in writing at any time 

during a year to reduce the level of any goal for such year established pursuant to 

this subpart. 

‘‘(b) STANDARD FOR REDUCTION.—The Director may reduce the level for a goal pursuant to such a petition only if— 

‘‘(1) market and economic conditions or the financial condition of the enterprise require such action; or 

‘‘(2) efforts to meet the goal would result in the constraint of liquidity, overinvestment in certain market segments, or other consequences contrary to the 

29 

intent of this subpart, or section 301(3) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1716(3)) or section 301(3) of the Federal Home 

Loan Mortgage Corporation Act (12 U.S.C. 1451 note), as applicable. 

‘‘(c) DETERMINATION.—The Director shall make a determination regarding any 

proposed reduction within 30 days of receipt of the petition regarding the reduction. 

The Director may extend such period for a single additional 15-day period, but only 

if the Director requests additional information from the enterprise. A denial by the 

Director to reduce the level of any goal under this section may be appealed to the 

United States District Court for the District of Columbia or the United States district court in the jurisdiction in which the headquarters of an enterprise is located.’’. 

(b) CONFORMING AMENDMENTS.—The Housing and Community Development Act 

of 1992 is amended—— 

(1) in section 1335(a) (12 U.S.C. 4565(a)), in the matter preceding paragraph 

(1), by striking ‘‘low- and moderate-income housing goal’’ and all that follows 

through ‘‘section 1334’’ and inserting ‘‘housing goals established under this subpart’’; 

(2) in section 1336(a)(1) (12 U.S.C. 4566(a)(1)), by striking ‘‘sections 1332, 

1333, and 1334,’’ and inserting ‘‘this subpart’’ . 

(c) DEFINITIONS.—Section 1303 of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4502), as amended by the preceding provisions of this Act, is further amended— 

(1) in paragraph (26), by striking ‘‘60 percent’’ each place such term appears 

and inserting ‘‘50 percent’’; 

(2) by redesignating paragraphs (23) through (26) as paragraphs (27) through 

(30), respectively; 

(3) by inserting after paragraph (22) the following new paragraph: 

‘‘(26) RURAL AREAS.—The term ‘rural areas’ means any areas that are nonmetropolitan areas (as such term is defined by the Director of the Office of Management and Budget), including micropolitan areas and tribal trust lands.’’. 

(4) by redesignating paragraphs (14) through (22) as paragraphs (17) through 

(25), respectively; and 

(5) by inserting after paragraph (13) the following new paragraph: 

‘‘(16) LOW-INCOME AREA.—The term ‘low income area’ means a census tract 

or block numbering area in which the median income does not exceed 80 percent of the median income for the area in which such census tract or block numbering area is located, and, for the purposes of section 1332(a)(2), shall include 

families having incomes not greater than 100 percent of the area median income who reside in minority census tracts.’’; 

(6) by redesignating paragraphs (12) and (13) as paragraphs (14) and (15), respectively; 

(7) by inserting after paragraph (11) the following new paragraph: 

‘‘(13) EXTREMELY LOW-INCOME.—The term ‘extremely low-income’ means— 

‘‘(A) in the case of owner-occupied units, income not in excess of 30 percent of the area median income; and 

‘‘(B) in the case of rental units, income not in excess of 30 percent of the 

area median income, with adjustments for smaller and larger families, as 

determined by the Secretary.’’; 

(8) by redesignating paragraphs (8) through (11) as paragraphs (9) through 

(12), respectively; and 

(9) by inserting after paragraph (7) the following new paragraph: 

‘‘(8) CONFORMING MORTGAGE.—The term ‘conforming mortgage’ means, with 

respect to an enterprise, a conventional mortgage having an original principal 

obligation that does not exceed the dollar limitation, in effect at the time of such 

origination, under, as applicable— 

‘‘(A) section 302(b)(2) of the Federal National Mortgage Association Charter Act; or 

‘‘(B) section 305(a)(2) of the Federal Home Loan Mortgage Corporation 

Act.’’. 

SEC. 126. DUTY TO SERVE UNDERSERVED MARKETS. 

(a) ESTABLISHMENT AND EVALUATION OF PERFORMANCE.—Section 1335 of the 

Housing and Community Development Act of 1992 (12 U.S.C. 4565) is amended— 

(1) in the section heading, by inserting ‘‘DUTY TO SERVE UNDERSERVED MARKETS AND’’ before ‘‘OTHER’’; 

(2) by striking subsection (b); 

(3) in subsection (a)— 

(A) in the matter preceding paragraph (1), by inserting ‘‘and to carry out 

the duty under subsection (a) of this section’’ before ‘‘, each enterprise 

shall’’; 

30 

(B) in paragraph (3), by inserting ‘‘and’’ after the semicolon at the end; 

(C) in paragraph (4), by striking ‘‘; and’’ and inserting a period; 

(D) by striking paragraph (5); and 

(E) by redesignating such subsection as subsection (b); 

(4) by inserting before subsection (b) (as so redesignated by paragraph (3)(E) 

of this subsection) the following new subsection: 

‘‘(a) DUTY TO SERVE UNDERSERVED MARKETS.— ‘‘(1) DUTY.—In accordance with the purpose of the enterprises under section 

301(3) of the Federal National Mortgage Association Charter Act (12 U.S.C. 

1716) and section 301(b)(3) of the Federal Home Loan Mortgage Corporation Act 

(12 U.S.C. 1451 note) to undertake activities relating to mortgages on housing 

for very low-, low-, and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities, each 

enterprise shall have the duty to increase the liquidity of mortgage investments 

and improve the distribution of investment capital available for mortgage financing for underserved markets. 

‘‘(2) UNDERSERVED MARKETS.—To meet its duty under paragraph (1), each enterprise shall comply with the following requirements with respect to the following underserved markets: 

‘‘(A) MANUFACTURED HOUSING.—The enterprise shall lead the industry in 

developing loan products and flexible underwriting guidelines to facilitate 

a secondary market for mortgages on manufactured homes for very low-, 

low-, and moderate-income families. 

‘‘(B) AFFORDABLE HOUSING PRESERVATION.—The enterprise shall lead the 

industry in developing loan products and flexible underwriting guidelines to 

facilitate a secondary market to preserve housing affordable to very low-, 

low-, and moderate-income families, including housing projects subsidized 

under— 

‘‘(i) the project-based and tenant-based rental assistance programs 

under section 8 of the United States Housing Act of 1937; 

‘‘(ii) the program under section 236 of the National Housing Act; 

‘‘(iii) the below-market interest rate mortgage program under section 

221(d)(4) of the National Housing Act; 

‘‘(iv) the supportive housing for the elderly program under section 

202 of the Housing Act of 1959; 

‘‘(v) the supportive housing program for persons with disabilities 

under section 811 of the Cranston-Gonzalez National Affordable Housing Act; and 

‘‘(vi) the rural rental housing program under section 515 of the Housing Act of 1949. 

‘‘(C) RURAL AND OTHER UNDERSERVED MARKETS.—The enterprise shall 

lead the industry in developing loan products and flexible underwriting 

guidelines to facilitate a secondary market for mortgages on housing for 

very low-, low-, and moderate-income families in rural areas, and for mortgages for housing for any other underserved market for very low-, low-, and 

moderate-income families that the Secretary identifies as lacking adequate 

credit through conventional lending sources. Such underserved markets 

may be identified by borrower type, market segment, or geographic area.’’; 

and 

(5) by adding at the end the following new subsection: 

‘‘(c) EVALUATION AND REPORTING OF COMPLIANCE.— 

‘‘(1) IN GENERAL.—Not later than 6 months after the effective date under section 185 of the Federal Housing Finance Reform Act of 2005, the Director shall 

establish a manner for evaluating whether, and the extent to which, the enterprises have complied with the duty under subsection (a) to serve underserved 

markets and for rating the extent of such compliance. Using such method, the 

Director shall, for each year, evaluate such compliance and rate the performance of each enterprise as to extent of compliance. The Director shall include 

such evaluation and rating for each enterprise for a year in the report for that 

year submitted pursuant to section 1319B(a). 

‘‘(2) SEPARATE EVALUATIONS.—In determining whether an enterprise has complied with the duty referred to in paragraph (1), the Director shall separately 

evaluate whether the enterprise has complied with such duty with respect to 

each of the underserved markets identified in subsection (a), taking into consideration— 

‘‘(A) the development of loan products and more flexible underwriting 

guidelines; 

‘‘(B) the extent of outreach to qualified loan sellers in each of such underserved markets; and 

31 

‘‘(C) the volume of loans purchased in each of such underserved markets.’’. 

(b) ENFORCEMENT.—Subsection (a) of section 1336 of the Housing and Community 

Development Act of 1992 (12 U.S.C. 4566(a)) is amended— 

(1) in paragraph (1), by inserting ‘‘and with the duty under section 1335A of 

each enterprise with respect to underserved markets,’’ before ‘‘as provided in 

this section,’’; and 

(2) by adding at the end of such subsection, as amended by the preceding provisions of this title, the following new paragraph: 

‘‘(4) ENFORCEMENT OF DUTY TO PROVIDE MORTGAGE CREDIT TO UNDERSERVED

MARKETS.—The duty under section 1335(a) of each enterprise to serve underserved markets (as determined in accordance with section 1335(c)) shall be enforceable under this section to the same extent and under the same provisions 

that the housing goals established under sections 1332, 1333, and 1334 are enforceable. Such duty shall not be enforceable under any other provision of this 

title (including subpart C of this part) other than this section or under any provision of the Federal National Mortgage Association Charter Act or the Federal 

Home Loan Mortgage Corporation Act.’’. 

SEC. 127. MONITORING AND ENFORCING COMPLIANCE WITH HOUSING GOALS. 

Section 1336 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4566) is amended— 

(1) in subsection (b)— 

(A) in the subsection heading, by inserting ‘‘Preliminary’’ before ‘‘Determination’’; 

(B) by striking paragraph (1) and inserting the following new paragraph: 

‘‘(1) NOTICE.—If the Director preliminarily determines that an enterprise has 

failed, or that there is a substantial probability that an enterprise will fail, to 

meet any housing goal established under this subpart, the Director shall provide written notice to the enterprise of such a preliminary determination, the 

reasons for such determination, and the information on which the Director 

based the determination.’’; 

(C) in paragraph (2)— 

(i) in subparagraph (A), by inserting ‘‘finally’’ before ‘‘determining’’; 

(ii) by striking subparagraphs (B) and (C) and inserting the following 

new subparagraph: 

‘‘(B) EXTENSION OR SHORTENING OF PERIOD.—The Director may— 

‘‘(i) extend the period under subparagraph (A) for good cause for not 

more than 30 additional days; and 

‘‘(ii) shorten the period under subparagraph (A) for good cause.’’; and 

(iii) by redesignating subparagraph (D) as subparagraph (C); and 

(D) in paragraph (3)— 

(i) in subparagraph (A), by striking ‘‘determine’’ and inserting ‘‘issue 

a final determination of’’; 

(ii) in subparagraph (B), by inserting ‘‘final’’ before ‘‘determinations’’; 

and 

(iii) in subparagraph (C)— 

(I) by striking ‘‘Committee on Banking, Finance and Urban Affairs’’ and inserting ‘‘Committee on Financial Services’’; and 

(II) by inserting ‘‘final’’ before ‘‘determination’’ each place such 

term appears; and 

(2) in subsection (c)— 

(A) by striking the subsection designation and heading and all that follows through the end of paragraph (1) and inserting the following: 

‘‘(c) CEASE AND DESIST ORDERS, CIVIL MONEY PENALTIES, AND REMEDIES INCLUDING HOUSING PLANS.— 

‘‘(1) REQUIREMENT.—If the Director finds, pursuant to subsection (b), that 

there is a substantial probability that an enterprise will fail, or has actually 

failed, to meet any housing goal under this subpart and that the achievement 

of the housing goal was or is feasible, the Director may require that the enterprise submit a housing plan under this subsection. If the Director makes such 

a finding and the enterprise refuses to submit such a plan, submits an unacceptable plan, fails to comply with the plan or the Director finds that the enterprise has failed to meet any housing goal under this subpart, in addition to requiring an enterprise to submit a housing plan, the Director may issue a cease 

and desist order in accordance with section 1341, impose civil money penalties 

in accordance with section 1345, or order other remedies as set forth in paragraph (7) of this subsection.’’; 

(B) in paragraph (2)— 

32 

(i) by striking ‘‘CONTENTS.—Each housing plan’’ and inserting ‘‘HOUSING PLAN.—If the Director requires a housing plan under this section, 

such a plan’’; and 

(ii) in subparagraph (B), by inserting ‘‘and changes in its operations’’ 

after ‘‘improvements’’; 

(C) in paragraph (3)— 

(i) by inserting ‘‘comply with any remedial action or’’ before ‘‘submit 

a housing plan’’; and 

(ii) by striking ‘‘under subsection (b)(3) that a housing plan is required’’; 

(D) in paragraph (4), by striking the first two sentences and inserting the 

following: ‘‘The Director shall review each submission by an enterprise, including a housing plan submitted under this subsection, and not later than 

30 days after submission, approve or disapprove the plan or other action. 

The Director may extend the period for approval or disapproval for a single 

additional 30-day period if the Director determines such extension necessary.’’; and 

(E) by adding at the end the following new paragraph: 

‘‘(7) ADDITIONAL REMEDIES FOR FAILURE TO MEET GOALS.—In addition to ordering a housing plan under this section, issuing cease and desist orders under 

section 1341, and ordering civil money penalties under section 1345, the Director may seek other actions when an enterprise fails to meet a goal, and exercise 

appropriate enforcement authority available to the Director under this Act to 

prohibit the enterprise from entering into new programs and new business activities and to order the enterprise to suspend programs and business activities 

pending its achievement of the goal.’’. 

SEC. 128. AFFORDABLE HOUSING FUND. 

(a) IN GENERAL.—The Housing and Community Development Act of 1992 is 

amended by striking sections 1337 and 1338 (12 U.S.C. 4562 note) and inserting the 

following new section: 

‘‘SEC. 1337. AFFORDABLE HOUSING FUND. 

‘‘(a) ESTABLISHMENT AND PURPOSE.—Each enterprise shall establish and manage 

an affordable housing fund in accordance with this section. The purpose of the affordable housing fund shall be— 

‘‘(1) to increase homeownership for extremely low-and very low-income families; 

‘‘(2) to increase investment in housing in low-income areas, and areas designated as qualified census tracts or an area of chronic economic distress pursuant to section 143(j) of the Internal Revenue Code of 1986 (26 U.S.C. 143(j)); 

‘‘(3) to increase and preserve the supply of rental and owner-occupied housing 

for extremely low- and very low-income families; and 

‘‘(4) to increase investment in economic and community development in economically underserved areas. 

‘‘(b) ALLOCATION OF AMOUNTS BY ENTERPRISES.— 

‘‘(1) IN GENERAL.—In accordance with regulations issued by the Director 

under subsection (l) and subject to paragraph (2) of this subsection, each enterprise shall allocate to the affordable housing fund established under subsection 

(a) by the enterprise, in each year beginning after the effective date under section 185 of the Federal Housing Finance Reform Act of 2005, 5 percent of the 

after-tax income of the enterprise for the preceding year. 

‘‘(2) LIMITATION.—An enterprise shall not be required to make an allocation 

for a year to the affordable housing fund of the enterprise established under 

subsection (a) unless— 

‘‘(A) the enterprise is classified by the Director at the time of such allocation as adequately capitalized; and 

‘‘(B) the enterprise generated after-tax income for the preceding year. 

‘‘(3) DETERMINATION OF AFTER-TAX INCOME.—For purposes of this section, the 

term ‘after-tax income’ means, with respect to an enterprise for a year, the 

amount reported by the enterprise for such year in the enterprise’s annual report for such year that is filed with the Securities and Exchange Commission, 

except that for any year in which no such filing is made by an enterprise or 

such filing is not timely made, such term means the amount determined by the 

Director based on the income tax return filings of the enterprise. 

‘‘(c) SELECTION OF ACTIVITIES FUNDED USING AFFORDABLE HOUSING FUND

AMOUNTS.—Amounts from the affordable housing fund of the enterprise may be 

used, or committed for use, only for activities that— 

‘‘(1) are eligible under subsection (d) for such use; and 

33 

‘‘(2) are selected for funding by the enterprise in accordance with the process 

and criteria for such selection established pursuant to subsection (l)(2)(C). 

‘‘(d) ELIGIBLE ACTIVITIES.—Amounts from the affordable housing fund of an enterprise shall be eligible for use, or for commitment for use, only for assistance for— 

‘‘(1) the production, preservation, and rehabilitation of rental housing, including housing under the programs identified in section 1335(a)(2)(B), except that 

amounts provided from the Fund may be used for the benefit only of extremely 

low- and very low-income families; 

‘‘(2) the production, preservation, and rehabilitation of housing for homeownership, including such forms as downpayment assistance, closing cost assistance, and assistance for interest-rate buy-downs, that— 

‘‘(A) is available for purchase only for use as a principal residence by families that qualify both as— 

‘‘(i) extremely low- and very-low income families at the times described in subparagraphs (A) through (C) of section 215(b)(2) of the 

Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 

12745(b)(2)); and 

‘‘(ii) first-time homebuyers, as such term is defined in section 104 of 

the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 

12704), except that any reference in such section to assistance under 

title II of such Act shall for purposes of this section be considered to 

refer to assistance from the affordable housing fund of the enterprise; 

‘‘(B) has an initial purchase price that meets the requirements of section 

215(b)(1) of the Cranston-Gonzalez National Affordable Housing Act; and 

‘‘(C) is subject to the same resale restrictions established under section 

215(b)(3) of the Cranston-Gonzalez National Affordable Housing Act and 

applicable to the participating jurisdiction that is the State in which such 

housing is located; and 

‘‘(3) leveraged grants under subsection (e). 

‘‘(e) LEVERAGED GRANTS.— 

‘‘(1) IN GENERAL.—Pursuant to regulations issued by the Director, each enterprise shall carry out a program under this subsection to make leveraged grants 

from amounts in the affordable housing fund of the enterprise, subject to the 

requirements under this subsection. 

‘‘(2) ELIGIBLE PURPOSES.—Amounts from the affordable housing fund of an enterprise may be used only for leveraged grants under paragraph (4) for— 

‘‘(A) the development, preservation, rehabilitation, or purchase of affordable housing that meets underserved needs for affordable housing; 

‘‘(B) community or economic development activities in economically underserved areas; or 

‘‘(C) a combination of the activities identified in subparagraphs (A) and 

(B). 

‘‘(3) ELIGIBLE SPONSORS.—A leveraged grant under this subsection may be 

made only on behalf of a sponsor that meets such requirements as the Director 

shall establish for experience and success in carrying out the types of activities 

proposed under the application of the sponsor, such as the following entities: 

‘‘(A) A low-income housing fund. 

‘‘(B) A housing finance agency of a State or unit of general local government. 

‘‘(C) A non-profit organization having as one of its principal purposes the 

development or management of affordable housing. 

‘‘(D) A community development financial institution. 

‘‘(E) A national non-profit housing intermediary. 

‘‘(F) A community development corporation. 

‘‘(G) A community development entity. 

‘‘(4) ELIGIBLE USES.—Amounts from the affordable housing fund of an enterprise may be used under this subsection only for the following types of leveraged grants: 

‘‘(A) To provide loan loss reserves. 

‘‘(B) To capitalize a revolving loan fund. 

‘‘(C) To provide equity capitalization of an affordable housing fund. 

‘‘(D) To provide equity capitalization of a community development or economic development fund. 

‘‘(E) For risk sharing loans. 

‘‘(F) For the funding of a specific, detailed investment plan that identifies 

the specific types of uses and the expected timeframes with respect to such 

uses. 

‘‘(5) APPLICATIONS.—The Director shall provide, in the application process established pursuant to subsection (l)(2)(C), for eligible sponsors under paragraph 

34 

(3) of this subsection to submit applications to an enterprise for leveraged 

grants pursuant to this subsection, which shall include a detailed description 

of— 

‘‘(A) the types of affordable housing or community or economic development activities for which the leveraged grant is made; 

‘‘(B) the type of eligible leveraged grants under paragraph (4) to be made 

in the project; 

‘‘(C) the types, sources, and amounts of other funding for the project; 

‘‘(D) and the expected time frame of the leveraged grant under this subsection. 

‘‘(6) LIMITATIONS.—The Director shall by regulation— 

‘‘(A) ensure that leveraged grants pursuant to this subsection are designed to alleviate need for affordable housing in underserved markets 

identified in section 1335(a) having the greatest need for such housing or 

to address community and economic development needs in economically underserved areas having the greatest need; and 

‘‘(B) any returns from leveraged grants under this subsection accrue to 

the affordable housing fund of the enterprise and are available for use only 

as provided under this section. 

‘‘(f) LIMITATIONS ON USE.— ‘‘(1) AMOUNTS FOR HOMEOWNERSHIP.—Of any amounts allocated pursuant to 

subsection (b) in each year to the affordable housing fund of an enterprise, not 

less than 10 percent shall be used for activities under paragraph (2) of subsection (d). 

‘‘(2) AMOUNTS FOR LEVERAGED GRANTS.—Of any amounts allocated pursuant 

to subsection (b) in each year to the affordable housing fund of an enterprise, 

not more than 12.5 percent shall be used for leveraged grants under subsection 

(e). 

‘‘(3) DEADLINE FOR COMMITMENT OR USE.—Any amounts allocated to the affordable housing fund of an enterprise shall be used or committed for use within 

two years of the date of such allocation. 

‘‘(4) USE OF RETURNS.—Any return on investment of any amounts allocated 

pursuant to subsection (b) to the affordable housing fund of an enterprise shall 

be available for use by the enterprise only for eligible activities under subsection (d). 

‘‘(5) ADMINISTRATIVE COSTS.—The Director shall, by regulation— 

‘‘(A) provide that, except as provided in subparagraph (B), amounts allocated to the affordable housing fund of an enterprise may not be used for 

administrative, outreach, or other costs of— 

‘‘(i) the enterprise; or 

‘‘(ii) any recipient of amounts from the affordable housing fund; and 

‘‘(B) limit the amount of any such contributions that may be used for administrative costs of the enterprise of maintaining the affordable housing 

fund and carrying out the program under this section. 

‘‘(6) PROHIBITION OF CONSIDERATION OF USE FOR MEETING HOUSING GOALS.— 

In determining compliance with the housing goals under this subpart, the Director may not consider amounts used under this section for eligible activities 

under subsection (d). The Director shall give credit toward the achievement of 

such housing goals to purchases of mortgages for housing that receives funding 

under this section, but only to the extent that such purchases are funded other 

than under this section. 

‘‘(7) PROHIBITION OF CERTAIN SUBGRANTS.—The Director shall, by regulation, 

ensure that amounts from the affordable housing fund of an enterprise awarded 

under this section to a national non-profit housing intermediary are not used 

for the purpose of distributing subgrants to other non-profit entities. 

‘‘(g) CONSISTENCY OF USE WITH HOUSING NEEDS.— 

‘‘(1) QUARTERLY REPORTS.—The Director shall require each enterprise to submit a report, on a quarterly basis, to the Director and the affordable housing 

board established under subsection (j) describing the activities funded under 

this section during such quarter with amounts from the affordable housing fund 

of the enterprise established under this section. The Director shall make such 

reports publicly available. The affordable housing board shall review each report by an enterprise to determine the consistency of such activities funded with 

the criteria for selection of such activities established pursuant to subsection 

(l)(2)(C). 

‘‘(2) REPLENISHMENT.—If the affordable housing board determines that an activity funded by an enterprise with amounts from the affordable housing fund 

of the enterprise is not consistent with the criteria established pursuant to subsection (l)(2)(C), the board shall notify the Director and the Director shall reVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00034 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
35 

quire the enterprise to allocate to such affordable housing fund (in addition to 

amounts allocated in compliance with subsection (b)) an amount equal to the 

sum of the amounts from the affordable housing fund used and further committed for use for such activity. 

‘‘(h) CAPITAL REQUIREMENTS.—The utilization or commitment of amounts from the 

affordable housing fund of an enterprise shall not be subject to the risk-based capital requirements established pursuant to section 1361(a). 

‘‘(i) REPORTING REQUIREMENT.—Each enterprise shall include, in the report required under section 309(m) of the Federal National Mortgage Association Charter 

Act or section 307(f) of the Federal Home Loan Mortgage Corporation Act, as applicable, a description of the actions taken by the enterprise to utilize or commit 

amounts allocated under this section to the affordable housing fund of the enterprise established under this section. 

‘‘(j) AFFORDABLE HOUSING BOARD.— ‘‘(1) APPOINTMENT.—The Director shall appoint an affordable housing board 

of 7, 9, or 11 persons, who shall include— 

‘‘(A) the Director, or the Director’s designee; 

‘‘(B) the Secretary of Housing and Urban Development, or the Secretary’s 

designee; 

‘‘(C) the Secretary of Agriculture, or the Secretary’s designee; 

‘‘(D) 2 persons from for-profit organizations or businesses actively involved in providing or promoting affordable housing for extremely low- and 

very low-income households; and 

‘‘(E) 2 persons from nonprofit organizations actively involved in providing 

or promoting affordable housing for extremely low- and very low-income 

households. 

‘‘(2) TERMS.— 

‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), the term of 

each member of the affordable housing board appointed pursuant to paragraph (1) (but not including members appointed pursuant to subparagraphs 

(A), (B), and (C)) shall be 3 years. 

‘‘(B) INITIAL APPOINTEES.—The Director shall appoint the initial members 

of the affordable housing board not later than the expiration of the 60-day 

period beginning on the date of the enactment of this Act. As designated 

by the Director at the time of appointment, of the members of the affordable housing board first appointed pursuant to paragraph (1) (but not including members appointed pursuant to subparagraphs (A), (B), and (C))— 

‘‘(i) in the case of a board having 7 members— 

‘‘(I) one shall be appointed for a term of one year; and 

‘‘(II) one shall be appointed for a term of two years; 

‘‘(ii) in the case of a board having 9 members— 

‘‘(I) two shall be appointed for a term of one year; and 

‘‘(II) two shall be appointed for a term of two years; and 

‘‘(iii) in the case of a board having 11 members— 

‘‘(I) two shall be appointed for a term of one year; and 

‘‘(II) three shall be appointed for a term of two years; 

‘‘(3) DUTIES.—The affordable housing board shall meet not less than quarterly— 

‘‘(A) to determine extremely low- and very low-income housing needs; 

‘‘(B) to advise the Director with respect to— 

‘‘(i) establishment of the selection criteria under subsection (l)(2)(C) 

that provide for appropriate use of amounts from the affordable housing funds of the enterprises to meet such needs; and 

‘‘(ii) operation of, and changes to, the program under this section appropriate to meet such needs; and 

‘‘(C) to review the reports submitted by the enterprises pursuant to subsection (g)(1) to determine whether the activities funded using amounts 

from the affordable housing funds of the enterprises comply with the regulations issued pursuant to subsection (l)(2)(C) and inform the Director of 

such determinations, for purposes of subsection (g)(2). 

‘‘(4) EXPENSES AND PER DIEM.—Members of the board shall receive travel expenses, including per diem in lieu of subsistence, in accordance with sections 

5702 and 5703 of title 5, United States Code. 

‘‘(5) ADVISORY COMMITTEE.—The board shall be considered an advisory committee for purposes of the Federal Advisory Committee Act (5 U.S.C. App.). 

‘‘(6) DURATION.— The board shall have continued existence until terminated 

by law. 

‘‘(k) DEFINITION.—For purposes of this section, the term ‘economically underserved 

area’ means an area that predominantly includes census tracts for which— 

36 

‘‘(1) at least 20 percent of the population is below the poverty line (as such 

term is defined in section 673(2) of the Omnibus Budget Reconciliation Act of 

1981 (42 U.S.C. 9902(2)), including any revision required by such section), applicable to a family of the size involved; or 

‘‘(2) median family income does not exceed the greater of— 

‘‘(A) 80 percent of the median family income for the metropolitan statistical area in which such census tracts are located; or 

‘‘(B) 80 percent of the median family income for the State in which such 

census tracts are located. 

‘‘(l) REGULATIONS.— 

‘‘(1) IN GENERAL.—The Director shall issue regulations to carry out this section. 

‘‘(2) REQUIRED CONTENTS.—The regulations issued under this subsection shall 

include— 

‘‘(A) authority for the Director to audit, provide for an audit, or otherwise 

verify an enterprise’s activities, to ensure compliance with this section; 

‘‘(B) a requirement that the Director ensure that the affordable housing 

fund of each enterprise is audited not less than annually to ensure compliance with this section; 

‘‘(C) requirements for a process for application to, and selection by, an enterprise for activities to be funded with amounts from the affordable housing fund, which shall provide that— 

‘‘(i) selection shall based upon specific criteria, including a 

prioritization of funding based upon— 

‘‘(I) greatest impact; 

‘‘(II) geographic diversity; 

‘‘(III) ability to obligate amounts and undertake activities so 

funded in a timely manner; 

‘‘(IV) in the case of rental housing projects under subsection 

(d)(1), the extent to which rents for units in the project funded are 

affordable, especially for extremely low-income families; and 

‘‘(V) in the case of rental housing projects under subsection (d)(1), 

the extent of the duration for which such rents will remain affordable; and 

‘‘(ii) an enterprise may not require for such selection that an activity 

involve financing or underwriting of any kind by the enterprise (other 

than funding through the affordable housing fund of the enterprise) 

and may not give preference in such selection to activities that involve 

such financing; and 

‘‘(D) requirements to ensure that amounts from the affordable housing 

funds of the enterprises used for rental housing under subsection (d)(1) are 

used only for the benefit of extremely low- and very-low income families. 

‘‘(3) LIMITATION.—Any regulations issued by the Director pursuant to this section shall be no more restrictive on the enterprises’ activities in connection with 

the allocation of after-tax income under this section than the regulations issued 

to implement the affordable housing program of the Federal home loan banks 

pursuant to section 10(j) of the Federal Home Loan Bank Act (12 U.S.C. 

1430(j)).’’. 

(b) CONTRIBUTIONS FOR 2006.— 

(1) RESERVATION AND CONTRIBUTION.—In 2006, each enterprise (as such term 

is defined in section 1303 of the Housing and Community Development Act of 

1992) shall reserve for contribution to the affordable housing fund to be established by the enterprise pursuant to section 1337 of such Act (as amended by 

subsection (a) of this section), an amount equal to 3.5 percent of the after-tax 

income of the enterprise for 2005. Upon the establishment of such affordable 

housing fund, each enterprise shall allocate to such fund the amounts reserved 

under this subsection by the enterprise. 

(2) EXCEPTION TO DEADLINE FOR COMMITMENT.—Section 1337(e)(2) of the 

Housing and Community Development Act of 1992 (as amended by subsection 

(a) of this section) shall not apply to amounts allocated to the affordable housing 

fund of an enterprise pursuant to paragraph (1). 

(3) AFTER-TAX INCOME.—For purposes of this subsection, the term ‘‘after-tax 

income’’ has the meaning provided in subsection (b)(3) of the new section 1337 

to be inserted by the amendment made by subsection (a) of this section. 

(4) EFFECTIVE DATE.—This subsection shall take effect on the date of the enactment of this Act. 

37 

SEC. 129. CONSISTENCY WITH MISSION. 

Subpart B of part 2 of subtitle A of title XIII of the Housing and Community Development Act of 1992 (12 U.S.C. 4561 et seq.) is amended by adding after section 

1337, as added by section 127 of this Act, the following new section: 

‘‘SEC. 1338. CONSISTENCY WITH MISSION. 

‘‘This subpart may not be construed to authorize an enterprise to engage in any 

program or activity that contravenes or is inconsistent with the Federal National 

Mortgage Association Charter Act or the Federal Home Loan Mortgage Corporation 

Act.’’. 

SEC. 130. ENFORCEMENT. 

(a) CEASE-AND-DESIST PROCEEDINGS.—Section 1341 of the Housing and Community Development Act of 1992 (12 U.S.C. 4581) is amended— 

(1) by striking subsection (a) and inserting the following new subsection: 

‘‘(a) GROUNDS FOR ISSUANCE.—The Director may issue and serve a notice of 

charges under this section upon an enterprise if the Director determines— 

‘‘(1) the enterprise has failed to meet any housing goal established under subpart B, following a written notice and determination of such failure in accordance with section 1336; 

‘‘(2) the enterprise has failed to submit a report under section 1314, following 

a notice of such failure, an opportunity for comment by the enterprise, and a 

final determination by the Director; 

‘‘(3) the enterprise has failed to submit the information required under subsection (m) or (n) of section 309 of the Federal National Mortgage Association 

Charter Act, or subsection (e) or (f) of section 307 of the Federal Home Loan 

Mortgage Corporation Act; 

‘‘(4) the enterprise has violated any provision of this part or any order, rule 

or regulation under this part; 

‘‘(5) the enterprise has failed to submit a housing plan that complies with section 1336(c) within the applicable period; or 

‘‘(6) the enterprise has failed to comply with a housing plan under section 

1336(c).’’; 

(2) in subsection (b)(2), by striking ‘‘requiring the enterprise to’’ and all that 

follows through the end of the paragraph and inserting the following: ‘‘requiring 

the enterprise to— 

‘‘(A) comply with the goal or goals; 

‘‘(B) submit a report under section 1314; 

‘‘(C) comply with any provision this part or any order, rule or regulation 

under such part; 

‘‘(D) submit a housing plan in compliance with section 1336(c); 

‘‘(E) comply with a housing plan submitted under section 1336(c); or 

‘‘(F) provide the information required under subsection (m) or (n) of section 309 of the Federal National Mortgage Association Charter Act or subsection (e) or (f) of section 307 of the Federal Home Loan Mortgage Corporation Act, as applicable.’’. 

(3) in subsection (c), by inserting ‘‘date of the’’ before ‘‘service of the order’’; 

and 

(4) by striking subsection (d). 

(b) AUTHORITY OF DIRECTOR TO ENFORCE NOTICES AND ORDERS.—Section 1344 of 

the Housing and Community Development Act of 1992 (12 U.S.C. 4584) is amended 

by striking subsection (a) and inserting the following new subsection: 

‘‘(a) ENFORCEMENT.—The Director may, in the discretion of the Director, apply to 

the United States District Court for the District of Columbia, or the United States 

district court within the jurisdiction of which the headquarters of the enterprise is 

located, for the enforcement of any effective and outstanding notice or order issued 

under section 1341 or 1345, or request that the Attorney General of the United 

States bring such an action. Such court shall have jurisdiction and power to order 

and require compliance with such notice or order.’’. 

(c) CIVIL MONEY PENALTIES.—Section 1345 of the Housing and Community Development Act of 1992 (12 U.S.C. 4585) is amended— 

(1) by striking subsections (a) and (b) and inserting the following new subsections: 

‘‘(a) AUTHORITY.—The Director may impose a civil money penalty, in accordance 

with the provisions of this section, on any enterprise that has failed to— 

‘‘(1) meet any housing goal established under subpart B, following a written 

notice and determination of such failure in accordance with section 1336(b); 

‘‘(2) submit a report under section 1314, following a notice of such failure, an 

opportunity for comment by the enterprise, and a final determination by the Director; 

38 

‘‘(3) submit the information required under subsection (m) or (n) of section 

309 of the Federal National Mortgage Association Charter Act, or subsection (e) 

or (f) of section 307 of the Federal Home Loan Mortgage Corporation Act; 

‘‘(4) comply with any provision of this part or any order, rule or regulation 

under this part; 

‘‘(5) submit a housing plan pursuant to section 1336(c) within the required period; or 

‘‘(6) comply with a housing plan for the enterprise under section 1336(c). 

‘‘(b) AMOUNT OF PENALTY.—The amount of the penalty, as determined by the Director, may not exceed— 

‘‘(1) for any failure described in paragraph (1), (5), or (6) of subsection (a), $50,000 for each day that the failure occurs; and 

‘‘(2) for any failure described in paragraph (2), (3), or (4) of subsection (a), $20,000 for each day that the failure occurs.’’; 

(2) in subsection (c)— 

(A) in paragraph (1)— 

(i) in subparagraph (A), by inserting ‘‘and’’ after the semicolon at the 

end; 

(ii) in subparagraph (B), by striking ‘‘; and’’ and inserting a period; 

and 

(iii) by striking subparagraph (C); and 

(B) in paragraph (2), by inserting after the period at the end the following: ‘‘In determining the penalty under subsection (a)(1), the Director 

shall give consideration to the length of time the enterprise should reasonably take to achieve the goal.’’; 

(3) in the first sentence of subsection (d)— 

(A) by striking ‘‘request the Attorney General of the United States to’’ 

and inserting ‘‘, in the discretion of the Director,’’; and 

(B) by inserting ‘‘, or request that the Attorney General of the United 

States bring such an action’’ before the period at the end; 

(4) by striking subsection (f); and 

(5) by redesignating subsection (g) as subsection (f). 

(d) ENFORCEMENT OF SUBPOENAS.—Section 1348(c) of the Housing and Community Development Act of 1992 (12 U.S.C. 4588(c)) is amended— 

(1) by striking ‘‘request the Attorney General of the United States to’’ and inserting ‘‘, in the discretion of the Director,’’; and 

(2) by inserting ‘‘or request that the Attorney General of the United States 

bring such an action,’’ after ‘‘District of Columbia,’’ 

(e) CONFORMING AMENDMENT.—The heading for subpart C of part 2 of subtitle A 

of the Housing and Community Development Act of 1992 is amended to read as follows: 

‘‘Subpart C—Enforcement’’. 

SEC. 131. CONFORMING AMENDMENTS. 

Part 2 of subtitle A of title XIII of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4541 et seq.) is amended— 

(1) by striking ‘‘Secretary’’ each place such term appears in such part and inserting ‘‘Director’’; 

(2) in the section heading for section 1323 (12 U.S.C. 4543), by inserting ‘‘OF

ENTERPRISES’’ before the period at the end; 

(3) by striking section 1327 (12 U.S.C. 4547); 

(4) by striking section 1328 (12 U.S.C. 4548); 

(5) in sections 1345(c)(1)(A) and 1346(b) (12 U.S.C. 4585(c)(1)(A), 4586(b)), by 

striking ‘‘Secretary’s’’ each place such term appears and inserting ‘‘Director’s’’; 

and 

(6) by striking section 1349 (12 U.S.C. 4589). 

Subtitle C—Prompt Corrective Action 

SEC. 141. CAPITAL CLASSIFICATIONS. 

(a) IN GENERAL.—Section 1364 of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4614) is amended— 

(1) in the heading for subsection (a) by striking ‘‘In General’’ and inserting 

‘‘Enterprises’’; 

(2) in subsection (c)— 

(A) by striking ‘‘subsection (b)’’ and inserting ‘‘subsection (c)’’; 

39 

(B) by striking ‘‘enterprises’’ and inserting ‘‘regulated entities’’; and 

(C) by striking the last sentence; 

(3) by redesignating subsections (c) (as so amended by paragraph (2) of this 

subsection) and (d) as subsections (d) and (f), respectively; 

(4) by striking subsection (b) and inserting the following new subsections: 

‘‘(b) FEDERAL HOME LOAN BANKS.— ‘‘(1) ESTABLISHMENT AND CRITERIA.—For purposes of this subtitle, the Director 

shall, by regulation— 

‘‘(A) establish the capital classifications specified under paragraph (2) for 

the Federal home loan banks; 

‘‘(B) establish criteria for each such capital classification based on the 

amount and types of capital held by a bank and the risk-based, minimum, 

and critical capital levels for the banks and taking due consideration of the 

capital classifications established under subsection (a) for the enterprises, 

with such modifications as the Director determines to be appropriate to reflect the difference in operations between the banks and the enterprises; 

and 

‘‘(C) shall classify the Federal home loan banks according to such capital 

classifications. 

‘‘(2) CLASSIFICATIONS.—The capital classifications specified under this paragraph are— 

‘‘(A) adequately capitalized; 

‘‘(B) undercapitalized; 

‘‘(C) significantly undercapitalized; and 

‘‘(D) critically undercapitalized. 

‘‘(c) DISCRETIONARY CLASSIFICATION.— ‘‘(1) GROUNDS FOR RECLASSIFICATION.—The Director may reclassify a regulated entity under paragraph (2) if— 

‘‘(A) at any time, the Director determines in writing that the regulated 

entity is engaging in conduct that could result in a rapid depletion of core 

or total capital or, in the case of an enterprise, that the value of the property subject to mortgages held or securitized by the enterprise has decreased significantly; 

‘‘(B) after notice and an opportunity for hearing, the Director determines 

that the regulated entity is in an unsafe or unsound condition; or 

‘‘(C) pursuant to section 1371(b), the Director deems the regulated entity 

to be engaging in an unsafe or unsound practice. 

‘‘(2) RECLASSIFICATION.—In addition to any other action authorized under this 

title, including the reclassification of a regulated entity for any reason not specified in this subsection, if the Director takes any action described in paragraph 

(1) the Director may classify a regulated entity— 

‘‘(A) as undercapitalized, if the regulated entity is otherwise classified as 

adequately capitalized; 

‘‘(B) as significantly undercapitalized, if the regulated entity is otherwise 

classified as undercapitalized; and 

‘‘(C) as critically undercapitalized, if the regulated entity is otherwise 

classified as significantly undercapitalized.’’; and 

(5) by inserting after subsection (d) (as so redesignated by paragraph (3) of 

this subsection), the following new subsection: 

‘‘(e) RESTRICTION ON CAPITAL DISTRIBUTIONS.— ‘‘(1) IN GENERAL.—A regulated entity shall make no capital distribution if, 

after making the distribution, the regulated entity would be undercapitalized. 

‘‘(2) EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a 

regulated entity, to the extent appropriate or applicable, to repurchase, redeem, 

retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— 

‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and 

‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’. 

(b) REGULATIONS.—Not later than the expiration of the 180-day period beginning 

on the effective date under section 185, the Director of the Federal Housing Finance 

Agency shall issue regulations to carry out section 1364(b) of the Housing and Community Development Act of 1992 (as added by paragraph (4) of this subsection), relating to capital classifications for the Federal home loan banks. 

SEC. 142. SUPERVISORY ACTIONS APPLICABLE TO UNDERCAPITALIZED REGULATED ENTITIES. 

Section 1365 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4615) is amended— 

40 

(1) in the section heading, by striking ‘‘ENTERPRISES’’ and inserting ‘‘REGULATED ENTITIES’’; 

(2) in subsection (a)— 

(A) by redesignating paragraphs (1) and (2) as paragraphs (2) and (3), respectively; 

(B) by inserting before paragraph (2) the following paragraph: 

‘‘(1) REQUIRED MONITORING.—The Director shall— 

‘‘(A) closely monitor the condition of any regulated entity that is classified 

as undercapitalized; 

‘‘(B) closely monitor compliance with the capital restoration plan, restrictions, and requirements imposed under this section; and 

‘‘(C) periodically review the plan, restrictions, and requirements applicable to the undercapitalized regulated entity to determine whether the plan, 

restrictions, and requirements are achieving the purpose of this section.’’; 

and 

(C) by inserting at the end the following new paragraphs: 

‘‘(4) RESTRICTION OF ASSET GROWTH.—A regulated entity that is classified as 

undercapitalized shall not permit its average total assets (as such term is defined in section 1316(b) during any calendar quarter to exceed its average total 

assets during the preceding calendar quarter unless— 

‘‘(A) the Director has accepted the capital restoration plan of the regulated entity; 

‘‘(B) any increase in total assets is consistent with the plan; and 

‘‘(C) the ratio of total capital to assets for the regulated entity increases 

during the calendar quarter at a rate sufficient to enable the entity to become adequately capitalized within a reasonable time. 

‘‘(5) PRIOR APPROVAL OF ACQUISITIONS, NEW PROGRAMS, AND NEW BUSINESS ACTIVITIES.—A regulated entity that is classified as undercapitalized shall not, directly or indirectly, acquire any interest in any entity or engage in any new program or new business activity unless— 

‘‘(A) the Director has accepted the capital restoration plan of the regulated entity, the entity is implementing the plan, and the Director determines that the proposed action is consistent with and will further the 

achievement of the plan; or 

‘‘(B) the Director determines that the proposed action will further the 

purpose of this section.’’; 

(3) in the subsection heading for subsection (b), by striking ‘‘FROM UNDERCAPITALIZED TO SIGNIFICANTLY UNDERCAPITALIZED’’; and 

(4) by striking subsection (c) and inserting the following new subsection: 

‘‘(c) OTHER DISCRETIONARY SAFEGUARDS.—The Director may take, with respect to 

a regulated entity that is classified as undercapitalized, any of the actions authorized to be taken under section 1366 with respect to a regulated entity that is classified as significantly undercapitalized, if the Director determines that such actions 

are necessary to carry out the purpose of this subtitle.’’. 

SEC. 143. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFICANTLY UNDERCAPITALIZED REGULATED ENTITIES. 

Section 1366 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4616) is amended— 

(1) in the section heading, by striking ‘‘ENTERPRISES’’ and inserting ‘‘ENTITIES’’; 

(2) in subsection (a)(2)(A), by striking ‘‘enterprise’’ the last place such term 

appears; 

(3) in subsection (b)— 

(A) in the subsection heading, by striking ‘‘Discretionary Supervisory Actions’’ and inserting ‘‘Specific Actions’’; 

(B) in the matter preceding paragraph (1), by striking ‘‘may, at any time, 

take any’’ and inserting ‘‘shall carry out this section by taking, at any time, 

one or more’’; 

(C) by redesignating paragraphs (5) and (6) as paragraphs (6) and (7), respectively; 

(D) by inserting after paragraph (4) the following new paragraph: 

‘‘(5) IMPROVEMENT OF MANAGEMENT.—Take one or more of the following actions: 

‘‘(A) NEW ELECTION OF BOARD.—Order a new election for the board of directors of the regulated entity. 

‘‘(B) DISMISSAL OF DIRECTORS OR EXECUTIVE OFFICERS.—Require the regulated entity to dismiss from office any director or executive officer who had 

held office for more than 180 days immediately before the entity became 

undercapitalized. Dismissal under this subparagraph shall not be construed 

41 

to be a removal pursuant to the Director’s enforcement powers provided in 

section 1377. 

‘‘(C) EMPLOY QUALIFIED EXECUTIVE OFFICERS.—Require the regulated entity to employ qualified executive officers (who, if the Director so specifies, 

shall be subject to approval by the Director).’’; and 

(E) by inserting at the end the following new paragraph: 

‘‘(8) OTHER ACTION.—Require the regulated entity to take any other action 

that the Director determines will better carry out the purpose of this section 

than any of the actions specified in this paragraph.’’; 

(4) by redesignating subsection (c) as subsection (d); and 

(5) by inserting after subsection (b) the following new subsection: 

‘‘(c) RESTRICTION ON COMPENSATION OF EXECUTIVE OFFICERS.—A regulated entity 

that is classified as significantly undercapitalized may not, without prior written approval by the Director— 

‘‘(1) pay any bonus to any executive officer; or 

‘‘(2) provide compensation to any executive officer at a rate exceeding that officer’s average rate of compensation (excluding bonuses, stock options, and profit sharing) during the 12 calendar months preceding the calendar month in 

which the regulated entity became undercapitalized.’’. 

SEC. 144. AUTHORITY OVER CRITICALLY UNDERCAPITALIZED REGULATED ENTITIES. 

(a) IN GENERAL.—Section 1367 of the Housing and Community Development Act 

of 1992 (12 U.S.C. 4617) is amended to read as follows: 

‘‘SEC. 1367. AUTHORITY OVER CRITICALLY UNDERCAPITALIZED REGULATED ENTITIES. 

‘‘(a) APPOINTMENT OF AGENCY AS CONSERVATOR OR RECEIVER.— 

‘‘(1) IN GENERAL.—Notwithstanding any other provision of Federal or State 

law, if any of the grounds under paragraph (3) exist, at the discretion of the 

Director, the Director may establish a conservatorship or receivership, as appropriate, for the purpose of reorganizing, rehabilitating, or winding up the affairs 

of a regulated entity. 

‘‘(2) APPOINTMENT.—In any conservatorship or receivership established under 

this section, the Director shall appoint the Agency as conservator or receiver. 

‘‘(3) GROUNDS FOR APPOINTMENT.—The grounds for appointing a conservator 

or receiver for a regulated entity are as follows: 

‘‘(A) ASSETS INSUFFICIENT FOR OBLIGATIONS.—The assets of the regulated 

entity are less than the obligations of the regulated entity to its creditors 

and others. 

‘‘(B) SUBSTANTIAL DISSIPATION.—Substantial dissipation of assets or earnings due to— 

‘‘(i) any violation of any provision of Federal or State law; or 

‘‘(ii) any unsafe or unsound practice. 

‘‘(C) UNSAFE OR UNSOUND CONDITION.—An unsafe or unsound condition 

to transact business. 

‘‘(D) CEASE-AND-DESIST ORDERS.—Any willful violation of a cease-and-desist order that has become final. 

‘‘(E) CONCEALMENT.—Any concealment of the books, papers, records, or 

assets of the regulated entity, or any refusal to submit the books, papers, 

records, or affairs of the regulated entity, for inspection to any examiner or 

to any lawful agent of the Director. 

‘‘(F) INABILITY TO MEET OBLIGATIONS.—The regulated entity is likely to be 

unable to pay its obligations or meet the demands of its creditors in the 

normal course of business. 

‘‘(G) LOSSES.—The regulated entity has incurred or is likely to incur 

losses that will deplete all or substantially all of its capital, and there is 

no reasonable prospect for the regulated entity to become adequately capitalized (as defined in section 1364(a)(1)). 

‘‘(H) VIOLATIONS OF LAW.—Any violation of any law or regulation, or any 

unsafe or unsound practice or condition that is likely to— 

‘‘(i) cause insolvency or substantial dissipation of assets or earnings; 

or 

‘‘(ii) weaken the condition of the regulated entity. 

‘‘(I) CONSENT.—The regulated entity, by resolution of its board of directors or its shareholders or members, consents to the appointment. 

‘‘(J) UNDERCAPITALIZATION.—The regulated entity is undercapitalized or 

significantly undercapitalized (as defined in section 1364(a)(3) or in regulations issued pursuant to section 1364(b), as applicable), and— 

‘‘(i) has no reasonable prospect of becoming adequately capitalized; 

‘‘(ii) fails to become adequately capitalized, as required by— 

42 

‘‘(I) section 1365(a)(1) with respect to an undercapitalized regulated entity; or 

‘‘(II) section 1366(a)(1) with respect to a significantly undercapitalized regulated entity; 

‘‘(iii) fails to submit a capital restoration plan acceptable to the Agency within the time prescribed under section 1369C; or 

‘‘(iv) materially fails to implement a capital restoration plan submitted and accepted under section 1369C. 

‘‘(K) CRITICAL UNDERCAPITALIZATION.—The regulated entity is critically 

undercapitalized, as defined in section 1364(a)(4) or in regulations issued 

pursuant to section 1364(b), as applicable. 

‘‘(L) MONEY LAUNDERING.—The Attorney General notifies the Director in 

writing that the regulated entity has been found guilty of a criminal offense 

under section 1956 or 1957 of title 18, United States Code, or section 5322 

or 5324 of title 31, United States Code. 

‘‘(4) JUDICIAL REVIEW.— ‘‘(A) IN GENERAL.—If the Agency is appointed conservator or receiver 

under this section, the regulated entity may, within 30 days of such appointment, bring an action in the United States District Court for the judicial district in which the principal place of business of such regulated entity 

is located, or in the United States District Court for the District of Columbia, for an order requiring the Agency to remove itself as conservator or receiver. 

‘‘(B) REVIEW.—Upon the filing of an action under subparagraph (A), the 

court shall, upon the merits, dismiss such action or direct the Agency to remove itself as such conservator or receiver. 

‘‘(5) DIRECTORS NOT LIABLE FOR ACQUIESCING IN APPOINTMENT OF CONSERVATOR OR RECEIVER.—The members of the board of directors of a regulated entity shall not be liable to the shareholders or creditors of the regulated entity for 

acquiescing in or consenting in good faith to the appointment of the Agency as 

conservator or receiver for that regulated entity. 

‘‘(6) AGENCY NOT SUBJECT TO ANY OTHER FEDERAL AGENCY.—When acting as 

conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise 

of the rights, powers, and privileges of the Agency. 

‘‘(b) POWERS AND DUTIES OF THE AGENCY AS CONSERVATOR OR RECEIVER.— 

‘‘(1) RULEMAKING AUTHORITY OF THE AGENCY.—The Agency may prescribe 

such regulations as the Agency determines to be appropriate regarding the conduct of conservatorships or receiverships. 

‘‘(2) GENERAL POWERS.— 

‘‘(A) SUCCESSOR TO REGULATED ENTITY.—The Agency shall, as conservator 

or receiver, and by operation of law, immediately succeed to— 

‘‘(i) all rights, titles, powers, and privileges of the regulated entity, 

and of any stockholder, officer, or director of such regulated entity with 

respect to the regulated entity and the assets of the regulated entity; 

and 

‘‘(ii) title to the books, records, and assets of any other legal custodian 

of such regulated entity. 

‘‘(B) OPERATE THE REGULATED ENTITY.—The Agency may, as conservator 

or receiver— 

‘‘(i) take over the assets of and operate the regulated entity with all 

the powers of the shareholders, the directors, and the officers of the 

regulated entity and conduct all business of the regulated entity; 

‘‘(ii) collect all obligations and money due the regulated entity; 

‘‘(iii) perform all functions of the regulated entity in the name of the 

regulated entity which are consistent with the appointment as conservator or receiver; and 

‘‘(iv) preserve and conserve the assets and property of such regulated 

entity. 

‘‘(C) FUNCTIONS OF OFFICERS, DIRECTORS, AND SHAREHOLDERS OF A REGULATED ENTITY.—The Agency may, by regulation or order, provide for the exercise of any function by any stockholder, director, or officer of any regulated entity for which the Agency has been named conservator or receiver. 

‘‘(D) POWERS AS CONSERVATOR.—The Agency may, as conservator, take 

such action as may be— 

‘‘(i) necessary to put the regulated entity in a sound and solvent condition; and 

‘‘(ii) appropriate to carry on the business of the regulated entity and 

preserve and conserve the assets and property of the regulated entity. 

43 

‘‘(E) ADDITIONAL POWERS AS RECEIVER.—The Agency may, as receiver, 

place the regulated entity in liquidation and proceed to realize upon the assets of the regulated entity, having due regard to the conditions of the housing finance market. 

‘‘(F) ORGANIZATION OF NEW REGULATED ENTITIES.—The Agency may, as 

receiver, organize a successor regulated entity that will operate pursuant 

to subsection (i). 

‘‘(G) TRANSFER OF ASSETS AND LIABILITIES.—The Agency may, as conservator or receiver, transfer any asset or liability of the regulated entity in 

default without any approval, assignment, or consent with respect to such 

transfer. Any Federal home loan bank may, with the approval of the Agency, acquire the assets of any Bank in conservatorship or receivership, and 

assume the liabilities of such Bank 

‘‘(H) PAYMENT OF VALID OBLIGATIONS.—The Agency, as conservator or receiver, shall, to the extent of proceeds realized from the performance of contracts or sale of the assets of a regulated entity, pay all valid obligations 

of the regulated entity in accordance with the prescriptions and limitations 

of this section. 

‘‘(I) SUBPOENA AUTHORITY.— ‘‘(i) IN GENERAL.— ‘‘(I) IN GENERAL.—The Agency may, as conservator or receiver, 

and for purposes of carrying out any power, authority, or duty with 

respect to a regulated entity (including determining any claim 

against the regulated entity and determining and realizing upon 

any asset of any person in the course of collecting money due the 

regulated entity), exercise any power established under section 

1348. 

‘‘(II) APPLICABILITY OF LAW.—The provisions of section 1348 shall 

apply with respect to the exercise of any power exercised under 

this subparagraph in the same manner as such provisions apply 

under that section. 

‘‘(ii) AUTHORITY OF DIRECTOR.—A subpoena or subpoena duces tecum 

may be issued under clause (i) only by, or with the written approval 

of, the Director, or the designee of the Director. 

‘‘(iii) RULE OF CONSTRUCTION.—This subsection shall not be construed 

to limit any rights that the Agency, in any capacity, might otherwise 

have under section 1317 or 1379D. 

‘‘(J) CONTRACTING FOR SERVICES.—The Agency may, as conservator or receiver, provide by contract for the carrying out of any of its functions, activities, actions, or duties as conservator or receiver. 

‘‘(K) INCIDENTAL POWERS.—The Agency may, as conservator or receiver— 

‘‘(i) exercise all powers and authorities specifically granted to conservators or receivers, respectively, under this section, and such incidental powers as shall be necessary to carry out such powers; and 

‘‘(ii) take any action authorized by this section, which the Agency determines is in the best interests of the regulated entity or the Agency. 

‘‘(3) AUTHORITY OF RECEIVER TO DETERMINE CLAIMS.— 

‘‘(A) IN GENERAL.—The Agency may, as receiver, determine claims in accordance with the requirements of this subsection and any regulations prescribed under paragraph (4). 

‘‘(B) NOTICE REQUIREMENTS.—The receiver, in any case involving the liquidation or winding up of the affairs of a closed regulated entity, shall— 

‘‘(i) promptly publish a notice to the creditors of the regulated entity 

to present their claims, together with proof, to the receiver by a date 

specified in the notice which shall be not less than 90 days after the 

publication of such notice; and 

‘‘(ii) republish such notice approximately 1 month and 2 months, respectively, after the publication under clause (i). 

‘‘(C) MAILING REQUIRED.—The receiver shall mail a notice similar to the 

notice published under subparagraph (B)(i) at the time of such publication 

to any creditor shown on the books of the regulated entity— 

‘‘(i) at the last address of the creditor appearing in such books; or 

‘‘(ii) upon discovery of the name and address of a claimant not appearing on the books of the regulated entity within 30 days after the 

discovery of such name and address. 

‘‘(4) RULEMAKING AUTHORITY RELATING TO DETERMINATION OF CLAIMS.—Subject to subsection (c), the Director may prescribe regulations regarding the allowance or disallowance of claims by the receiver and providing for administrative determination of claims and review of such determination. 

44 

‘‘(5) PROCEDURES FOR DETERMINATION OF CLAIMS.— ‘‘(A) DETERMINATION PERIOD.— ‘‘(i) IN GENERAL.—Before the end of the 180-day period beginning on 

the date on which any claim against a regulated entity is filed with the 

Agency as receiver, the Agency shall determine whether to allow or disallow the claim and shall notify the claimant of any determination with 

respect to such claim. 

‘‘(ii) EXTENSION OF TIME.—The period described in clause (i) may be 

extended by a written agreement between the claimant and the Agency. 

‘‘(iii) MAILING OF NOTICE SUFFICIENT.—The notification requirements 

of clause (i) shall be deemed to be satisfied if the notice of any determination with respect to any claim is mailed to the last address of the 

claimant which appears— 

‘‘(I) on the books of the regulated entity; 

‘‘(II) in the claim filed by the claimant; or 

‘‘(III) in documents submitted in proof of the claim. 

‘‘(iv) CONTENTS OF NOTICE OF DISALLOWANCE.—If any claim filed 

under clause (i) is disallowed, the notice to the claimant shall contain— 

‘‘(I) a statement of each reason for the disallowance; and 

‘‘(II) the procedures available for obtaining agency review of the 

determination to disallow the claim or judicial determination of the 

claim. 

‘‘(B) ALLOWANCE OF PROVEN CLAIM.—The receiver shall allow any claim 

received on or before the date specified in the notice published under paragraph (3)(B)(i), or the date specified in the notice required under paragraph 

(3)(C), which is proved to the satisfaction of the receiver. 

‘‘(C) DISALLOWANCE OF CLAIMS FILED AFTER END OF FILING PERIOD.— 

Claims filed after the date specified in the notice published under paragraph (3)(B)(i), or the date specified under paragraph (3)(C), shall be disallowed and such disallowance shall be final. 

‘‘(D) AUTHORITY TO DISALLOW CLAIMS.— 

‘‘(i) IN GENERAL.—The receiver may disallow any portion of any claim 

by a creditor or claim of security, preference, or priority which is not 

proved to the satisfaction of the receiver. 

‘‘(ii) PAYMENTS TO LESS THAN FULLY SECURED CREDITORS.—In the 

case of a claim of a creditor against a regulated entity which is secured 

by any property or other asset of such regulated entity, the receiver— 

‘‘(I) may treat the portion of such claim which exceeds an amount 

equal to the fair market value of such property or other asset as 

an unsecured claim against the regulated entity; and 

‘‘(II) may not make any payment with respect to such unsecured 

portion of the claim other than in connection with the disposition 

of all claims of unsecured creditors of the regulated entity. 

‘‘(iii) EXCEPTIONS.—No provision of this paragraph shall apply with 

respect to any extension of credit from any Federal Reserve Bank, Federal home loan bank, or the Treasury of the United States. 

‘‘(E) NO JUDICIAL REVIEW OF DETERMINATION PURSUANT TO SUBPARAGRAPH

(D).—No court may review the determination of the Agency under subparagraph (D) to disallow a claim. This subparagraph shall not effect the authority of a claimant to obtain de novo judicial review of a claim pursuant 

to paragraph (6). 

‘‘(F) LEGAL EFFECT OF FILING.— 

‘‘(i) STATUTE OF LIMITATION TOLLED.—For purposes of any applicable 

statute of limitations, the filing of a claim with the receiver shall constitute a commencement of an action. 

‘‘(ii) NO PREJUDICE TO OTHER ACTIONS.—Subject to paragraph (10), 

the filing of a claim with the receiver shall not prejudice any right of 

the claimant to continue any action which was filed before the date of 

the appointment of the receiver, subject to the determination of claims 

by the receiver. 

‘‘(6) PROVISION FOR JUDICIAL DETERMINATION OF CLAIMS.— 

‘‘(A) IN GENERAL.—The claimant may file suit on a claim (or continue an 

action commenced before the appointment of the receiver) in the district or 

territorial court of the United States for the district within which the principal place of business of the regulated entity is located or the United 

States District Court for the District of Columbia (and such court shall have 

jurisdiction to hear such claim), before the end of the 60-day period beginning on the earlier of— 

45 

‘‘(i) the end of the period described in paragraph (5)(A)(i) with respect 

to any claim against a regulated entity for which the Agency is receiver; or 

‘‘(ii) the date of any notice of disallowance of such claim pursuant to 

paragraph (5)(A)(i). 

‘‘(B) STATUTE OF LIMITATIONS.—A claim shall be deemed to be disallowed 

(other than any portion of such claim which was allowed by the receiver), 

and such disallowance shall be final, and the claimant shall have no further 

rights or remedies with respect to such claim, if the claimant fails, before 

the end of the 60-day period described under subparagraph (A), to file suit 

on such claim (or continue an action commenced before the appointment of 

the receiver). 

‘‘(7) REVIEW OF CLAIMS.— ‘‘(A) OTHER REVIEW PROCEDURES.— ‘‘(i) IN GENERAL.—The Agency shall establish such alternative dispute 

resolution processes as may be appropriate for the resolution of claims 

filed under paragraph (5)(A)(i). 

‘‘(ii) CRITERIA.—In establishing alternative dispute resolution processes, the Agency shall strive for procedures which are expeditious, 

fair, independent, and low cost. 

‘‘(iii) VOLUNTARY BINDING OR NONBINDING PROCEDURES.—The Agency 

may establish both binding and nonbinding processes, which may be 

conducted by any government or private party. All parties, including 

the claimant and the Agency, must agree to the use of the process in 

a particular case. 

‘‘(B) CONSIDERATION OF INCENTIVES.—The Agency shall seek to develop 

incentives for claimants to participate in the alternative dispute resolution 

process. 

‘‘(8) EXPEDITED DETERMINATION OF CLAIMS.— 

‘‘(A) ESTABLISHMENT REQUIRED.—The Agency shall establish a procedure 

for expedited relief outside of the routine claims process established under 

paragraph (5) for claimants who— 

‘‘(i) allege the existence of legally valid and enforceable or perfected 

security interests in assets of any regulated entity for which the Agency 

has been appointed receiver; and 

‘‘(ii) allege that irreparable injury will occur if the routine claims procedure is followed. 

‘‘(B) DETERMINATION PERIOD.—Before the end of the 90-day period beginning on the date any claim is filed in accordance with the procedures established under subparagraph (A), the Director shall— 

‘‘(i) determine— 

‘‘(I) whether to allow or disallow such claim; or 

‘‘(II) whether such claim should be determined pursuant to the 

procedures established under paragraph (5); and 

‘‘(ii) notify the claimant of the determination, and if the claim is disallowed, provide a statement of each reason for the disallowance and 

the procedure for obtaining agency review or judicial determination. 

‘‘(C) PERIOD FOR FILING OR RENEWING SUIT.—Any claimant who files a request for expedited relief shall be permitted to file a suit, or to continue 

a suit filed before the appointment of the receiver, seeking a determination 

of the rights of the claimant with respect to such security interest after the 

earlier of— 

‘‘(i) the end of the 90-day period beginning on the date of the filing 

of a request for expedited relief; or 

‘‘(ii) the date the Agency denies the claim. 

‘‘(D) STATUTE OF LIMITATIONS.—If an action described under subparagraph (C) is not filed, or the motion to renew a previously filed suit is not 

made, before the end of the 30-day period beginning on the date on which 

such action or motion may be filed under subparagraph (B), the claim shall 

be deemed to be disallowed as of the end of such period (other than any 

portion of such claim which was allowed by the receiver), such disallowance 

shall be final, and the claimant shall have no further rights or remedies 

with respect to such claim. 

‘‘(E) LEGAL EFFECT OF FILING.— 

‘‘(i) STATUTE OF LIMITATION TOLLED.—For purposes of any applicable 

statute of limitations, the filing of a claim with the receiver shall constitute a commencement of an action. 

‘‘(ii) NO PREJUDICE TO OTHER ACTIONS.—Subject to paragraph (10), 

the filing of a claim with the receiver shall not prejudice any right of 

46 

the claimant to continue any action that was filed before the appointment of the receiver, subject to the determination of claims by the receiver. 

‘‘(9) PAYMENT OF CLAIMS.— 

‘‘(A) IN GENERAL.—The receiver may, in the discretion of the receiver, and 

to the extent funds are available from the assets of the regulated entity, 

pay creditor claims, in such manner and amounts as are authorized under 

this section, which are— 

‘‘(i) allowed by the receiver; 

‘‘(ii) approved by the Agency pursuant to a final determination pursuant to paragraph (7) or (8); or 

‘‘(iii) determined by the final judgment of any court of competent jurisdiction. 

‘‘(B) AGREEMENTS AGAINST THE INTEREST OF THE AGENCY.—No agreement 

that tends to diminish or defeat the interest of the Agency in any asset acquired by the Agency as receiver under this section shall be valid against 

the Agency unless such agreement is in writing, and executed by an authorized official of the regulated entity, except that such requirements for qualified financial contracts shall be applied in a manner consistent with reasonable business trading practices in the financial contracts market. 

‘‘(C) PAYMENT OF DIVIDENDS ON CLAIMS.—The receiver may, in the sole 

discretion of the receiver, pay from the assets of the regulated entity dividends on proved claims at any time, and no liability shall attach to the 

Agency, by reason of any such payment, for failure to pay dividends to a 

claimant whose claim is not proved at the time of any such payment. 

‘‘(D) RULEMAKING AUTHORITY OF THE DIRECTOR.—The Director may prescribe such rules, including definitions of terms, as the Director deems appropriate to establish a single uniform interest rate for, or to make payments of post-insolvency interest to creditors holding proven claims against 

the receivership estates of regulated entities following satisfaction by the 

receiver of the principal amount of all creditor claims. 

‘‘(10) SUSPENSION OF LEGAL ACTIONS.— 

‘‘(A) IN GENERAL.—After the appointment of a conservator or receiver for 

a regulated entity, the conservator or receiver may, in any judicial action 

or proceeding to which such regulated entity is or becomes a party, request 

a stay for a period not to exceed— 

‘‘(i) 45 days, in the case of any conservator; and 

‘‘(ii) 90 days, in the case of any receiver. 

‘‘(B) GRANT OF STAY BY ALL COURTS REQUIRED.—Upon receipt of a request 

by any conservator or receiver under subparagraph (A) for a stay of any judicial action or proceeding in any court with jurisdiction of such action or 

proceeding, the court shall grant such stay as to all parties. 

‘‘(11) ADDITIONAL RIGHTS AND DUTIES.— 

‘‘(A) PRIOR FINAL ADJUDICATION.—The Agency shall abide by any final 

unappealable judgment of any court of competent jurisdiction which was 

rendered before the appointment of the Agency as conservator or receiver. 

‘‘(B) RIGHTS AND REMEDIES OF CONSERVATOR OR RECEIVER.—In the event 

of any appealable judgment, the Agency as conservator or receiver shall— 

‘‘(i) have all the rights and remedies available to the regulated entity 

(before the appointment of such conservator or receiver) and the Agency, including removal to Federal court and all appellate rights; and 

‘‘(ii) not be required to post any bond in order to pursue such remedies. 

‘‘(C) NO ATTACHMENT OR EXECUTION.—No attachment or execution may 

issue by any court upon assets in the possession of the receiver. 

‘‘(D) LIMITATION ON JUDICIAL REVIEW.—Except as otherwise provided in 

this subsection, no court shall have jurisdiction over— 

‘‘(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any regulated entity 

for which the Agency has been appointed receiver; or 

‘‘(ii) any claim relating to any act or omission of such regulated entity 

or the Agency as receiver. 

‘‘(E) DISPOSITION OF ASSETS.—In exercising any right, power, privilege, or 

authority as conservator or receiver in connection with any sale or disposition of assets of a regulated entity for which the Agency has been appointed 

conservator or receiver, the Agency shall conduct its operations in a manner 

which maintains stability in the housing finance markets and, to the extent 

consistent with that goal— 

47 

‘‘(i) maximizes the net present value return from the sale or disposition of such assets; 

‘‘(ii) minimizes the amount of any loss realized in the resolution of 

cases; and 

‘‘(iii) ensures adequate competition and fair and consistent treatment 

of offerors. 

‘‘(12) STATUTE OF LIMITATIONS FOR ACTIONS BROUGHT BY CONSERVATOR OR RE- CEIVER.— 

‘‘(A) IN GENERAL.—Notwithstanding any provision of any contract, the applicable statute of limitations with regard to any action brought by the 

Agency as conservator or receiver shall be— 

‘‘(i) in the case of any contract claim, the longer of— 

‘‘(I) the 6-year period beginning on the date the claim accrues; or 

‘‘(II) the period applicable under State law; and 

‘‘(ii) in the case of any tort claim, the longer of— 

‘‘(I) the 3-year period beginning on the date the claim accrues; or 

‘‘(II) the period applicable under State law. 

‘‘(B) DETERMINATION OF THE DATE ON WHICH A CLAIM ACCRUES.—For purposes of subparagraph (A), the date on which the statute of limitations begins to run on any claim described in such subparagraph shall be the later 

of— 

‘‘(i) the date of the appointment of the Agency as conservator or receiver; or 

‘‘(ii) the date on which the cause of action accrues. 

‘‘(13) REVIVAL OF EXPIRED STATE CAUSES OF ACTION.— 

‘‘(A) IN GENERAL.—In the case of any tort claim described under subparagraph (B) for which the statute of limitations applicable under State law 

with respect to such claim has expired not more than 5 years before the 

appointment of the Agency as conservator or receiver, the Agency may 

bring an action as conservator or receiver on such claim without regard to 

the expiration of the statute of limitation applicable under State law. 

‘‘(B) CLAIMS DESCRIBED.—A tort claim referred to under subparagraph (A) 

is a claim arising from fraud, intentional misconduct resulting in unjust enrichment, or intentional misconduct resulting in substantial loss to the regulated entity. 

‘‘(14) ACCOUNTING AND RECORDKEEPING REQUIREMENTS.— 

‘‘(A) IN GENERAL.—The Agency as conservator or receiver shall, consistent 

with the accounting and reporting practices and procedures established by 

the Agency, maintain a full accounting of each conservatorship and receivership or other disposition of a regulated entity in default. 

‘‘(B) ANNUAL ACCOUNTING OR REPORT.—With respect to each conservatorship or receivership, the Agency shall make an annual accounting or report 

available to the Board, the Comptroller General of the United States, the 

Committee on Banking, Housing, and Urban Affairs of the Senate, and the 

Committee on Financial Services of the House of Representatives. 

‘‘(C) AVAILABILITY OF REPORTS.—Any report prepared under subparagraph 

(B) shall be made available by the Agency upon request to any shareholder 

of a regulated entity or any member of the public. 

‘‘(D) RECORDKEEPING REQUIREMENT.—After the end of the 6-year period 

beginning on the date that the conservatorship or receivership is terminated by the Director, the Agency may destroy any records of such regulated entity which the Agency, in the discretion of the Agency, determines 

to be unnecessary unless directed not to do so by a court of competent jurisdiction or governmental agency, or prohibited by law. 

‘‘(15) FRAUDULENT TRANSFERS.— 

‘‘(A) IN GENERAL.—The Agency, as conservator or receiver, may avoid a 

transfer of any interest of a regulated entity-affiliated party, or any person 

who the conservator or receiver determines is a debtor of the regulated entity, in property, or any obligation incurred by such party or person, that was 

made within 5 years of the date on which the Agency was appointed conservator or receiver, if such party or person voluntarily or involuntarily made 

such transfer or incurred such liability with the intent to hinder, delay, or 

defraud the regulated entity, the Agency, the conservator, or receiver. 

‘‘(B) RIGHT OF RECOVERY.—To the extent a transfer is avoided under subparagraph (A), the conservator or receiver may recover, for the benefit of 

the regulated entity, the property transferred, or, if a court so orders, the 

value of such property (at the time of such transfer) from— 

‘‘(i) the initial transferee of such transfer or the regulated entity-affiliated party or person for whose benefit such transfer was made; or 

48 

‘‘(ii) any immediate or mediate transferee of any such initial transferee. 

‘‘(C) RIGHTS OF TRANSFEREE OR OBLIGEE.—The conservator or receiver 

may not recover under subparagraph (B) from— 

‘‘(i) any transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith; or 

‘‘(ii) any immediate or mediate good faith transferee of such transferee. 

‘‘(D) RIGHTS UNDER THIS PARAGRAPH.—The rights under this paragraph of 

the conservator or receiver described under subparagraph (A) shall be superior to any rights of a trustee or any other party (other than any party 

which is a Federal agency) under title 11, United States Code. 

‘‘(16) ATTACHMENT OF ASSETS AND OTHER INJUNCTIVE RELIEF.—Subject to 

paragraph (17), any court of competent jurisdiction may, at the request of the 

conservator or receiver, issue an order in accordance with Rule 65 of the Federal Rules of Civil Procedure, including an order placing the assets of any person designated by the Agency or such conservator under the control of the court, 

and appointing a trustee to hold such assets. 

‘‘(17) STANDARDS OF PROOF.—Rule 65 of the Federal Rules of Civil Procedure 

shall apply with respect to any proceeding under paragraph (16) without regard 

to the requirement of such rule that the applicant show that the injury, loss, 

or damage is irreparable and immediate. 

‘‘(18) TREATMENT OF CLAIMS ARISING FROM BREACH OF CONTRACTS EXECUTED

BY THE RECEIVER OR CONSERVATOR.— 

‘‘(A) IN GENERAL.—Notwithstanding any other provision of this subsection, any final and unappealable judgment for monetary damages entered against a receiver or conservator for the breach of an agreement executed or approved in writing by such receiver or conservator after the date 

of its appointment, shall be paid as an administrative expense of the receiver or conservator. 

‘‘(B) NO LIMITATION OF POWER.—Nothing in this paragraph shall be construed to limit the power of a receiver or conservator to exercise any rights 

under contract or law, including to terminate, breach, cancel, or otherwise 

discontinue such agreement. 

‘‘(19) GENERAL EXCEPTIONS.— 

‘‘(A) LIMITATIONS.—The rights of a conservator or receiver appointed 

under this section shall be subject to the limitations on the powers of a receiver under sections 402 through 407 of the Federal Deposit Insurance 

Corporation Improvement Act of 1991 (12 U.S.C. 4402 through 4407). 

‘‘(B) MORTGAGES HELD IN TRUST.— 

‘‘(i) IN GENERAL.—Any mortgage, pool of mortgages, or interest in a 

pool of mortgages, held in trust, custodial, or agency capacity by a regulated entity for the benefit of persons other than the regulated entity 

shall not be available to satisfy the claims of creditors generally. 

‘‘(ii) HOLDING OF MORTGAGES.—Any mortgage, pool of mortgages, or 

interest in a pool of mortgages, described under clause (i) shall be held 

by the conservator or receiver appointed under this section for the beneficial owners of such mortgage, pool of mortgages, or interest in a pool 

of mortgages in accordance with the terms of the agreement creating 

such trust, custodial, or other agency arrangement. 

‘‘(iii) LIABILITY OF RECEIVER.—The liability of a receiver appointed 

under this section for damages shall, in the case of any contingent or 

unliquidated claim relating to the mortgages held in trust, be estimated 

in accordance set forth in the regulations of the Director. 

‘‘(c) PRIORITY OF EXPENSES AND UNSECURED CLAIMS.— 

‘‘(1) IN GENERAL.—Unsecured claims against a regulated entity, or a receiver, 

that are proven to the satisfaction of the receiver shall have priority in the following order: 

‘‘(A) Administrative expenses of the receiver. 

‘‘(B) Any other general or senior liability of the regulated entity and 

claims of other Federal home loan banks arising from their payment obligations (including joint and several payment obligations). 

‘‘(C) Any obligation subordinated to general creditors. 

‘‘(D) Any obligation to shareholders or members arising as a result of 

their status as shareholder or members. 

‘‘(2) CREDITORS SIMILARLY SITUATED.—All creditors that are similarly situated 

under paragraph (1) shall be treated in a similar manner, except that the Agency may make such other payments to creditors necessary to maximize the 

present value return from the sale or disposition or such regulated entity’s asVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00048 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
49 

sets or to minimize the amount of any loss realized in the resolution of cases 

so long as all creditors similarly situated receive not less than the amount provided under subsection (e)(2). 

‘‘(3) DEFINITION.—The term ‘administrative expenses of the receiver’ shall include the actual, necessary costs and expenses incurred by the receiver in preserving the assets of the regulated entity or liquidating or otherwise resolving 

the affairs of the regulated entity. Such expenses shall include obligations that 

are incurred by the receiver after appointment as receiver that the Director determines are necessary and appropriate to facilitate the smooth and orderly liquidation or other resolution of the regulated entity. 

‘‘(d) PROVISIONS RELATING TO CONTRACTS ENTERED INTO BEFORE APPOINTMENT OF

CONSERVATOR OR RECEIVER.— 

‘‘(1) AUTHORITY TO REPUDIATE CONTRACTS.—In addition to any other rights a 

conservator or receiver may have, the conservator or receiver for any regulated 

entity may disaffirm or repudiate any contract or lease— 

‘‘(A) to which such regulated entity is a party; 

‘‘(B) the performance of which the conservator or receiver, in its sole discretion, determines to be burdensome; and 

‘‘(C) the disaffirmance or repudiation of which the conservator or receiver 

determines, in its sole discretion, will promote the orderly administration 

of the affairs of the regulated entity. 

‘‘(2) TIMING OF REPUDIATION.—The conservator or receiver shall determine 

whether or not to exercise the rights of repudiation under this subsection within 

a reasonable period following such appointment. 

‘‘(3) CLAIMS FOR DAMAGES FOR REPUDIATION.— 

‘‘(A) IN GENERAL.—Except as otherwise provided under subparagraph (C) 

and paragraphs (4), (5), and (6), the liability of the conservator or receiver 

for the disaffirmance or repudiation of any contract pursuant to paragraph 

(1) shall be— 

‘‘(i) limited to actual direct compensatory damages; and 

‘‘(ii) determined as of— 

‘‘(I) the date of the appointment of the conservator or receiver; 

or 

‘‘(II) in the case of any contract or agreement referred to in paragraph (8), the date of the disaffirmance or repudiation of such contract or agreement. 

‘‘(B) NO LIABILITY FOR OTHER DAMAGES.—For purposes of subparagraph 

(A), the term ‘actual direct compensatory damages’ shall not include— 

‘‘(i) punitive or exemplary damages; 

‘‘(ii) damages for lost profits or opportunity; or 

‘‘(iii) damages for pain and suffering. 

‘‘(C) MEASURE OF DAMAGES FOR REPUDIATION OF FINANCIAL CONTRACTS.— 

In the case of any qualified financial contract or agreement to which paragraph (8) applies, compensatory damages shall be— 

‘‘(i) deemed to include normal and reasonable costs of cover or other 

reasonable measures of damages utilized in the industries for such contract and agreement claims; and 

‘‘(ii) paid in accordance with this subsection and subsection (e), except 

as otherwise specifically provided in this section. 

‘‘(4) LEASES UNDER WHICH THE REGULATED ENTITY IS THE LESSEE.— 

‘‘(A) IN GENERAL.—If the conservator or receiver disaffirms or repudiates 

a lease under which the regulated entity was the lessee, the conservator or 

receiver shall not be liable for any damages (other than damages determined under subparagraph (B)) for the disaffirmance or repudiation of such 

lease. 

‘‘(B) PAYMENTS OF RENT.—Notwithstanding subparagraph (A), the lessor 

under a lease to which that subparagraph applies shall— 

‘‘(i) be entitled to the contractual rent accruing before the later of the 

date— 

‘‘(I) the notice of disaffirmance or repudiation is mailed; or 

‘‘(II) the disaffirmance or repudiation becomes effective, unless 

the lessor is in default or breach of the terms of the lease; 

‘‘(ii) have no claim for damages under any acceleration clause or 

other penalty provision in the lease; and 

‘‘(iii) have a claim for any unpaid rent, subject to all appropriate offsets and defenses, due as of the date of the appointment, which shall 

be paid in accordance with this subsection and subsection (e). 

‘‘(5) LEASES UNDER WHICH THE REGULATED ENTITY IS THE LESSOR.— 

50 

‘‘(A) IN GENERAL.—If the conservator or receiver repudiates an unexpired 

written lease of real property of the regulated entity under which the regulated entity is the lessor and the lessee is not, as of the date of such repudiation, in default, the lessee under such lease may either— 

‘‘(i) treat the lease as terminated by such repudiation; or 

‘‘(ii) remain in possession of the leasehold interest for the balance of 

the term of the lease, unless the lessee defaults under the terms of the 

lease after the date of such repudiation. 

‘‘(B) PROVISIONS APPLICABLE TO LESSEE REMAINING IN POSSESSION.—If any 

lessee under a lease described under subparagraph (A) remains in possession of a leasehold interest under clause (ii) of such subparagraph— 

‘‘(i) the lessee— 

‘‘(I) shall continue to pay the contractual rent pursuant to the 

terms of the lease after the date of the repudiation of such lease; 

and 

‘‘(II) may offset against any rent payment which accrues after the 

date of the repudiation of the lease, and any damages which accrue 

after such date due to the nonperformance of any obligation of the 

regulated entity under the lease after such date; and 

‘‘(ii) the conservator or receiver shall not be liable to the lessee for 

any damages arising after such date as a result of the repudiation 

other than the amount of any offset allowed under clause (i)(II). 

‘‘(6) CONTRACTS FOR THE SALE OF REAL PROPERTY.— 

‘‘(A) IN GENERAL.—If the conservator or receiver repudiates any contract 

for the sale of real property and the purchaser of such real property under 

such contract is in possession, and is not, as of the date of such repudiation, 

in default, such purchaser may either— 

‘‘(i) treat the contract as terminated by such repudiation; or 

‘‘(ii) remain in possession of such real property. 

‘‘(B) PROVISIONS APPLICABLE TO PURCHASER REMAINING IN POSSESSION.— 

If any purchaser of real property under any contract described under subparagraph (A) remains in possession of such property under clause (ii) of 

such subparagraph— 

‘‘(i) the purchaser— 

‘‘(I) shall continue to make all payments due under the contract 

after the date of the repudiation of the contract; and 

‘‘(II) may offset against any such payments any damages which 

accrue after such date due to the nonperformance (after such date) 

of any obligation of the regulated entity under the contract; and 

‘‘(ii) the conservator or receiver shall— 

‘‘(I) not be liable to the purchaser for any damages arising after 

such date as a result of the repudiation other than the amount of 

any offset allowed under clause (i)(II); 

‘‘(II) deliver title to the purchaser in accordance with the provisions of the contract; and 

‘‘(III) have no obligation under the contract other than the performance required under subclause (II). 

‘‘(C) ASSIGNMENT AND SALE ALLOWED.— 

‘‘(i) IN GENERAL.—No provision of this paragraph shall be construed 

as limiting the right of the conservator or receiver to assign the contract described under subparagraph (A), and sell the property subject 

to the contract and the provisions of this paragraph. 

‘‘(ii) NO LIABILITY AFTER ASSIGNMENT AND SALE.—If an assignment 

and sale described under clause (i) is consummated, the conservator or 

receiver shall have no further liability under the contract described 

under subparagraph (A), or with respect to the real property which was 

the subject of such contract. 

‘‘(7) PROVISIONS APPLICABLE TO SERVICE CONTRACTS.— 

‘‘(A) SERVICES PERFORMED BEFORE APPOINTMENT.—In the case of any contract for services between any person and any regulated entity for which 

the Agency has been appointed conservator or receiver, any claim of such 

person for services performed before the appointment of the conservator or 

the receiver shall be— 

‘‘(i) a claim to be paid in accordance with subsections (b) and (e); and 

‘‘(ii) deemed to have arisen as of the date the conservator or receiver 

was appointed. 

‘‘(B) SERVICES PERFORMED AFTER APPOINTMENT AND PRIOR TO REPUDIATION.—If, in the case of any contract for services described under subparagraph (A), the conservator or receiver accepts performance by the other perVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00050 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
51 

son before the conservator or receiver makes any determination to exercise 

the right of repudiation of such contract under this section— 

‘‘(i) the other party shall be paid under the terms of the contract for 

the services performed; and 

‘‘(ii) the amount of such payment shall be treated as an administrative expense of the conservatorship or receivership. 

‘‘(C) ACCEPTANCE OF PERFORMANCE NO BAR TO SUBSEQUENT REPUDI- ATION.—The acceptance by any conservator or receiver of services referred 

to under subparagraph (B) in connection with a contract described in such 

subparagraph shall not affect the right of the conservator or receiver to repudiate such contract under this section at any time after such performance. ‘‘(8) CERTAIN QUALIFIED FINANCIAL CONTRACTS.— ‘‘(A) RIGHTS OF PARTIES TO CONTRACTS.—Subject to paragraphs (9) and 

(10) and notwithstanding any other provision of this Act, any other Federal 

law, or the law of any State, no person shall be stayed or prohibited from 

exercising— 

‘‘(i) any right such person has to cause the termination, liquidation, 

or acceleration of any qualified financial contract with a regulated entity that arises upon the appointment of the Agency as receiver for such 

regulated entity at any time after such appointment; 

‘‘(ii) any right under any security agreement or arrangement or other 

credit enhancement relating to one or more qualified financial contracts 

described in clause (i); or 

‘‘(iii) any right to offset or net out any termination value, payment 

amount, or other transfer obligation arising under or in connection with 

1 or more contracts and agreements described in clause (i), including 

any master agreement for such contracts or agreements. 

‘‘(B) APPLICABILITY OF OTHER PROVISIONS.—Paragraph (10) of subsection 

(b) shall apply in the case of any judicial action or proceeding brought 

against any receiver referred to under subparagraph (A), or the regulated 

entity for which such receiver was appointed, by any party to a contract or 

agreement described under subparagraph (A)(i) with such regulated entity. 

‘‘(C) CERTAIN TRANSFERS NOT AVOIDABLE.— 

‘‘(i) IN GENERAL.—Notwithstanding paragraph (11) or any other Federal or State laws relating to the avoidance of preferential or fraudulent transfers, the Agency, whether acting as such or as conservator or 

receiver of a regulated entity, may not avoid any transfer of money or 

other property in connection with any qualified financial contract with 

a regulated entity. 

‘‘(ii) EXCEPTION FOR CERTAIN TRANSFERS.—Clause (i) shall not apply 

to any transfer of money or other property in connection with any 

qualified financial contract with a regulated entity if the Agency determines that the transferee had actual intent to hinder, delay, or defraud 

such regulated entity, the creditors of such regulated entity, or any conservator or receiver appointed for such regulated entity. 

‘‘(D) CERTAIN CONTRACTS AND AGREEMENTS DEFINED.—In this subsection: 

‘‘(i) QUALIFIED FINANCIAL CONTRACT.—The term ‘qualified financial 

contract’ means any securities contract, commodity contract, forward 

contract, repurchase agreement, swap agreement, and any similar 

agreement that the Agency determines by regulation, resolution, or 

order to be a qualified financial contract for purposes of this paragraph. 

‘‘(ii) SECURITIES CONTRACT.—The term ‘securities contract’— 

‘‘(I) means a contract for the purchase, sale, or loan of a security, 

a certificate of deposit, a mortgage loan, or any interest in a mortgage loan, a group or index of securities, certificates of deposit, or 

mortgage loans or interests therein (including any interest therein 

or based on the value thereof) or any option on any of the foregoing, including any option to purchase or sell any such security, 

certificate of deposit, mortgage loan, interest, group or index, or option, and including any repurchase or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, 

interest, group or index, or option; 

‘‘(II) does not include any purchase, sale, or repurchase obligation 

under a participation in a commercial mortgage loan unless the 

Agency determines by regulation, resolution, or order to include 

any such agreement within the meaning of such term; 

‘‘(III) means any option entered into on a national securities exchange relating to foreign currencies; 

52 

‘‘(IV) means the guarantee by or to any securities clearing agency 

of any settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, certificates of deposit, or mortgage loans or interests therein (including 

any interest therein or based on the value thereof) or option on any 

of the foregoing, including any option to purchase or sell any such 

security, certificate of deposit, mortgage loan, interest, group or 

index, or option; 

‘‘(V) means any margin loan; 

‘‘(VI) means any other agreement or transaction that is similar 

to any agreement or transaction referred to in this clause; 

‘‘(VII) means any combination of the agreements or transactions 

referred to in this clause; 

‘‘(VIII) means any option to enter into any agreement or transaction referred to in this clause; 

‘‘(IX) means a master agreement that provides for an agreement 

or transaction referred to in subclause (I), (III), (IV), (V), (VI), (VII), 

or (VIII), together with all supplements to any such master agreement, without regard to whether the master agreement provides 

for an agreement or transaction that is not a securities contract 

under this clause, except that the master agreement shall be considered to be a securities contract under this clause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (III), (IV), (V), (VI), (VII), 

or (VIII); and 

‘‘(X) means any security agreement or arrangement or other 

credit enhancement related to any agreement or transaction referred to in this clause, including any guarantee or reimbursement 

obligation in connection with any agreement or transaction referred to in this clause. 

‘‘(iii) COMMODITY CONTRACT.—The term ‘commodity contract’ means— 

‘‘(I) with respect to a futures commission merchant, a contract for 

the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade; 

‘‘(II) with respect to a foreign futures commission merchant, a 

foreign future; 

‘‘(III) with respect to a leverage transaction merchant, a leverage 

transaction; 

‘‘(IV) with respect to a clearing organization, a contract for the 

purchase or sale of a commodity for future delivery on, or subject 

to the rules of, a contract market or board of trade that is cleared 

by such clearing organization, or commodity option traded on, or 

subject to the rules of, a contract market or board of trade that is 

cleared by such clearing organization; 

‘‘(V) with respect to a commodity options dealer, a commodity option; 

‘‘(VI) any other agreement or transaction that is similar to any 

agreement or transaction referred to in this clause; 

‘‘(VII) any combination of the agreements or transactions referred to in this clause; 

‘‘(VIII) any option to enter into any agreement or transaction referred to in this clause; 

‘‘(IX) a master agreement that provides for an agreement or 

transaction referred to in subclause (I), (II), (III), (IV), (V), (VI), 

(VII), or (VIII), together with all supplements to any such master 

agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a commodity contract under this clause, except that the master agreement shall be 

considered to be a commodity contract under this clause only with 

respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (II), (III), (IV), (V), (VI), 

(VII), or (VIII); or 

‘‘(X) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in 

this clause, including any guarantee or reimbursement obligation 

in connection with any agreement or transaction referred to in this 

clause. 

‘‘(iv) FORWARD CONTRACT.—The term ‘forward contract’ means— 

53 

‘‘(I) a contract (other than a commodity contract) for the purchase, sale, or transfer of a commodity or any similar good, article, 

service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byproduct thereof, with a maturity date more than 2 days 

after the date the contract is entered into, including, a repurchase 

transaction, reverse repurchase transaction, consignment, lease, 

swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or any other similar agreement; 

‘‘(II) any combination of agreements or transactions referred to 

in subclauses (I) and (III); 

‘‘(III) any option to enter into any agreement or transaction referred to in subclause (I) or (II); 

‘‘(IV) a master agreement that provides for an agreement or 

transaction referred to in subclauses (I), (II), or (III), together with 

all supplements to any such master agreement, without regard to 

whether the master agreement provides for an agreement or transaction that is not a forward contract under this clause, except that 

the master agreement shall be considered to be a forward contract 

under this clause only with respect to each agreement or transaction under the master agreement that is referred to in subclause 

(I), (II), or (III); or 

‘‘(V) any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in 

subclause (I), (II), (III), or (IV), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause. 

‘‘(v) REPURCHASE AGREEMENT.—The term ‘repurchase agreement’ 

(which definition also applies to a reverse repurchase agreement)— 

‘‘(I) means an agreement, including related terms, which provides 

for the transfer of one or more certificates of deposit, mortgage-related securities (as such term is defined in the Securities Exchange 

Act of 1934), mortgage loans, interests in mortgage-related securities or mortgage loans, eligible bankers’ acceptances, qualified foreign government securities or securities that are direct obligations 

of, or that are fully guaranteed by, the United States or any agency 

of the United States against the transfer of funds by the transferee 

of such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests with a simultaneous agreement 

by such transferee to transfer to the transferor thereof certificates 

of deposit, eligible bankers’ acceptances, securities, mortgage loans, 

or interests as described above, at a date certain not later than 1 

year after such transfers or on demand, against the transfer of 

funds, or any other similar agreement; 

‘‘(II) does not include any repurchase obligation under a participation in a commercial mortgage loan unless the Agency determines by regulation, resolution, or order to include any such participation within the meaning of such term; 

‘‘(III) means any combination of agreements or transactions referred to in subclauses (I) and (IV); 

‘‘(IV) means any option to enter into any agreement or transaction referred to in subclause (I) or (III); 

‘‘(V) means a master agreement that provides for an agreement 

or transaction referred to in subclause (I), (III), or (IV), together 

with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement 

or transaction that is not a repurchase agreement under this 

clause, except that the master agreement shall be considered to be 

a repurchase agreement under this subclause only with respect to 

each agreement or transaction under the master agreement that is 

referred to in subclause (I), (III), or (IV); and 

‘‘(VI) means any security agreement or arrangement or other 

credit enhancement related to any agreement or transaction referred to in subclause (I), (III), (IV), or (V), including any guarantee 

or reimbursement obligation in connection with any agreement or 

transaction referred to in any such subclause. 

For purposes of this clause, the term ‘qualified foreign government security’ means a security that is a direct obligation of, or that is fully 

guaranteed by, the central government of a member of the OrganizaVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00053 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
54 

tion for Economic Cooperation and Development (as determined by regulation or order adopted by the appropriate Federal banking authority). 

‘‘(vi) SWAP AGREEMENT.—The term ‘swap agreement’ means— 

‘‘(I) any agreement, including the terms and conditions incorporated by reference in any such agreement, which is an interest 

rate swap, option, future, or forward agreement, including a rate 

floor, rate cap, rate collar, cross-currency rate swap, and basis 

swap; a spot, same day-tomorrow, tomorrow-next, forward, or other 

foreign exchange or precious metals agreement; a currency swap, 

option, future, or forward agreement; an equity index or equity 

swap, option, future, or forward agreement; a debt index or debt 

swap, option, future, or forward agreement; a total return, credit 

spread or credit swap, option, future, or forward agreement; a commodity index or commodity swap, option, future, or forward agreement; or a weather swap, weather derivative, or weather option; 

‘‘(II) any agreement or transaction that is similar to any other 

agreement or transaction referred to in this clause and that is of 

a type that has been, is presently, or in the future becomes, the 

subject of recurrent dealings in the swap markets (including terms 

and conditions incorporated by reference in such agreement) and 

that is a forward, swap, future, or option on one or more rates, currencies, commodities, equity securities or other equity instruments, 

debt securities or other debt instruments, quantitative measures 

associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic 

or financial risk or value; 

‘‘(III) any combination of agreements or transactions referred to 

in this clause; 

‘‘(IV) any option to enter into any agreement or transaction referred to in this clause; 

‘‘(V) a master agreement that provides for an agreement or 

transaction referred to in subclause (I), (II), (III), or (IV), together 

with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement or 

transaction that is not a swap agreement under this clause, except 

that the master agreement shall be considered to be a swap agreement under this clause only with respect to each agreement or 

transaction under the master agreement that is referred to in subclause (I), (II), (III), or (IV); and 

‘‘(VI) any security agreement or arrangement or other credit enhancement related to any agreements or transactions referred to in 

subclause (I), (II), (III), (IV), or (V), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause. 

Such term is applicable for purposes of this subsection only and shall 

not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any swap agreement under any other 

statute, regulation, or rule, including the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act 

of 1935, the Trust Indenture Act of 1939, the Investment Company Act 

of 1940, the Investment Advisers Act of 1940, the Securities Investor 

Protection Act of 1970, the Commodity Exchange Act, the GrammLeach-Bliley Act, and the Legal Certainty for Bank Products Act of 

2000. 

‘‘(vii) TREATMENT OF MASTER AGREEMENT AS ONE AGREEMENT.—Any 

master agreement for any contract or agreement described in any preceding clause of this subparagraph (or any master agreement for such 

master agreement or agreements), together with all supplements to 

such master agreement, shall be treated as a single agreement and a 

single qualified financial contract. If a master agreement contains provisions relating to agreements or transactions that are not themselves 

qualified financial contracts, the master agreement shall be deemed to 

be a qualified financial contract only with respect to those transactions 

that are themselves qualified financial contracts. 

‘‘(viii) TRANSFER.—The term ‘transfer’ means every mode, direct or 

indirect, absolute or conditional, voluntary or involuntary, of disposing 

of or parting with property or with an interest in property, including 

55 

retention of title as a security interest and foreclosure of the regulated 

entity’s equity of redemption. 

‘‘(E) CERTAIN PROTECTIONS IN EVENT OF APPOINTMENT OF CONSERVATOR.— Notwithstanding any other provision of this Act (other than paragraph (13) 

of this subsection), any other Federal law, or the law of any State, no person shall be stayed or prohibited from exercising— 

‘‘(i) any right such person has to cause the termination, liquidation, 

or acceleration of any qualified financial contract with a regulated entity in a conservatorship based upon a default under such financial contract which is enforceable under applicable noninsolvency law; 

‘‘(ii) any right under any security agreement or arrangement or other 

credit enhancement relating to one or more such qualified financial 

contracts; or 

‘‘(iii) any right to offset or net out any termination values, payment 

amounts, or other transfer obligations arising under or in connection 

with such qualified financial contracts. 

‘‘(F) CLARIFICATION.—No provision of law shall be construed as limiting 

the right or power of the Agency, or authorizing any court or agency to 

limit or delay, in any manner, the right or power of the Agency to transfer 

any qualified financial contract in accordance with paragraphs (9) and (10) 

of this subsection or to disaffirm or repudiate any such contract in accordance with subsection (d)(1) of this section. 

‘‘(G) WALKAWAY CLAUSES NOT EFFECTIVE.— 

‘‘(i) IN GENERAL.—Notwithstanding the provisions of subparagraphs 

(A) and (E), and sections 403 and 404 of the Federal Deposit Insurance 

Corporation Improvement Act of 1991, no walkaway clause shall be enforceable in a qualified financial contract of a regulated entity in default. 

‘‘(ii) WALKAWAY CLAUSE DEFINED.—For purposes of this subparagraph, the term ‘walkaway clause’ means a provision in a qualified financial contract that, after calculation of a value of a party’s position 

or an amount due to or from 1 of the parties in accordance with its 

terms upon termination, liquidation, or acceleration of the qualified financial contract, either does not create a payment obligation of a party 

or extinguishes a payment obligation of a party in whole or in part solely because of such party’s status as a nondefaulting party. 

‘‘(9) TRANSFER OF QUALIFIED FINANCIAL CONTRACTS.—In making any transfer 

of assets or liabilities of a regulated entity in default which includes any qualified financial contract, the conservator or receiver for such regulated entity 

shall either— 

‘‘(A) transfer to 1 person— 

‘‘(i) all qualified financial contracts between any person (or any affiliate of such person) and the regulated entity in default; 

‘‘(ii) all claims of such person (or any affiliate of such person) against 

such regulated entity under any such contract (other than any claim 

which, under the terms of any such contract, is subordinated to the 

claims of general unsecured creditors of such regulated entity); 

‘‘(iii) all claims of such regulated entity against such person (or any 

affiliate of such person) under any such contract; and 

‘‘(iv) all property securing or any other credit enhancement for any 

contract described in clause (i) or any claim described in clause (ii) or 

(iii) under any such contract; or 

‘‘(B) transfer none of the financial contracts, claims, or property referred 

to under subparagraph (A) (with respect to such person and any affiliate 

of such person). 

‘‘(10) NOTIFICATION OF TRANSFER.— 

‘‘(A) IN GENERAL.—If— 

‘‘(i) the conservator or receiver for a regulated entity in default makes 

any transfer of the assets and liabilities of such regulated entity, and 

‘‘(ii) the transfer includes any qualified financial contract, 

the conservator or receiver shall notify any person who is a party to any 

such contract of such transfer by 5:00 p.m. (eastern time) on the business 

day following the date of the appointment of the receiver in the case of a 

receivership, or the business day following such transfer in the case of a 

conservatorship. 

‘‘(B) CERTAIN RIGHTS NOT ENFORCEABLE.— 

‘‘(i) RECEIVERSHIP.—A person who is a party to a qualified financial 

contract with a regulated entity may not exercise any right that such 

person has to terminate, liquidate, or net such contract under paraVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00055 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
56 

graph (8)(A) of this subsection or section 403 or 404 of the Federal Deposit Insurance Corporation Improvement Act of 1991, solely by reason 

of or incidental to the appointment of a receiver for the regulated entity 

(or the insolvency or financial condition of the regulated entity for 

which the receiver has been appointed)— 

‘‘(I) until 5:00 p.m. (eastern time) on the business day following 

the date of the appointment of the receiver; or 

‘‘(II) after the person has received notice that the contract has 

been transferred pursuant to paragraph (9)(A). 

‘‘(ii) CONSERVATORSHIP.—A person who is a party to a qualified financial contract with a regulated entity may not exercise any right that 

such person has to terminate, liquidate, or net such contract under 

paragraph (8)(E) of this subsection or section 403 or 404 of the Federal 

Deposit Insurance Corporation Improvement Act of 1991, solely by reason of or incidental to the appointment of a conservator for the regulated entity (or the insolvency or financial condition of the regulated 

entity for which the conservator has been appointed). 

‘‘(iii) NOTICE.—For purposes of this paragraph, the Agency as receiver 

or conservator of a regulated entity shall be deemed to have notified 

a person who is a party to a qualified financial contract with such regulated entity if the Agency has taken steps reasonably calculated to provide notice to such person by the time specified in subparagraph (A). 

‘‘(C) BUSINESS DAY DEFINED.—For purposes of this paragraph, the term 

‘business day’ means any day other than any Saturday, Sunday, or any day 

on which either the New York Stock Exchange or the Federal Reserve Bank 

of New York is closed. 

‘‘(11) DISAFFIRMANCE OR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS.— 

In exercising the rights of disaffirmance or repudiation of a conservator or receiver with respect to any qualified financial contract to which a regulated entity is a party, the conservator or receiver for such institution shall either— 

‘‘(A) disaffirm or repudiate all qualified financial contracts between— 

‘‘(i) any person or any affiliate of such person; and 

‘‘(ii) the regulated entity in default; or 

‘‘(B) disaffirm or repudiate none of the qualified financial contracts referred to in subparagraph (A) (with respect to such person or any affiliate 

of such person). 

‘‘(12) CERTAIN SECURITY INTERESTS NOT AVOIDABLE.—No provision of this subsection shall be construed as permitting the avoidance of any legally enforceable 

or perfected security interest in any of the assets of any regulated entity, except 

where such an interest is taken in contemplation of the insolvency of the regulated entity, or with the intent to hinder, delay, or defraud the regulated entity 

or the creditors of such regulated entity. 

‘‘(13) AUTHORITY TO ENFORCE CONTRACTS.— 

‘‘(A) IN GENERAL.—Notwithstanding any provision of a contract providing 

for termination, default, acceleration, or exercise of rights upon, or solely 

by reason of, insolvency or the appointment of a conservator or receiver, the 

conservator or receiver may enforce any contract or regulated entity bond 

entered into by the regulated entity. 

‘‘(B) CERTAIN RIGHTS NOT AFFECTED.—No provision of this paragraph may 

be construed as impairing or affecting any right of the conservator or receiver to enforce or recover under a director’s or officer’s liability insurance 

contract or surety bond under other applicable law. 

‘‘(C) CONSENT REQUIREMENT.— 

‘‘(i) IN GENERAL.—Except as otherwise provided under this section, no 

person may exercise any right or power to terminate, accelerate, or declare a default under any contract to which a regulated entity is a 

party, or to obtain possession of or exercise control over any property 

of the regulated entity, or affect any contractual rights of the regulated 

entity, without the consent of the conservator or receiver, as appropriate, for a period of— 

‘‘(I) 45 days after the date of appointment of a conservator; or 

‘‘(II) 90 days after the date of appointment of a receiver. 

‘‘(ii) EXCEPTIONS.—This paragraph shall— 

‘‘(I) not apply to a director’s or officer’s liability insurance contract; 

‘‘(II) not apply to the rights of parties to any qualified financial 

contracts under subsection (d)(8); and 

57 

‘‘(III) not be construed as permitting the conservator or receiver 

to fail to comply with otherwise enforceable provisions of such contracts. 

‘‘(14) SAVINGS CLAUSE.—The meanings of terms used in this subsection are 

applicable for purposes of this subsection only, and shall not be construed or 

applied so as to challenge or affect the characterization, definition, or treatment 

of any similar terms under any other statute, regulation, or rule, including the 

Gramm-Leach-Bliley Act, the Legal Certainty for Bank Products Act of 2000, 

the securities laws (as that term is defined in section 3(a)(47) of the Securities 

Exchange Act of 1934), and the Commodity Exchange Act 

‘‘(15) EXCEPTION FOR FEDERAL RESERVE AND FEDERAL HOME LOAN BANKS.—No 

provision of this subsection shall apply with respect to— 

‘‘(A) any extension of credit from any Federal home loan bank or Federal 

Reserve Bank to any regulated entity; or 

‘‘(B) any security interest in the assets of the regulated entity securing 

any such extension of credit. 

‘‘(e) VALUATION OF CLAIMS IN DEFAULT.— 

‘‘(1) IN GENERAL.—Notwithstanding any other provision of Federal law or the 

law of any State, and regardless of the method which the Agency determines 

to utilize with respect to a regulated entity in default or in danger of default, 

including transactions authorized under subsection (i), this subsection shall govern the rights of the creditors of such regulated entity. 

‘‘(2) MAXIMUM LIABILITY.—The maximum liability of the Agency, acting as receiver or in any other capacity, to any person having a claim against the receiver or the regulated entity for which such receiver is appointed shall equal 

the lesser of— 

‘‘(A) the amount such claimant would have received if the Agency had liquidated the assets and liabilities of such regulated entity without exercising 

the authority of the Agency under subsection (i) of this section; or 

‘‘(B) the amount of proceeds realized from the performance of contracts 

or sale of the assets of the regulated entity. 

‘‘(f) LIMITATION ON COURT ACTION.—Except as provided in this section or at the 

request of the Director, no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver. 

‘‘(g) LIABILITY OF DIRECTORS AND OFFICERS.— 

‘‘(1) IN GENERAL.—A director or officer of a regulated entity may be held personally liable for monetary damages in any civil action by, on behalf of, or at 

the request or direction of the Agency, which action is prosecuted wholly or partially for the benefit of the Agency— 

‘‘(A) acting as conservator or receiver of such regulated entity, or 

‘‘(B) acting based upon a suit, claim, or cause of action purchased from, 

assigned by, or otherwise conveyed by such receiver or conservator, 

for gross negligence, including any similar conduct or conduct that demonstrates a greater disregard of a duty of care (than gross negligence) including 

intentional tortious conduct, as such terms are defined and determined under 

applicable State law. 

‘‘(2) NO LIMITATION.—Nothing in this paragraph shall impair or affect any 

right of the Agency under other applicable law. 

‘‘(h) DAMAGES.—In any proceeding related to any claim against a director, officer, 

employee, agent, attorney, accountant, appraiser, or any other party employed by 

or providing services to a regulated entity, recoverable damages determined to result from the improvident or otherwise improper use or investment of any assets 

of the regulated entity shall include principal losses and appropriate interest. 

‘‘(i) LIMITED-LIFE REGULATED ENTITIES.— 

‘‘(1) ORGANIZATION.— 

‘‘(A) PURPOSE.—If a regulated entity is in default, or if the Agency anticipates that a regulated entity will default, the Agency may organize a limited-life regulated entity with those powers and attributes of the regulated 

entity in default or in danger of default that the Director determines necessary, subject to the provisions of this subsection. The Director shall grant 

a temporary charter to the limited-life regulated entity, and the limited-life 

regulated entity shall operate subject to that charter. 

‘‘(B) AUTHORITIES.—Upon the creation of a limited-life regulated entity 

under subparagraph (A), the limited-life regulated entity may— 

‘‘(i) assume such liabilities of the regulated entity that is in default 

or in danger of default as the Agency may, in its discretion, determine 

to be appropriate, provided that the liabilities assumed shall not exceed 

the amount of assets of the limited-life regulated entity; 

58 

‘‘(ii) purchase such assets of the regulated entity that is in default, 

or in danger of default, as the Agency may, in its discretion, determine 

to be appropriate; and 

‘‘(iii) perform any other temporary function which the Agency may, 

in its discretion, prescribe in accordance with this section. 

‘‘(2) CHARTER.— 

‘‘(A) CONDITIONS.—The Agency may grant a temporary charter if the 

Agency determines that the continued operation of the regulated entity in 

default or in danger of default is in the best interest of the national economy and the housing markets. 

‘‘(B) TREATMENT AS BEING IN DEFAULT FOR CERTAIN PURPOSES.—A limitedlife regulated entity shall be treated as a regulated entity in default at such 

times and for such purposes as the Agency may, in its discretion, determine. 

‘‘(C) MANAGEMENT.—A limited-life regulated entity, upon the granting of 

its charter, shall be under the management of a board of directors consisting of not fewer than 5 nor more than 10 members appointed by the 

Agency. 

‘‘(D) BYLAWS.—The board of directors of a limited-life regulated entity 

shall adopt such bylaws as may be approved by the Agency. 

‘‘(3) CAPITAL STOCK.—No capital stock need be paid into a limited-life regulated entity by the Agency. 

‘‘(4) INVESTMENTS.—Funds of a limited-life regulated entity shall be kept on 

hand in cash, invested in obligations of the United States or obligations guaranteed as to principal and interest by the United States, or deposited with the 

Agency, or any Federal Reserve bank. 

‘‘(5) EXEMPT STATUS.—Notwithstanding any other provision of Federal or 

State law, the limited-life regulated entity, its franchise, property, and income 

shall be exempt from all taxation now or hereafter imposed by the United 

States, by any territory, dependency, or possession thereof, or by any State, 

county, municipality, or local taxing authority. 

‘‘(6) WINDING UP.— 

‘‘(A) IN GENERAL.—Subject to subparagraph (B), unless Congress authorizes the sale of the capital stock of the limited-life regulated entity, not 

later than 2 years after the date of its organization, the Agency shall wind 

up the affairs of the limited-life regulated entity. 

‘‘(B) EXTENSION.—The Director may, in the discretion of the Director, extend the status of the limited-life regulated entity for 3 additional 1-year 

periods. 

‘‘(7) TRANSFER OF ASSETS AND LIABILITIES.— 

‘‘(A) IN GENERAL.— 

‘‘(i) TRANSFER OF ASSETS AND LIABILITIES.—The Agency, as receiver, 

may transfer any assets and liabilities of a regulated entity in default, 

or in danger of default, to the limited-life regulated entity in accordance 

with paragraph (1). 

‘‘(ii) SUBSEQUENT TRANSFERS.—At any time after a charter is transferred to a limited-life regulated entity, the Agency, as receiver, may 

transfer any assets and liabilities of such regulated entity in default, 

or in danger in default, as the Agency may, in its discretion, determine 

to be appropriate in accordance with paragraph (1). 

‘‘(iii) EFFECTIVE WITHOUT APPROVAL.—The transfer of any assets or liabilities of a regulated entity in default, or in danger of default, transferred to a limited-life regulated entity shall be effective without any 

further approval under Federal or State law, assignment, or consent 

with respect thereto. 

‘‘(8) PROCEEDS.—To the extent that available proceeds from the limited-life 

regulated entity exceed amounts required to pay obligations, such proceeds may 

be paid to the regulated entity in default, or in danger of default. 

‘‘(9) POWERS.— 

‘‘(A) IN GENERAL.—Each limited-life regulated entity created under this 

subsection shall have all corporate powers of, and be subject to the same 

provisions of law as, the regulated entity in default or in danger of default 

to which it relates, except that— 

‘‘(i) the Agency may— 

‘‘(I) remove the directors of a limited-life regulated entity; and 

‘‘(II) fix the compensation of members of the board of directors 

and senior management, as determined by the Agency in its discretion, of a limited-life regulated entity; 

59 

‘‘(ii) the Agency may indemnify the representatives for purposes of 

paragraph (1)(B), and the directors, officers, employees, and agents of 

a limited-life regulated entity on such terms as the Agency determines 

to be appropriate; and 

‘‘(iii) the board of directors of a limited-life regulated entity— 

‘‘(I) shall elect a chairperson who may also serve in the position 

of chief executive officer, except that such person shall not serve 

either as chairperson or as chief executive officer without the prior 

approval of the Agency; and 

‘‘(II) may appoint a chief executive officer who is not also the 

chairperson, except that such person shall not serve as chief executive officer without the prior approval of the Agency. 

‘‘(B) STAY OF JUDICIAL ACTION.—Any judicial action to which a limitedlife regulated entity becomes a party by virtue of its acquisition of any assets or assumption of any liabilities of a regulated entity in default shall 

be stayed from further proceedings for a period of up to 45 days at the request of the limited-life regulated entity. Such period may be modified upon 

the consent of all parties. 

‘‘(10) OBTAINING OF CREDIT AND INCURRING OF DEBT.— 

‘‘(A) IN GENERAL.—The limited-life regulated entity may obtain unsecured 

credit and incur unsecured debt in the ordinary course of business. 

‘‘(B) INABILITY TO OBTAIN CREDIT.—If the limited-life regulated entity is 

unable to obtain unsecured credit the Director may authorize the obtaining 

of credit or the incurring of debt— 

‘‘(i) with priority over any or all administrative expenses; 

‘‘(ii) secured by a lien on property that is not otherwise subject to a 

lien; or 

‘‘(iii) secured by a junior lien on property that is subject to a lien. 

‘‘(C) LIMITATIONS.— 

‘‘(i) IN GENERAL.—The Director, after notice and a hearing, may authorize the obtaining of credit or the incurring of debt secured by a senior or equal lien on property that is subject to a lien (other than mortgages that collateralize the mortgage-backed securities issued or guaranteed by the regulated entity) only if— 

‘‘(I) the limited-life regulated entity is unable to obtain such credit otherwise; and 

‘‘(II) there is adequate protection of the interest of the holder of 

the lien on the property which such senior or equal lien is proposed 

to be granted. 

‘‘(ii) BURDEN OF PROOF.—In any hearing under this subsection, the 

Director has the burden of proof on the issue of adequate protection. 

‘‘(D) AFFECT ON DEBTS AND LIENS.—The reversal or modification on appeal of an authorization under this paragraph to obtain credit or incur debt, 

or of a grant under this section of a priority or a lien, does not affect the 

validity of any debt so incurred, or any priority or lien so granted, to an 

entity that extended such credit in good faith, whether or not such entity 

knew of the pendency of the appeal, unless such authorization and the incurring of such debt, or the granting of such priority or lien, were stayed 

pending appeal. 

‘‘(11) ISSUANCE OF PREFERRED DEBT.—A limited-life regulated entity may, subject to the approval of the Director and subject to such terms and conditions 

as the Director may prescribe, issue notes, bonds, or other debt obligations of 

a class to which all other debt obligations of the limited-life regulated entity 

shall be subordinate in right and payment. 

‘‘(12) NO FEDERAL STATUS.— 

‘‘(A) AGENCY STATUS.—A limited-life regulated entity is not an agency, establishment, or instrumentality of the United States. 

‘‘(B) EMPLOYEE STATUS.—Representatives for purposes of paragraph 

(1)(B), interim directors, directors, officers, employees, or agents of a limited-life regulated entity are not, solely by virtue of service in any such capacity, officers or employees of the United States. Any employee of the 

Agency or of any Federal instrumentality who serves at the request of the 

Agency as a representative for purposes of paragraph (1)(B), interim director, director, officer, employee, or agent of a limited-life regulated entity 

shall not— 

‘‘(i) solely by virtue of service in any such capacity lose any existing 

status as an officer or employee of the United States for purposes of 

title 5, United States Code, or any other provision of law; or 

60 

‘‘(ii) receive any salary or benefits for service in any such capacity 

with respect to a limited-life regulated entity in addition to such salary 

or benefits as are obtained through employment with the Agency or 

such Federal instrumentality. 

‘‘(13) ADDITIONAL POWERS.—In addition to any other powers granted under 

this subsection, a limited-life regulated entity may— 

‘‘(A) extend a maturity date or change in an interest rate or other term 

of outstanding securities; 

‘‘(B) issue securities of the limited-life regulated entity, for cash, for property, for existing securities, or in exchange for claims or interests, or for any 

other appropriate purposes; and 

‘‘(C) take any other action not inconsistent with this section. 

‘‘(j) OTHER EXEMPTIONS.—When acting as a receiver, the following provisions shall 

apply with respect to the Agency: 

‘‘(1) EXEMPTION FROM TAXATION.—The Agency, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation 

imposed by any State, country, municipality, or local taxing authority, except 

that any real property of the Agency shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as 

other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of the value of such property, 

and the tax thereon, shall be determined as of the period for which such tax 

is imposed. 

‘‘(2) EXEMPTION FROM ATTACHMENT AND LIENS.—No property of the Agency 

shall be subject to levy, attachment, garnishment, foreclosure, or sale without 

the consent of the Agency, nor shall any involuntary lien attach to the property 

of the Agency. 

‘‘(3) EXEMPTION FROM PENALTIES AND FINES.—The Agency shall not be liable 

for any amounts in the nature of penalties or fines, including those arising from 

the failure of any person to pay any real property, personal property, probate, 

or recording tax or any recording or filing fees when due. 

‘‘(k) PROHIBITION OF CHARTER REVOCATION.—In no case may a receiver appointed 

pursuant to this section revoke, annul, or terminate the charter of a regulated entity.’’. 

(b) CONFORMING AMENDMENTS.—Subtitle B of title XIII of the Housing and Community Development Act of 1992 is amended by striking sections 1369 (12 U.S.C. 

4619), 1369A (12 U.S.C. 4620), and 1369B (12 U.S.C. 4621). 

SEC. 145. CONFORMING AMENDMENTS. 

Title XIII of the Housing and Community Development Act of 1992, as amended 

by the preceding provisions of this Act, is further amended— 

(1) in sections 1365 (12 U.S.C. 4615) through 1369D (12 U.S.C. 4623), but not 

including section 1367 (12 U.S.C. 4617) as added by section 144 of this Act— 

(A) by striking ‘‘An enterprise’’ each place such term appears and inserting ‘‘A regulated entity’’; 

(B) by striking ‘‘an enterprise’’ each place such term appears and inserting ‘‘a regulated entity’’; and 

(C) by striking ‘‘the enterprise’’ each place such term appears and inserting ‘‘the regulated entity’’; 

(2) in section 1366 (12 U.S.C. 4616)— 

(A) in subsection (b)(7), by striking ‘‘section 1369 (excluding subsection 

(a)(1) and (2))’’ and inserting ‘‘section 1367’’; and 

(B) in subsection (d), by striking ‘‘the enterprises’’ and inserting ‘‘the regulated entities’’; 

(3) in section 1368(d) (12 U.S.C. 4618(d)), by striking ‘‘Committee on Banking, 

Finance and Urban Affairs’’ and inserting ‘‘Committee on Financial Services’’; 

(4) in section 1369C(c) (12 U.S.C. 4622(c)), by striking ‘‘any enterprise’’ and 

inserting ‘‘any regulated entity’’; and 

(5) in subsections (a) and (d) of section 1369D, by striking ‘‘section 1366 or 

1367 or action under section 1369)’’ each place such phrase appears and inserting ‘‘section 1367)’’. 

Subtitle D—Enforcement Actions 

SEC. 161. CEASE-AND-DESIST PROCEEDINGS. 

Section 1371 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4631) is amended— 

61 

(1) by striking subsections (a) and (b) and inserting the following new subsections: 

‘‘(a) ISSUANCE FOR UNSAFE OR UNSOUND PRACTICES AND VIOLATIONS OF RULES OR

LAWS.—If, in the opinion of the Director, a regulated entity or any regulated entityaffiliated party is engaging or has engaged, or the Director has reasonable cause to 

believe that the regulated entity or any regulated entity-affiliated party is about to 

engage, in an unsafe or unsound practice in conducting the business of the regulated entity or is violating or has violated, or the Director has reasonable cause to 

believe that the regulated entity or any regulated entity-affiliated party is about to 

violate, a law, rule, or regulation, or any condition imposed in writing by the Director in connection with the granting of any application or other request by the regulated entity or any written agreement entered into with the Director, the Director 

may issue and serve upon the regulated entity or such party a notice of charges in 

respect thereof. The Director may not, pursuant to this section, enforce compliance 

with any housing goal established under subpart B of part 2 of subtitle A of this 

title, with section 1336 or 1337 of this title, with subsection (m) or (n) of section 

309 of the Federal National Mortgage Association Charter Act (12 U.S.C. 1723a(m), 

(n)), with subsection (e) or (f) of section 307 of the Federal Home Loan Mortgage 

Corporation Act (12 U.S.C. 1456(e), (f)), or with paragraph (5) of section 10(j) of the 

Federal Home Loan Bank Act (12 U.S.C. 1430(j)). 

‘‘(b) ISSUANCE FOR UNSATISFACTORY RATING.—If a regulated entity receives, in its 

most recent report of examination, a less-than-satisfactory rating for asset quality, 

management, earnings, or liquidity, the Director may (if the deficiency is not corrected) deem the regulated entity to be engaging in an unsafe or unsound practice 

for purposes of this subsection.’’; 

(2) in subsection (c)(2), by striking ‘‘enterprise, executive officer, or director’’ 

and inserting ‘‘regulated entity or regulated entity-affiliated party’’; and 

(3) in subsection (d)—— 

(A) in the matter preceding paragraph (1), by striking ‘‘enterprise, executive officer, or director’’ and inserting ‘‘regulated entity or regulated entityaffiliated party’’ 

(B) in paragraph (1)— 

(i) by striking ‘‘an executive officer or director’’ and inserting ‘‘a regulated entity affiliated party’’; 

(ii) by inserting ‘‘(including reimbursement of compensation under 

section 1318)’’ after ‘‘reimbursement’’; 

(C) in paragraph (6), by striking ‘‘and’’ at the end; 

(D) by redesignating paragraph (7) as paragraph (8); and 

(E) by inserting after paragraph (6) the following new paragraph: 

‘‘(7) to effect an attachment on a regulated entity or regulated entity-affiliated 

party subject to an order under this section or section 1372; and’’. 

SEC. 162. TEMPORARY CEASE-AND-DESIST PROCEEDINGS. 

Section 1372 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4632) is amended— 

(1) by striking subsection (a) and inserting the following new subsection: 

‘‘(a) GROUNDS FOR ISSUANCE.—Whenever the Director determines that the violation or threatened violation or the unsafe or unsound practice or practices specified 

in the notice of charges served upon the regulated entity or any regulated entityaffiliated party pursuant to section 1371(a), or the continuation thereof, is likely to 

cause insolvency or significant dissipation of assets or earnings of the regulated entity, or is likely to weaken the condition of the regulated entity prior to the completion of the proceedings conducted pursuant to sections 1371 and 1373, the Director 

may issue a temporary order requiring the regulated entity or such party to cease 

and desist from any such violation or practice and to take affirmative action to prevent or remedy such insolvency, dissipation, condition, or prejudice pending completion of such proceedings. Such order may include any requirement authorized under 

section 1371(d).’’; 

(2) in subsection (b), by striking ‘‘enterprise, executive officer, or director’’ and 

inserting ‘‘regulated entity or regulated entity-affiliated party’’; 

(3) in subsection (d)— 

(A) by striking ‘‘An enterprise, executive officer, or director’’ and inserting 

‘‘A regulated entity or regulated entity-affiliated party’’; and 

(B) by striking ‘‘the enterprise, executive officer, or director’’ and inserting 

‘‘the regulated entity or regulated entity-affiliated party’’; and 

(4) by striking subsection (e) and in inserting the following new subsection: 

‘‘(e) ENFORCEMENT.—In the case of violation or threatened violation of, or failure 

to obey, a temporary cease-and-desist order issued pursuant to this section, the Director may apply to the United States District Court for the District of Columbia 

62 

or the United States district court within the jurisdiction of which the headquarters 

of the regulated entity is located, for an injunction to enforce such order, and, if the 

court determines that there has been such violation or threatened violation or failure to obey, it shall be the duty of the court to issue such injunction.’’. 

SEC. 163. PREJUDGMENT ATTACHMENT. 

The Housing and Community Development Act of 1992 is amended by inserting 

after section 1375 (12 U.S.C. 4635) the following new section: 

‘‘SEC. 1375A. PREJUDGMENT ATTACHMENT. 

‘‘(a) IN GENERAL.—In any action brought pursuant to this title, or in actions 

brought in aid of, or to enforce an order in, any administrative or other civil action 

for money damages, restitution, or civil money penalties brought pursuant to this 

title, the court may, upon application of the Director or Attorney General, as applicable, issue a restraining order that— 

‘‘(1) prohibits any person subject to the proceeding from withdrawing, transferring, removing, dissipating, or disposing of any funds, assets or other property; and 

‘‘(2) appoints a person on a temporary basis to administer the restraining 

order. 

‘‘(b) STANDARD.— ‘‘(1) SHOWING.—Rule 65 of the Federal Rules of Civil Procedure shall apply 

with respect to any proceeding under subsection (a) without regard to the requirement of such rule that the applicant show that the injury, loss, or damage 

is irreparable and immediate. 

‘‘(2) STATE PROCEEDING.—If, in the case of any proceeding in a State court, 

the court determines that rules of civil procedure available under the laws of 

such State provide substantially similar protections to a party’s right to due 

process as Rule 65 (as modified with respect to such proceeding by paragraph 

(1)), the relief sought under subsection (a) may be requested under the laws of 

such State.’’. 

SEC. 164. ENFORCEMENT AND JURISDICTION. 

Section 1375 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4635) is amended— 

(1) by striking subsection (a) and inserting the following new subsection: 

‘‘(a) ENFORCEMENT.—The Director may, in the discretion of the Director, apply to 

the United States District Court for the District of Columbia, or the United States 

district court within the jurisdiction of which the headquarters of the regulated entity is located, for the enforcement of any effective and outstanding notice or order 

issued under this subtitle or subtitle B, or request that the Attorney General of the 

United States bring such an action. Such court shall have jurisdiction and power 

to order and require compliance with such notice or order.’’; and 

(2) in subsection (b), by striking ‘‘or 1376’’ and inserting ‘‘1376, or 1377’’. 

SEC. 165. CIVIL MONEY PENALTIES. 

Section 1376 of the Housing and Community Development Act of 1992 (12 U.S.C. 

4636) is amended— 

(1) in subsection (a)— 

(A) in the matter preceding paragraph (1), by striking ‘‘or any executive 

officer or’’ and inserting ‘‘any executive officer of a regulated entity, any 

regulated entity-affiliated party, or any’’; and 

(B) in paragraph (1)— 

(i) by striking ‘‘the Federal National Mortgage Association Charter 

Act, the Federal Home Loan Mortgage Corporation Act’’ and inserting 

‘‘any provision of any of the authorizing statutes’’; 

(ii) by striking ‘‘or Act’’ and inserting ‘‘or statute’’; 

(iii) by striking ‘‘or subsection’’ and inserting ‘‘, subsection’’; and 

(iv) by inserting ‘‘, or paragraph (5) or (12) of section 10(j) of the Federal Home Loan Bank Act’’ before the semicolon at the end; 

(2) by striking subsection (b) and inserting the following new subsection: 

‘‘(b) AMOUNT OF PENALTY.— ‘‘(1) FIRST TIER.—Any regulated entity which, or any regulated entity-affiliated party who— 

‘‘(A) violates any provision of this title, any provision of any of the authorizing statutes, or any order, condition, rule, or regulation under any such 

title or statute, except that the Director may not, pursuant to this section, 

enforce compliance with any housing goal established under subpart B of 

part 2 of subtitle A of this title, with section 1336 or 1337 of this title, with 

subsection (m) or (n) of section 309 of the Federal National Mortgage Association Charter Act (12 U.S.C. 1723a(m), (n)), with subsection (e) or (f) of 

63 

section 307 of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 

1456(e), (f)), or with paragraph (5) or (12) of section 10(j) of the Federal 

Home Loan Bank Act; 

‘‘(B) violates any final or temporary order or notice issued pursuant to 

this title; 

‘‘(C) violates any condition imposed in writing by the Director in connection with the grant of any application or other request by such regulated 

entity; 

‘‘(D) violates any written agreement between the regulated entity and the 

Director; or 

‘‘(E) engages in any conduct the Director determines to be an unsafe or 

unsound practice, shall forfeit and pay a civil penalty of not more than 

$10,000 for each day during which such violation continues. 

‘‘(2) SECOND TIER.—Notwithstanding paragraph (1)— 

‘‘(A) if a regulated entity, or a regulated entity-affiliated party— 

‘‘(i) commits any violation described in any subparagraph of paragraph (1); 

‘‘(ii) recklessly engages in an unsafe or unsound practice in conducting the affairs of such regulated entity; or 

‘‘(iii) breaches any fiduciary duty; and 

‘‘(B) the violation, practice, or breach— 

‘‘(i) is part of a pattern of misconduct; 

‘‘(ii) causes or is likely to cause more than a minimal loss to such regulated entity; or 

‘‘(iii) results in pecuniary gain or other benefit to such party, the regulated entity or regulated entity-affiliated party shall forfeit and pay a 

civil penalty of not more than $50,000 for each day during which such 

violation, practice, or breach continues. 

‘‘(3) THIRD TIER.—Notwithstanding paragraphs (1) and (2), any regulated entity which, or any regulated entity-affiliated party who— 

‘‘(A) knowingly— 

‘‘(i) commits any violation or engages in any conduct described in any 

subparagraph of paragraph (1); 

‘‘(ii) engages in any unsafe or unsound practice in conducting the affairs of such regulated entity; or 

‘‘(iii) breaches any fiduciary duty; and 

‘‘(B) knowingly or recklessly causes a substantial loss to such regulated 

entity or a substantial pecuniary gain or other benefit to such party by reason of such violation, practice, or breach, shall forfeit and pay a civil penalty in an amount not to exceed the applicable maximum amount determined under paragraph (4) for each day during which such violation, practice, or breach continues. 

‘‘(4) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION DESCRIBED IN PARAGRAPH (3).—The maximum daily amount of any civil penalty which may be assessed pursuant to paragraph (3) for any violation, practice, or breach described 

in such paragraph is— 

‘‘(A) in the case of any person other than a regulated entity, an amount 

not to exceed $2,000,000; and 

‘‘(B) in the case of any regulated entity, $2,000,000.’’; 

(3) in subsection (c)(1)(B), by striking ‘‘enterprise, executive officer, or director’’ and inserting ‘‘regulated entity or regulated entity-affiliated party’’; 

(4) in subsection (d), by striking the first sentence and inserting the following: 

‘‘If a regulated entity or regulated entity-affiliated party fails to comply with an 

order of the Director imposing a civil money penalty under this section, after 

the order is no longer subject to review as provided under subsection (c)(1) and 

section 1374, the Director may, in the discretion of the Director, bring an action 

in the United States District Court for the District of Columbia, or the United 

States district court within the jurisdiction of which the headquarters of the 

regulated entity is located, to obtain a monetary judgment against the regulated 

entity or regulated entity affiliated party and such other relief as may be available, or request that the Attorney General of the United States bring such an 

action.’’; and 

(5) in subsection (g), by striking ‘‘subsection (b)(3)’’ and inserting ‘‘this section, 

unless authorized by the Director by rule, regulation, or order’’. 

SEC. 166. REMOVAL AND PROHIBITION AUTHORITY. 

(a) IN GENERAL.—Subtitle C of title XIII of the Housing and Community Development Act of 1992 is amended— 

64 

(1) by redesignating sections 1377, 1378, 1379, 1379A, and 1379B (12 U.S.C. 

4637–41) as sections 1379, 1379A, 1379B, 1379C, and 1379D, respectively; and 

(2) by inserting after section 1376 (12 U.S.C. 4636) the following new section: 

‘‘SEC. 1377. REMOVAL AND PROHIBITION AUTHORITY. 

‘‘(a) AUTHORITY TO ISSUE ORDER.—Whenever the Director determines that— 

‘‘(1) any regulated entity-affiliated party has, directly or indirectly— 

‘‘(A) violated— 

‘‘(i) any law or regulation; 

‘‘(ii) any cease-and-desist order which has become final; 

‘‘(iii) any condition imposed in writing by the Director in connection 

with the grant of any application or other request by such regulated entity; or 

‘‘(iv) any written agreement between such regulated entity and the 

Director; 

‘‘(B) engaged or participated in any unsafe or unsound practice in connection with any regulated entity; or 

‘‘(C) committed or engaged in any act, omission, or practice which constitutes a breach of such party’s fiduciary duty; 

‘‘(2) by reason of the violation, practice, or breach described in any subparagraph of paragraph (1)— 

‘‘(A) such regulated entity has suffered or will probably suffer financial 

loss or other damage; or 

‘‘(B) such party has received financial gain or other benefit by reason of 

such violation, practice, or breach; and 

‘‘(3) such violation, practice, or breach— 

‘‘(A) involves personal dishonesty on the part of such party; or 

‘‘(B) demonstrates willful or continuing disregard by such party for the 

safety or soundness of such regulated entity, the Director may serve upon 

such party a written notice of the Director’s intention to remove such party 

from office or to prohibit any further participation by such party, in any 

manner, in the conduct of the affairs of any regulated entity. 

‘‘(b) SUSPENSION ORDER.— 

‘‘(1) SUSPENSION OR PROHIBITION AUTHORITY.—If the Director serves written 

notice under subsection (a) to any regulated entity-affiliated party of the Director’s intention to issue an order under such subsection, the Director may— 

‘‘(A) suspend such party from office or prohibit such party from further 

participation in any manner in the conduct of the affairs of the regulated 

entity, if the Director— 

‘‘(i) determines that such action is necessary for the protection of the 

regulated entity; and 

‘‘(ii) serves such party with written notice of the suspension order; 

and 

‘‘(B) prohibit the regulated entity from releasing to or on behalf of the 

regulated entity-affiliated party any compensation or other payment of 

money or other thing of current or potential value in connection with any 

resignation, removal, retirement, or other termination of employment or office of the party. 

‘‘(2) EFFECTIVE PERIOD.—Any suspension order issued under this subsection— 

‘‘(A) shall become effective upon service; and 

‘‘(B) unless a court issues a stay of such order under subsection (g) of this 

section, shall remain in effect and enforceable until— 

‘‘(i) the date the Director dismisses the charges contained in the notice served under subsection (a) with respect to such party; or 

‘‘(ii) the effective date of an order issued by the Director to such party 

under subsection (a). 

‘‘(3) COPY OF ORDER.—If the Director issues a suspension order under this 

subsection to any regulated entity-affiliated party, the Director shall serve a 

copy of such order on any regulated entity with which such party is affiliated 

at the time such order is issued. 

‘‘(c) NOTICE, HEARING, AND ORDER.—A notice of intention to remove a regulated 

entity-affiliated party from office or to prohibit such party from participating in the 

conduct of the affairs of a regulated entity shall contain a statement of the facts 

constituting grounds for such action, and shall fix a time and place at which a hearing will be held on such action. Such hearing shall be fixed for a date not earlier 

than 30 days nor later than 60 days after the date of service of such notice, unless 

an earlier or a later date is set by the Director at the request of (1) such party, 

and for good cause shown, or (2) the Attorney General of the United States. Unless 

such party shall appear at the hearing in person or by a duly authorized representaVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00064 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
65 

tive, such party shall be deemed to have consented to the issuance of an order of 

such removal or prohibition. In the event of such consent, or if upon the record 

made at any such hearing the Director shall find that any of the grounds specified 

in such notice have been established, the Director may issue such orders of suspension or removal from office, or prohibition from participation in the conduct of the 

affairs of the regulated entity, as it may deem appropriate, together with an order 

prohibiting compensation described in subsection (b)(1)(B). Any such order shall become effective at the expiration of 30 days after service upon such regulated entity 

and such party (except in the case of an order issued upon consent, which shall become effective at the time specified therein). Such order shall remain effective and 

enforceable except to such extent as it is stayed, modified, terminated, or set aside 

by action of the Director or a reviewing court. 

‘‘(d) PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES.—Any person subject to an 

order issued under this section shall not— 

‘‘(1) participate in any manner in the conduct of the affairs of any regulated 

entity; 

‘‘(2) solicit, procure, transfer, attempt to transfer, vote, or attempt to vote any 

proxy, consent, or authorization with respect to any voting rights in any regulated entity; 

‘‘(3) violate any voting agreement previously approved by the Director; or 

‘‘(4) vote for a director, or serve or act as a regulated entity-affiliated party. 

‘‘(e) INDUSTRY-WIDE PROHIBITION.— 

‘‘(1) IN GENERAL.—Except as provided in paragraph (2), any person who, pursuant to an order issued under this section, has been removed or suspended 

from office in a regulated entity or prohibited from participating in the conduct 

of the affairs of a regulated entity may not, while such order is in effect, continue or commence to hold any office in, or participate in any manner in the 

conduct of the affairs of, any regulated entity. 

‘‘(2) EXCEPTION IF DIRECTOR PROVIDES WRITTEN CONSENT.—If, on or after the 

date an order is issued under this section which removes or suspends from office any regulated entity-affiliated party or prohibits such party from participating in the conduct of the affairs of a regulated entity, such party receives 

the written consent of the Director, the order shall, to the extent of such consent, cease to apply to such party with respect to the regulated entity described 

in the written consent. If the Director grants such a written consent, it shall 

publicly disclose such consent. 

‘‘(3) VIOLATION OF PARAGRAPH (1) TREATED AS VIOLATION OF ORDER.—Any violation of paragraph (1) by any person who is subject to an order described in 

such subsection shall be treated as a violation of the order. 

‘‘(f) APPLICABILITY.—This section shall only apply to a person who is an individual, 

unless the Director specifically finds that it should apply to a corporation, firm, or 

other business enterprise. 

‘‘(g) STAY OF SUSPENSION AND PROHIBITION OF REGULATED ENTITY-AFFILIATED

PARTY.—Within 10 days after any regulated entity-affiliated party has been suspended from office and/or prohibited from participation in the conduct of the affairs 

of a regulated entity under this section, such party may apply to the United States 

District Court for the District of Columbia, or the United States district court for 

the judicial district in which the headquarters of the regulated entity is located, for 

a stay of such suspension and/or prohibition and any prohibition under subsection 

(b)(1)(B) pending the completion of the administrative proceedings pursuant to the 

notice served upon such party under this section, and such court shall have jurisdiction to stay such suspension and/or prohibition. 

‘‘(h) SUSPENSION OR REMOVAL OF REGULATED ENTITY-AFFILIATED PARTY CHARGED

WITH FELONY.— 

‘‘(1) SUSPENSION OR PROHIBITION.— 

‘‘(A) IN GENERAL.—Whenever any regulated entity-affiliated party is 

charged in any information, indictment, or complaint, with the commission 

of or participation in a crime involving dishonesty or breach of trust which 

is punishable by imprisonment for a term exceeding one year under State 

or Federal law, the Director may, if continued service or participation by 

such party may pose a threat to the regulated entity or impair public confidence in the regulated entity, by written notice served upon such party— 

‘‘(i) suspend such party from office or prohibit such party from further participation in any manner in the conduct of the affairs of any 

regulated entity; and 

‘‘(ii) prohibit the regulated entity from releasing to or on behalf of the 

regulated entity-affiliated party any compensation or other payment of 

money or other thing of current or potential value in connection with 

66 

the period of any such suspension or with any resignation, removal, retirement, or other termination of employment or office of the party. 

‘‘(B) PROVISIONS APPLICABLE TO NOTICE.— ‘‘(i) COPY.—A copy of any notice under paragraph (1)(A) shall also be 

served upon the regulated entity. 

‘‘(ii) EFFECTIVE PERIOD.—A suspension or prohibition under subparagraph (A) shall remain in effect until the information, indictment, or 

complaint referred to in such subparagraph is finally disposed of or 

until terminated by the Director. 

‘‘(2) REMOVAL OR PROHIBITION.— ‘‘(A) IN GENERAL.—If a judgment of conviction or an agreement to enter 

a pretrial diversion or other similar program is entered against a regulated 

entity-affiliated party in connection with a crime described in paragraph 

(1)(A), at such time as such judgment is not subject to further appellate review, the Director may, if continued service or participation by such party 

may pose a threat to the regulated entity or impair public confidence in the 

regulated entity, issue and serve upon such party an order that— 

‘‘(i) removes such party from office or prohibits such party from further participation in any manner in the conduct of the affairs of the 

regulated entity without the prior written consent of the Director; and 

‘‘(ii) prohibits the regulated entity from releasing to or on behalf of 

the regulated entity-affiliated party any compensation or other payment of money or other thing of current or potential value in connection with the termination of employment or office of the party. 

‘‘(B) PROVISIONS APPLICABLE TO ORDER.— 

‘‘(i) COPY.—A copy of any order under paragraph (2)(A) shall also be 

served upon the regulated entity, whereupon the regulated entity-affiliated party who is subject to the order (if a director or an officer) shall 

cease to be a director or officer of such regulated entity. 

‘‘(ii) EFFECT OF ACQUITTAL.—A finding of not guilty or other disposition of the charge shall not preclude the Director from instituting proceedings after such finding or disposition to remove such party from office or to prohibit further participation in regulated entity affairs, and 

to prohibit compensation or other payment of money or other thing of 

current or potential value in connection with any resignation, removal, 

retirement, or other termination of employment or office of the party, 

pursuant to subsections (a), (d), or (e) of this section. 

‘‘(iii) EFFECTIVE PERIOD.—Any notice of suspension or order of removal issued under this subsection shall remain effective and outstanding until the completion of any hearing or appeal authorized 

under paragraph (4) unless terminated by the Director. 

‘‘(3) AUTHORITY OF REMAINING BOARD MEMBERS.—If at any time, because of 

the suspension of one or more directors pursuant to this section, there shall be 

on the board of directors of a regulated entity less than a quorum of directors 

not so suspended, all powers and functions vested in or exercisable by such 

board shall vest in and be exercisable by the director or directors on the board 

not so suspended, until such time as there shall be a quorum of the board of 

directors. In the event all of the directors of a regulated entity are suspended 

pursuant to this section, the Director shall appoint persons to serve temporarily 

as directors in their place and stead pending the termination of such suspensions, or until such time as those who have been suspended cease to be directors 

of the regulated entity and their respective successors take office. 

‘‘(4) HEARING REGARDING CONTINUED PARTICIPATION.—Within 30 days from 

service of any notice of suspension or order of removal issued pursuant to paragraph (1) or (2) of this subsection, the regulated entity-affiliated party concerned may request in writing an opportunity to appear before the Director to 

show that the continued service to or participation in the conduct of the affairs 

of the regulated entity by such party does not, or is not likely to, pose a threat 

to the interests of the regulated entity or threaten to impair public confidence 

in the regulated entity. Upon receipt of any such request, the Director shall fix 

a time (not more than 30 days after receipt of such request, unless extended 

at the request of such party) and place at which such party may appear, personally or through counsel, before one or more members of the Director or designated employees of the Director to submit written materials (or, at the discretion of the Director, oral testimony) and oral argument. Within 60 days of such 

hearing, the Director shall notify such party whether the suspension or prohibition from participation in any manner in the conduct of the affairs of the regulated entity will be continued, terminated, or otherwise modified, or whether 

the order removing such party from office or prohibiting such party from further 

67 

participation in any manner in the conduct of the affairs of the regulated entity, 

and prohibiting compensation in connection with termination will be rescinded 

or otherwise modified. Such notification shall contain a statement of the basis 

for the Director’s decision, if adverse to such party. The Director is authorized 

to prescribe such rules as may be necessary to effectuate the purposes of this 

subsection. 

‘‘(i) HEARINGS AND JUDICIAL REVIEW.— ‘‘(1) VENUE AND PROCEDURE.—Any hearing provided for in this section shall 

be held in the District of Columbia or in the Federal judicial district in which 

the headquarters of the regulated entity is located, unless the party afforded 

the hearing consents to another place, and shall be conducted in accordance 

with the provisions of chapter 5 of title 5, United States Code. After such hearing, and within 90 days after the Director has notified the parties that the case 

has been submitted to it for final decision, it shall render its decision (which 

shall include findings of fact upon which its decision is predicated) and shall 

issue and serve upon each party to the proceeding an order or orders consistent 

with the provisions of this section. Judicial review of any such order shall be 

exclusively as provided in this subsection. Unless a petition for review is timely 

filed in a court of appeals of the United States, as provided in paragraph (2), 

and thereafter until the record in the proceeding has been filed as so provided, 

the Director may at any time, upon such notice and in such manner as it shall 

deem proper, modify, terminate, or set aside any such order. Upon such filing 

of the record, the Director may modify, terminate, or set aside any such order 

with permission of the court. 

‘‘(2) REVIEW OF ORDER.—Any party to any proceeding under paragraph (1) 

may obtain a review of any order served pursuant to paragraph (1) (other than 

an order issued with the consent of the regulated entity or the regulated entityaffiliated party concerned, or an order issued under subsection (h) of this section) by the filing in the United States Court of Appeals for the District of Columbia Circuit or court of appeals of the United States for the circuit in which 

the headquarters of the regulated entity is located, within 30 days after the 

date of service of such order, a written petition praying that the order of the 

Director be modified, terminated, or set aside. A copy of such petition shall be 

forthwith transmitted by the clerk of the court to the Director, and thereupon 

the Director shall file in the court the record in the proceeding, as provided in 

section 2112 of title 28, United States Code. Upon the filing of such petition, 

such court shall have jurisdiction, which upon the filing of the record shall (except as provided in the last sentence of paragraph (1)) be exclusive, to affirm, 

modify, terminate, or set aside, in whole or in part, the order of the Director. 

Review of such proceedings shall be had as provided in chapter 7 of title 5, 

United States Code. The judgment and decree of the court shall be final, except 

that the same shall be subject to review by the Supreme Court upon certiorari, 

as provided in section 1254 of title 28, United States Code. 

‘‘(3) PROCEEDINGS NOT TREATED AS STAY.—The commencement of proceedings 

for judicial review under paragraph (2) shall not, unless specifically ordered by 

the court, operate as a stay of any order issued by the Director.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) 1992 ACT.—Section 1317(f) of the Housing and Community Development 

Act of 1992 (12 U.S.C. 4517(f)) is amended by striking ‘‘section 1379B’’ and inserting ‘‘section 1379D’’. 

(2) FANNIE MAE CHARTER ACT.—The second sentence of subsection (b) of section 308 of the Federal National Mortgage Association Charter Act (12 U.S.C. 

1723(b)) is amended by striking ‘‘The’’ and inserting ‘‘Except to the extent that 

action under section 1377 of the Housing and Community Development Act of 

1992 temporarily results in a lesser number, the’’. 

(3) FREDDIE MAC ACT.—The second sentence of subparagraph (A) of section 

303(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 

1452(a)(2)(A)) is amended by striking ‘‘The’’ and inserting ‘‘Except to the extent 

that action under section 1377 of the Housing and Community Development Act 

of 1992 temporarily results in a lesser number, the’’. 

SEC. 167. CRIMINAL PENALTY. 

Subtitle C of title XIII of the Housing and Community Development Act of 1992 

(12 U.S.C. 4631 et seq.) is amended by inserting after section 1377 (as added by 

the preceding provisions of this Act) the following new section: 

‘‘SEC. 1378. CRIMINAL PENALTY. 

‘‘Whoever, being subject to an order in effect under section 1377, without the prior 

written approval of the Director, knowingly participates, directly or indirectly, in 

any manner (including by engaging in an activity specifically prohibited in such an 

68 

order) in the conduct of the affairs of any regulated entity shall, notwithstanding 

section 3571 of title 18, be fined not more than $1,000,000, imprisoned for not more 

than 5 years, or both.’’. 

SEC. 168. SUBPOENA AUTHORITY. 

Section 1379D(c) of the Housing and Community Development Act of 1992 (12 

U.S.C. 4641(c)), as so redesignated by section 165(a)(1) of this Act, is further amended— 

(1) by striking ‘‘request the Attorney General of the United States to’’ and inserting ‘‘, in the discretion of the Director,’’; 

(2) by inserting ‘‘or request that the Attorney General of the United States 

bring such an action,’’ after ‘‘District of Columbia,’’; and 

(3) by striking ‘‘or may, under the direction and control of the Attorney General, bring such an action’’. 

SEC. 169. CONFORMING AMENDMENTS. 

Subtitle C of title XIII of the Housing and Community Development Act of 1992 

is amended— 

(1) in section 1372(c)(1) (12 U.S.C. 4632(c)), by striking ‘‘that enterprise’’ and 

inserting ‘‘that regulated entity’’; 

(2) in section 1379 (12 U.S.C. 4637), as so redesignated by section 165(a)(1) 

of this Act— 

(A) by inserting ‘‘, or of a regulated entity-affiliated party,’’ before ‘‘shall 

not affect’’; and 

(B) by striking ‘‘such director or executive officer’’ each place such term 

appears and inserting ‘‘such director, executive officer, or regulated entityaffiliated party’’; 

(3) in section 1379A (12 U.S.C. 4638), as so redesignated by section 165(a)(1) 

of this Act, by inserting ‘‘or against a regulated entity-affiliated party,’’ before 

‘‘or impair’’; 

(4) by striking ‘‘An enterprise’’ each place such term appears in such subtitle 

and inserting ‘‘A regulated entity’’; 

(5) by striking ‘‘an enterprise’’ each place such term appears in such subtitle 

and inserting ‘‘a regulated entity’’; 

(6) by striking ‘‘the enterprise’’ each place such term appears in such subtitle 

and inserting ‘‘the regulated entity’’; and 

(7) by striking ‘‘any enterprise’’ each place such term appears in such subtitle 

and inserting ‘‘any regulated entity’’. 

Subtitle E—General Provisions 

SEC. 181. PRESIDENTIALLY APPOINTED DIRECTORS OF ENTERPRISES. 

(a) FANNIE MAE.— 

(1) IN GENERAL.—Subsection (b) of section 308 of the Federal National Mortgage Association Charter Act (12 U.S.C. 1723(b)) is amended— 

(A) in the first sentence, by striking ‘‘eighteen persons, five of whom shall 

be appointed annually by the President of the United States, and the remainder of whom’’ and inserting ‘‘not less than 7 and not more than 15 persons, 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) TRANSITIONAL PROVISION.—The amendments made by paragraph (1) shall 

not apply to any appointed position of the board of directors of the Federal National Mortgage Association until the expiration of the annual term for such position during which the effective date under section 185 occurs. 

(b) FREDDIE MAC.— 

(1) IN GENERAL.—Paragraph (2) of section 303(a) 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 ‘‘18 persons, 5 of whom shall be 

appointed annually by the President of the United States and the remainder of whom’’ and inserting ‘‘not less than 7 and not more than 

15 persons, who’’; and 

69 

(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) TRANSITIONAL PROVISION.—The amendments made by paragraph (1) shall 

not apply to any appointed position of the Board of Directors of the Federal 

Home Loan Mortgage Corporation until the expiration of the annual term for 

such position during which the effective date under section 185 occurs. 

SEC. 182. REPORT ON PORTFOLIO OPERATIONS, SAFETY AND SOUNDNESS, AND MISSION OF 

ENTERPRISES. 

Not later than the expiration of the 12-month period beginning on the effective 

date under section 185, the Director of the Federal Housing Finance Agency shall 

submit a report to the Congress which shall include— 

(1) a description of the portfolio holdings of the enterprises (as such term is 

defined in section 1303 of the Housing and Community Development Act of 

1992 (12 U.S.C. 4502) in mortgages (including whole loans and mortgage-backed 

securities), non-mortgages, and other assets; 

(2) a description of the risk implications for the enterprises of such holdings 

and the consequent risk management undertaken by the enterprises (including 

the use of derivatives for hedging purposes), compared with off-balance sheet 

liabilities of the enterprises (including mortgage-backed securities guaranteed 

by the enterprises); 

(3) an analysis of portfolio holdings for safety and soundness purposes; 

(4) an assessment of whether portfolio holdings fulfill the mission purposes 

of the enterprises under the Federal National Mortgage Association Charter Act 

and the Federal Home Loan Mortgage Corporation Act; and 

(5) an analysis of the potential systemic risk implications for the enterprises, 

the housing and capital markets, and the financial system of portfolio holdings, 

and whether such holdings should be limited or reduced over time. 

SEC. 183. CONFORMING AND TECHNICAL AMENDMENTS. 

(a) 1992 Act.—Title XIII of the Housing and Community Development Act of 1992 

is amended by striking section 1383 (12 U.S.C. 1451 note). 

(b) TITLE 18, UNITED STATES CODE.—Section 1905 of title 18, United States Code, 

is amended by striking ‘‘Office of Federal Housing Enterprise Oversight’’ and inserting ‘‘Federal Housing Finance Agency’’ . 

(c) FLOOD DISASTER PROTECTION ACT OF 1973.—Section 102(f)(3)(A) of the Flood 

Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)(3)(A)) is amended by striking 

‘‘Director of the Office of Federal Housing Enterprise Oversight of the Department 

of Housing and Urban Development’’ and inserting ‘‘Director of the Federal Housing 

Finance Agency’’. 

(d) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT ACT.—Section 5 of the 

Department of Housing and Urban Development Act (42 U.S.C. 3534) is amended 

by striking subsection (d). 

(e) TITLE 5, UNITED STATES CODE.— 

(1) DIRECTOR’S PAY RATE.—Section 5313 of title 5, United States Code, is 

amended by striking the item relating to the Director of the Office of Federal 

Housing Enterprise Oversight, Department of Housing and Urban Development 

and inserting the following new item: 

‘‘ Director of the Federal Housing Finance Agency.’’. 

(2) DEPUTY DIRECTORS’ PAY RATE.—Section 5314 of title 5, United States Code, 

is amended by adding at the end the following new item: 

‘‘ Deputy Directors, Federal Housing Finance Agency (3).’’. 

(3) PAY RATE FOR MEMBERS OF HOUSING FINANCE OVERSIGHT BOARD.—Section 

5315 of title 5, United States Code, is amended by adding at the end the following new item: 

‘‘ Members, Housing Finance Oversight Board.’’. 

(4) EXCLUSION FROM SENIOR EXECUTIVE SERVICE.—Section 3132(a)(1)(D) of 

title 5, United States Code, is amended by striking ‘‘the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development’’ and inserting ‘‘the Federal Housing Finance Agency’’. 

(f) INSPECTOR GENERAL ACT OF 1978.—Section 8G(a)(2) of the Inspector General 

Act of 1978 (5 U.S.C. App.) is amended by striking ‘‘Federal Housing Finance Board’’ 

and inserting ‘‘Federal Housing Finance Agency’’. 

70 

(g) FEDERAL DEPOSIT INSURANCE ACT.—Section 11(t)(2)(A) of the Federal Deposit 

Insurance Act (12 U.S.C.1821(t)(2)(A)) is amended by adding at the end the following new clause: 

‘‘(vii) The Federal Housing Finance Agency.’’. 

(h) 1997 EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT.—Section 10001 of the 

1997 Emergency Supplemental Appropriations Act for Recovery From Natural Disasters, and for Overseas Peacekeeping Efforts, Including Those In Bosnia (42 U.S.C. 

3548) is amended— 

(1) by striking ‘‘the Government National Mortgage Association, and the Office of Federal Housing Enterprise Oversight’’ and inserting ‘‘and the Government National Mortgage Association’’; and 

(2) by striking ‘‘, the Government National Mortgage Association, or the Office 

of Federal Housing Enterprise Oversight’’ and inserting ‘‘or the Government National Mortgage Association’’. 

(i) NATIONAL HOMEOWNERSHIP TRUST ACT .—Section 302(b)(4) of the CranstonGonzalez National Affordable Housing Act (42 U.S.C. 12851(b)(4)) is amended by 

striking ‘‘the chairperson of the Federal Housing Finance Board’’ and inserting ‘‘the 

Director of the Federal Housing Finance Agency’’. 

SEC. 184. STUDY OF ALTERNATIVE SECONDARY MARKET SYSTEMS. 

(a) IN GENERAL.—The Director of the Federal Housing Finance Agency, in consultation with the Board of Governors of the Federal Reserve System, the Secretary 

of the Treasury, and the Secretary of Housing and Urban Development, shall conduct a comprehensive study of the effects on financial and housing finance markets 

of alternatives to the current secondary market system for housing finance, taking 

into consideration changes in the structure of financial and housing finance markets 

and institutions since the creation of the Federal National Mortgage Association and 

the Federal Home Loan Mortgage Corporation. 

(b) CONTENTS.—The study under this section shall— 

(1) include, among the alternatives to the current secondary market system 

analyzed— 

(A) repeal of the chartering Acts for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation; 

(B) establishing bank-like mechanisms for granting new charters for limited purposed mortgage securitization entities; 

(C) permitting the Director of the Federal Housing Finance Agency to 

grant new charters for limited purpose mortgage securitization entities, 

which shall include analyzing the terms on which such charters should be 

granted, including whether such charters should be sold, or whether such 

charters and the charters for the Federal National Mortgage Association 

and the Federal Home Loan Mortgage Corporation should be taxed or otherwise assessed a monetary price; and 

(D) such other alternatives as the Director considers appropriate; 

(2) examine all of the issues involved in making the transition to a completely 

private secondary mortgage market system; 

(3) examine the technological advancements the private sector has made in 

providing liquidity in the secondary mortgage market and how such advancements have affected liquidity in the secondary mortgage market; and 

(4) examine how taxpayers would be impacted by each alternative system, including the complete privatization of the Federal National Mortgage Association 

and the Federal Home Loan Mortgage Corporation. 

(c) REPORT.—The Director of the Federal Housing Finance Agency shall submit 

a report to the Congress on the study not later than the expiration of the 12-month 

period beginning on the effective date under section 185. 

SEC. 185. EFFECTIVE DATE. 

Except as specifically provided otherwise in this title, the amendments made by 

this title shall take effect on, and shall apply beginning on, the expiration of the 

1-year period beginning on the date of the enactment of this Act. 

TITLE II—FEDERAL HOME LOAN BANKS 

SEC. 201. DEFINITIONS. 

Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) is amended— 

(1) by striking paragraphs (1), (10), and (11); 

(2) by redesignating paragraphs (2) through (9) as paragraphs (1) through (8), 

respectively; 

71 

(3) by redesignating paragraphs (12) and (13) as paragraphs (9) and (10), respectively; and 

(4) by adding at the end the following: 

‘‘(11) DIRECTOR.—The term ‘Director’ means the Director of the Federal Housing Finance Agency. 

‘‘(12) AGENCY.—The term ‘Agency’ means the Federal Housing Finance Agency.’’. 

SEC. 202. DIRECTORS. 

(a) ELECTION.—Section 7 of the Federal Home Loan Bank Act (12 U.S.C. 1427) 

is amended— 

(1) by striking subsection (a) and inserting the following: 

‘‘(a) NUMBER; ELECTION; QUALIFICATIONS; CONFLICTS OF INTEREST.— 

‘‘(1) IN GENERAL.—The management of each Federal Home Loan Bank shall 

be vested in a board of 13 directors, or such other number as the Director determines appropriate, each of whom shall be elected by the members and shall be 

a citizen of the United States. 

‘‘(2) MEMBER DIRECTORS.—A majority of the directors of each Bank shall be 

officers or directors of a member of such Bank that is located in the district in 

which such Bank is located. 

‘‘(3) INDEPENDENT DIRECTORS.—At least one-third of the directors of each 

Bank shall be independent directors as follows: 

‘‘(A) IN GENERAL.—Each independent director shall be a bona fide resident of the district in which such Bank is located. 

‘‘(B) PUBLIC INTEREST DIRECTORS.—At least 2 of the independent directors 

under this paragraph of each Bank shall be representatives chosen from organizations with more than a 2-year history of representing consumer or 

community interests on banking services, credit needs, housing, or financial 

consumer protections. 

‘‘(C) OTHER DIRECTORS.—Each independent director that is not a public 

interest director under subparagraph (B) shall have demonstrated knowledge of, or experience in, financial management, auditing and accounting, 

risk management practices, derivatives, project development, or organizational management, or such other knowledge or expertise as the Director 

may provide by regulation. 

‘‘(D) CONFLICTS OF INTEREST.—An independent director under this paragraph of a Bank may not, during such director’s term of office, serve as an 

officer of any Federal Home Loan Bank or as a director or officer of any 

member of a Bank.’’; 

(2) in subsection (b)— 

(A) in the first sentence, by striking ‘‘directorship’’ and inserting ‘‘member 

directorship pursuant to subsection (a)(2)’’ ; and 

(B) by inserting after the period at the end of the first sentence the following new sentence: ‘‘Each independent directorship pursuant to subsection (a)(3) shall be filled by election by a plurality of the votes of the 

members of the Bank at large, in which election each member shall be entitled to nominate candidates and to cast the same number of votes as in an 

election to fill a directorship allocated to the member’s State.’’; 

(3) in subsection (c), by striking the second, third, and fifth sentences; 

(4) in subsection (d)— 

(A) in the first sentence, by striking ‘‘, whether elected or appointed,’’; 

(B) in the second sentence, by striking ‘‘or appointed’’; and 

(C) in the third sentence, by striking ‘‘an elective’’ each place such term 

appears and inserting ‘‘a’’; and 

(5) by striking ‘‘elective’’ each place such term appears (except in subsection 

(e)). 

(b) TERMS.— 

(1) IN GENERAL.—Section 7(d) of the Federal Home Loan Bank Act (12 U.S.C. 

1427(i)) is amended— 

(A) in the first sentence, by striking ‘‘3 years’’ and inserting ‘‘4 years’’; 

and 

(B) in the second sentence— 

(i) by striking ‘‘Federal Home Loan Bank System Modernization Act 

of 1999’’ and inserting ‘‘Federal Housing Finance Reform Act of 2005’’; 

and 

(ii) by striking ‘‘1/3’’ and inserting ‘‘1/4’’. 

(2) SAVINGS PROVISION.—The amendments made by paragraph (1) shall not 

apply to the term of office of any director of a Federal home loan bank who is 

72 

serving as of the effective date of this Act under section 211, including any director elected to fill a vacancy in any such office. 

(c) VACANCIES.—Subsection (f) of section 7 of the Federal Home Loan Bank Act 

(12 U.S.C. 1427(f)) is amended to read as follows: 

‘‘(f) VACANCIES.—A Bank director elected to fill a vacancy shall be elected for the 

unexpired term of his or her predecessor in office. In the event of a vacancy in any 

Bank directorship, such vacancy shall be filled by an affirmative vote of a majority 

of the remaining Bank directors, regardless of whether such remaining Bank directors constitute a quorum of the Bank’s board of directors. A Bank director so elected 

shall satisfy the requirements for eligibility which were applicable to his predecessor. If any Bank director shall cease to have any qualification set forth in this 

section, the office held by such person shall immediately become vacant. ’’. 

(d) COMPENSATION.—Subsection (i) of section 7 of the Federal Home Loan Bank 

Act (12 U.S.C. 1427(i)) is amended to read as follows: 

‘‘(i) DIRECTORS’ COMPENSATION.— 

‘‘(1) IN GENERAL.—Each Federal home loan bank may pay the directors on the 

board of directors for the bank reasonable and appropriate compensation for the 

time required of such directors, and reasonable and appropriate expenses incurred by such directors, in connection with service on the board of directors, 

in accordance with resolutions adopted by the board of directors and subject to 

the approval of the Director. 

‘‘(2) ANNUAL REPORT BY THE BOARD.—The Director shall include, in the annual report submitted to the Congress pursuant to section 1319B of the Federal 

Housing Enterprises Financial Safety and Soundness Act of 1992, information 

regarding the compensation and expenses paid by the Federal home loan banks 

to the directors on the boards of directors of the banks.’’. 

(e) TRANSITION RULE.—Any member of the board of directors of a Federal Home 

Loan Bank serving as of the effective date under section 211 may continue to serve 

as a member of such board of directors for the remainder of the term of such office 

as provided in section 7 of the Federal Home Loan Bank Act, as in effect before such 

effective date. 

SEC. 203. FEDERAL HOUSING FINANCE AGENCY OVERSIGHT OF FEDERAL HOME LOAN BANKS. 

The Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.), other than in provisions of that Act added or amended otherwise by this Act, is amended— 

(1) by striking sections 2A and 2B (12 U.S.C. 1422a, 1422b); 

(2) in section 6 (12 U.S.C. 1426(b)(1))— 

(A) in subsection (b)(1), in the matter preceding subparagraph (A), by 

striking ‘‘Finance Board approval’’ and inserting ‘‘approval by the Director’’; 

and 

(B) in each of subsections (c)(4)(B) and (d)(2), by striking ‘‘Finance Board 

regulations’’ each place that term appears and inserting ‘‘regulations of the 

Director’’; 

(3) in section 8 (12 U.S.C. 1428), in the section heading, by striking ‘‘BY THE

BOARD’’; 

(4) in section 10(b) (12 U.S.C. 1430), by striking ‘‘by formal resolution’’; 

(5) in section 11 (12 U.S.C. 1431)— 

(A) in subsection (b)— 

(i) in the first sentence— 

(I) by striking ‘‘The Board’’ and inserting ‘‘The Office of Finance, 

as agent for the Banks,’’; and 

(II) by striking ‘‘the Board’’ and inserting ‘‘such Office’’; and 

(ii) in the second and fourth sentences, by striking ‘‘the Board’’ each 

place such term appears and inserting ‘‘the Office of Finance’’; 

(B) in subsection (c)— 

(i) by striking ‘‘the Board’’ the first place such term appears and inserting ‘‘the Office of Finance, as agent for the Banks,’’; and 

(ii) by striking ‘‘the Board’’ the second place such term appears and 

inserting ‘‘such Office’’; and 

(C) in subsection (f)— 

(i) by striking the two commas after ‘‘permit’’ and inserting ‘‘or’’; and 

(ii) by striking the comma after ‘‘require’’; 

(6) in section 15 (12 U.S.C. 1435), by inserting ‘‘or the Director’’ after ‘‘the 

Board’’; 

(7) in section 18 (12 U.S.C. 1438), by striking subsection (b); 

(8) in section 21 (12 U.S.C. 1441)— 

(A) in subsection (b)— 

(i) in paragraph (5), by striking ‘‘Chairperson of the Federal Housing 

Finance Board’’ and inserting ‘‘Director’’; and 

73 

(ii) in the heading for paragraph (8), by striking ‘‘FEDERAL HOUSING

FINANCE BOARD’’ and inserting ‘‘DIRECTOR’’; and 

(B) in subsection (i), in the heading for paragraph (2), by striking ‘‘FED- ERAL HOUSING FINANCE BOARD’’ and inserting ‘‘DIRECTOR’’; 

(9) in section 23 (12 U.S.C. 1443), by striking ‘‘Board of Directors of the Federal Housing Finance Board’’ and inserting ‘‘Director’’; 

(10) by striking ‘‘the Board’’ each place such term appears in such Act (except 

in section 15 (12 U.S.C. 1435), section 21(f)(2) (12 U.S.C. 1441(f)(2)), subsections 

(a), (k)(2)(B)(i), and (n)(6)(C)(ii) of section 21A (12 U.S.C. 1441a), subsections 

(e)(7), (f)(2)(C), and (k)(7)(B)(ii) of section 21B (12 U.S.C. 1441b), and the first 

two places such term appears in section 22 (12 U.S.C. 1442)) and inserting ‘‘the 

Director’’; 

(11) by striking ‘‘The Board’’ each place such term appears in such Act (except 

in sections 7(e) (12 U.S.C. 1427(e)), and 11(b) (12 U.S.C. 1431(b)) and inserting 

‘‘The Director’’; 

(12) by striking ‘‘the Board’s’’ each place such term appears in such Act and 

inserting ‘‘the Director’s’’; 

(13) by striking ‘‘The Board’s’’ each place such term appears in such Act and 

inserting ‘‘The Director’s’’; 

(14) by striking ‘‘The Finance Board’’ each place such term appears in such 

Act and inserting ‘‘The Director’’; 

(15) by striking ‘‘the Finance Board’’ each place such term appears in such 

Act and inserting ‘‘the Director’’; 

(16) by striking ‘‘Federal Housing Finance Board’’ each place such term appears and inserting ‘‘Director’’; 

(17) in section 11(i) (12 U.S.C. 1431(i), by striking ‘‘the Chairperson of’’; and 

(18) in section 21(e)(9) (12 U.S.C. 1441(e)(9)), by striking ‘‘Chairperson of the’’. 

SEC. 204. JOINT ACTIVITIES OF BANKS. 

Section 11 of the Federal Home Loan Bank Act (12 U.S.C. 1431) is amended by 

adding at the end the following new subsection: 

‘‘(l) JOINT ACTIVITIES.—Subject to the regulation of the Director, any two or more 

Federal Home Loan Banks may establish a joint office for the purpose of performing 

functions for, or providing services to, the Banks on a common or collective basis, 

or may require that the Office of Finance perform such functions or services, but 

only if the Banks are otherwise authorized to perform such functions or services individually.’’. 

SEC. 205. SHARING OF INFORMATION BETWEEN FEDERAL HOME LOAN BANKS. 

(a) IN GENERAL.— The Federal Home Loan Bank Act is amended by inserting 

after section 20 (12 U.S.C. 1440) the following new section: 

‘‘SEC. 20A. SHARING OF INFORMATION BETWEEN FEDERAL HOME LOAN BANKS. 

‘‘(a) REGULATORY AUTHORITY.—The Director shall prescribe such regulations as 

may be necessary to ensure that each Federal Home Loan Bank has access to information that the Bank needs to determine the nature and extent of its joint and several liability. 

‘‘(b) NO WAIVER OF PRIVILEGE.—The Director shall not be deemed to have waived 

any privilege applicable to any information concerning a Federal Home Loan Bank 

by transferring, or permitting the transfer of, that information to any other Federal 

Home Loan Bank for the purpose of enabling the recipient to evaluate the nature 

and extent of its joint and several liability.’’. 

(b) REGULATIONS.—The regulations required under the amendment made by subsection (a) shall be issued in final form not later than 6 months after the effective 

date under section 211 of this Act. 

SEC. 206. REORGANIZATION OF BANKS AND VOLUNTARY MERGER. 

Section 26 of the Federal Home Loan Bank Act (12 U.S.C. 1446) is amended— 

(1) by inserting ‘‘(a) REORGANIZATION.—’’ before ‘‘Whenever’’; and 

(2) by striking ‘‘liquidated or’’ each place such phrase appears; 

(3) by striking ‘‘liquidation or’’; and 

(4) by adding at the end the following new subsection: 

‘‘(b) VOLUNTARY MERGERS.—Any Bank may, with the approval of the Director, 

and the approval of the boards of directors of the Banks involved, merge with another Bank. The Director shall promulgate regulations establishing the conditions 

and procedures for the consideration and approval of any such voluntary merger, 

including the procedures for Bank member approval.’’. 

SEC. 207. SECURITIES AND EXCHANGE COMMISSION DISCLOSURE. 

(a) IN GENERAL.—The Federal Home Loan Banks shall be exempt from compliance with— 

74 

(1) sections 13(e), 14(a), 14(c), and 17A of the Securities Exchange Act of 1934 

and related Commission regulations; and 

(2) section 15 of that Act and related Securities and Exchange Commission 

regulations with respect to transactions in capital stock of the Banks. 

(b) MEMBER EXEMPTION.—The members of the Federal Home Loan Banks shall 

be exempt from compliance with sections 13(d), 13(f), 13(g), 14(d), and 16 of the Securities Exchange Act of 1934 and related Securities and Exchange Commission regulations with respect to their ownership of, or transactions in, capital stock of the 

Federal Home Loan Banks. 

(c) EXEMPTED AND GOVERNMENT SECURITIES.— (1) CAPITAL STOCK.—The capital stock issued by each of the Federal Home 

Loan Banks under section 6 of the Federal Home Loan Bank Act are— 

(A) exempted securities within the meaning of section 3(a)(2) of the Securities Act of 1933; and 

(B) ‘‘exempted securities’’ within the meaning of section 3(a)(12)(A) of the 

Securities Exchange Act of 1934. 

(2) OTHER OBLIGATIONS.—The debentures, bonds, and other obligations issued 

under section 11 of the Federal Home Loan Bank Act are— 

(A) exempted securities within the meaning of section 3(a)(2) of the Securities Act of 1933; 

(B) ‘‘government securities’’ within the meaning of section 3(a)(42) of the 

Securities Exchange Act of 1934; 

(C) excluded from the definition of ‘‘government securities broker’’ within 

section 3(a)(43) of the Securities Exchange Act of 1934; 

(D) excluded from the definition of ‘‘government securities dealer’’ within 

section 3(a)(44) of the Securities Exchange Act of 1934; and 

(E) ‘‘government securities’’ within the meaning of section 2(a)(16) of the 

Investment Company Act of 1940. 

(d) EXEMPTION FROM REPORTING REQUIREMENTS.—The Federal Home Loan Banks 

shall be exempt from periodic reporting requirements pertaining to— 

(1) the disclosure of related party transactions that occur in the ordinary 

course of business of the Banks with their members; and 

(2) the disclosure of unregistered sales of equity securities. 

(e) TENDER OFFERS.—The Securities and Exchange Commission’s rules relating to 

tender offers shall not apply in connection with transactions in capital stock of the 

Federal Home Loan Banks. 

(f) REGULATIONS.—In issuing final regulations to implement provisions of this section, the Securities and Exchange Commission shall consider the distinctive characteristics of the Federal Home Loan Banks when evaluating the accounting treatment with respect to the payment to Resolution Funding Corporation, the role of 

the combined financial statements of the twelve Banks, the accounting classification 

of redeemable capital stock, and the accounting treatment related to the joint and 

several nature of the obligations of the Banks. 

SEC. 208. COMMUNITY FINANCIAL INSTITUTION MEMBERS. 

(a) TOTAL ASSET REQUIREMENT.—Paragraph (10) of section 2 of the Federal Home 

Loan Bank Act (12 U.S.C. 1422(10)), as so redesignated by section 201(3) of this Act, 

is amended by striking ‘‘$500,000,000’’ each place such term appears and inserting 

‘‘$1,000,000,000’’. 

(b) USE OF ADVANCES FOR COMMUNITY DEVELOPMENT ACTIVITIES.—Section 10(a) 

of the Federal Home Loan Bank Act (12 U.S.C. 1430(a)) is amended— 

(1) in paragraph (2)(B)— 

(A) by striking ‘‘and’’; and 

(B) by inserting ‘‘, and community development activities’’ before the period at the end; 

(2) in paragraph (3)(E), by inserting ‘‘or community development activities’’ 

after ‘‘agriculture,’’; and 

(3) in paragraph (6)— 

(A) by striking ‘‘and’’; and 

(B) by inserting ‘‘, and ‘community development activities’ ’’ before ‘‘shall’’. 

SEC. 209. TECHNICAL AND CONFORMING AMENDMENTS. 

(a) RIGHT TO FINANCIAL PRIVACY ACT OF 1978.—Section 1113(o) of the Right to 

Financial Privacy Act of 1978 (12 U.S.C. 3413(o)) is amended— 

(1) by striking ‘‘Federal Housing Finance Board’’ and inserting ‘‘Federal Housing Finance Agency’’; and 

(2) by striking ‘‘Federal Housing Finance Board’s’’ and inserting ‘‘Federal 

Housing Finance Agency’s’’. 

(b) RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY IMPROVEMENT ACT OF

1994.—Section 117(e) of the Riegle Community Development and Regulatory ImVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00074 Fmt 6659 Sfmt 6621 E:\HR\OC\HR171P1.XXX HR171P1
75 

provement Act of 1994 (12 U.S.C. 4716(e)) is amended by striking ‘‘Federal Housing 

Finance Board’’ and inserting ‘‘Federal Housing Finance Agency’’. 

(c) TITLE 18, UNITED STATES CODE.—Title 18, United States Code, is amended by 

striking ‘‘Federal Housing Finance Board’’ each place such term appears in each of 

sections 212, 657, 1006, 1014, and inserting ‘‘Federal Housing Finance Agency’’. 

(d) MAHRA ACT OF 1997.—Section 517(b)(4) of the Multifamily Assisted Housing 

Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by striking 

‘‘Federal Housing Finance Board’’ and inserting ‘‘Federal Housing Finance Agency’’. 

(e) TITLE 44, UNITED STATES CODE.—Section 3502(5) of title 44, United States 

Code, is amended by striking ‘‘Federal Housing Finance Board’’ and inserting ‘‘Federal Housing Finance Agency’’. 

(f) ACCESS TO LOCAL TV ACT OF 2000.—Section 1004(d)(2)(D)(iii) of the Launching 

Our Communities’ Access to Local Television Act of 2000 (47 U.S.C. 

1103(d)(2)(D)(iii)) is amended by striking ‘‘Office of Federal Housing Enterprise 

Oversight, the Federal Housing Finance Board’’ and inserting ‘‘Federal Housing Finance Agency’’. 

SEC. 210. STUDY OF AFFORDABLE HOUSING PROGRAM USE FOR LONG-TERM CARE FACILITIES. 

The Comptroller General shall conduct a study of the use of affordable housing 

programs of the Federal home loan banks under section 10(j) of the Federal Home 

Loan Bank Act to determine how and the extent to which such programs are used 

to assist long-term care facilities for low- and moderate-income individuals, and the 

effectiveness and adequacy of such assistance in meeting the needs of affected communities. The study shall examine the applicability of such use to the affordable 

housing programs required to be established by the enterprises pursuant to the 

amendment made by section 128 of this Act. The Comptroller General shall submit 

a report to the Director of the Federal Housing Finance Agency and the Congress 

regarding the results of the study not later than the expiration of the 1-year period 

beginning on the date of the enactment of this Act. 

SEC. 211. EFFECTIVE DATE. 

Except as specifically provided otherwise in this title, the amendments made by 

this title shall take effect on, and shall apply beginning on, the expiration of the 

1-year period beginning on the date of the enactment of this Act. 

TITLE III—TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY OF OFFICE OF 

FEDERAL HOUSING ENTERPRISE OVERSIGHT, FEDERAL HOUSING FINANCE BOARD, 

AND DEPARTMENT OF HOUSING AND URBAN 

DEVELOPMENT 

Subtitle A—Office of Federal Housing Enterprise 

Oversight 

SEC. 301. ABOLISHMENT OF OFHEO. 

(a) IN GENERAL.—Effective at the end of the 1-year period beginning on the date 

of the enactment of this Act, the Office of Federal Housing Enterprise Oversight of 

the Department of Housing and Urban Development and the positions of the Director and Deputy Director of such Office are abolished. 

(b) DISPOSITION OF AFFAIRS.—During the 1-year period beginning on the date of 

the enactment of this Act, the Director of the Office of Federal Housing Enterprise 

Oversight shall, solely for the purpose of winding up the affairs of the Office of Federal Housing Enterprise Oversight— 

(1) manage the employees of such Office and provide for the payment of the 

compensation and benefits of any such employee which accrue before the effective date of the transfer of such employee pursuant to section 303; and 

(2) may take any other action necessary for the purpose of winding up the 

affairs of the Office. 

(c) STATUS OF EMPLOYEES BEFORE TRANSFER.—The amendments made by title I 

and the abolishment of the Office of Federal Housing Enterprise Oversight under 

subsection (a) of this section may not be construed to affect the status of any employee of such Office as employees of an agency of the United States for purposes 

76 

of any other provision of law before the effective date of the transfer of any such 

employee pursuant to section 303. 

(d) USE OF PROPERTY AND SERVICES.— 

(1) PROPERTY.—The Director of the Federal Housing Finance Agency may use 

the property of the Office of Federal Housing Enterprise Oversight to perform 

functions which have been transferred to the Director of the Federal Housing 

Finance Agency for such time as is reasonable to facilitate the orderly transfer 

of functions transferred pursuant to any other provision of this Act or any 

amendment made by this Act to any other provision of law. 

(2) AGENCY SERVICES.—Any agency, department, or other instrumentality of 

the United States, and any successor to any such agency, department, or instrumentality, which was providing supporting services to the Office of Federal 

Housing Enterprise Oversight before the expiration of the period under subsection (a) in connection with functions that are transferred to the Director of 

the Federal Housing Finance Agency shall— 

(A) continue to provide such services, on a reimbursable basis, until the 

transfer of such functions is complete; and 

(B) consult with any such agency to coordinate and facilitate a prompt 

and reasonable transition. 

(e) SAVINGS PROVISIONS.— 

(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—Subsection (a) 

shall not affect the validity of any right, duty, or obligation of the United States, 

the Director of the Office of Federal Housing Enterprise Oversight, or any other 

person, which— 

(A) arises under or pursuant to the title XIII of the Housing and Community Development Act of 1992, the Federal National Mortgage Association 

Charter Act, the Federal Home Loan Mortgage Corporation Act, or any 

other provision of law applicable with respect to such Office; and 

(B) existed on the day before the abolishment under subsection (a) of this 

section. 

(2) CONTINUATION OF SUITS.—No action or other proceeding commenced by or 

against the Director of the Office of Federal Housing Enterprise Oversight in 

connection with functions that are transferred to the Director of the Federal 

Housing Finance Agency shall abate by reason of the enactment of this Act, except that the Director of the Federal Housing Finance Agency shall be substituted for the Director of the Office of Federal Housing Enterprise Oversight 

as a party to any such action or proceeding. 

SEC. 302. CONTINUATION AND COORDINATION OF CERTAIN REGULATIONS. 

All regulations, orders, determinations, and resolutions that— 

(1) were issued, made, prescribed, or allowed to become effective by— 

(A) the Office of Federal Housing Enterprise Oversight; or 

(B) a court of competent jurisdiction and that relate to functions transferred by this subtitle; and 

(2) are in effect on the date of the abolishment under section 301(a) of this 

Act, shall remain in effect according to the terms of such regulations, orders, 

determinations, and resolutions, and shall be enforceable by or against the Director of the Federal Housing Finance Agency until modified, terminated, set 

aside, or superseded in accordance with applicable law by such Director, as the 

case may be, any court of competent jurisdiction, or operation of law. 

SEC. 303. TRANSFER AND RIGHTS OF EMPLOYEES OF OFHEO. 

(a) TRANSFER.—Each employee of the Office of Federal Housing Enterprise Oversight shall be transferred to the Federal Housing Finance Agency for employment 

no later than the date of the abolishment under section 301(a) of this Act and such 

transfer shall be deemed a transfer of function for purposes of section 3503 of title 

5, United States Code. 

(b) GUARANTEED POSITIONS.—Each employee transferred under subsection (a) 

shall be guaranteed a position with the same status, tenure, grade, and pay as that 

held on the day immediately preceding the transfer. Each such employee holding 

a permanent position shall not be involuntarily separated or reduced in grade or 

compensation for 12 months after the date of transfer, except for cause or, if the 

employee is a temporary employee, separated in accordance with the terms of the 

appointment. 

(c) APPOINTMENT AUTHORITY FOR EXCEPTED SERVICE EMPLOYEES.— 

(1) IN GENERAL.—In the case of employees occupying positions in the excepted 

service, any appointment authority established pursuant to law or regulations 

of the Office of Personnel Management for filling such positions shall be transferred, subject to paragraph (2). 

77 

(2) DECLINE OF TRANSFER.—The Director of the Federal Housing Finance 

Agency may decline a transfer of authority under paragraph (1) (and the employees appointed pursuant thereto) to the extent that such authority relates 

to positions excepted from the competitive service because of their confidential, 

policy-making, policy-determining, or policy-advocating character. 

(d) REORGANIZATION.—If the Director of the Federal Housing Finance Agency determines, after the end of the 1-year period beginning on the date of the abolishment under section 201(a), that a reorganization of the combined work force is required, that reorganization shall be deemed a major reorganization for purposes of 

affording affected employees retirement under section 8336(d)(2) or 8414(b)(1)(B) of 

title 5, United States Code. 

(e) EMPLOYEE BENEFIT PROGRAMS.—Any employee of the Office of Federal Housing Enterprise Oversight accepting employment with the Director of the Federal 

Housing Finance Agency as a result of a transfer under subsection (a) may retain 

for 12 months after the date such transfer occurs membership in any employee benefit program of the Federal Housing Finance Agency or the Office of Federal Housing Enterprise Oversight, as applicable, including insurance, to which such employee belongs on the date of the abolishment under section 201(a) if— 

(1) the employee does not elect to give up the benefit or membership in the 

program; and 

(2) the benefit or program is continued by the Director of the Federal Housing 

Finance Agency; 

The difference in the costs between the benefits which would have been provided 

by such agency and those provided by this section shall be paid by the Director of 

the Federal Housing Finance Agency. If any employee elects to give up membership 

in a health insurance program or the health insurance program is not continued by 

such Director, the employee shall be permitted to select an alternate Federal health 

insurance program within 30 days of such election or notice, without regard to any 

other regularly scheduled open season. 

SEC. 304. TRANSFER OF PROPERTY AND FACILITIES. 

Upon the abolishment under section 301(a), all property of the Office of Federal 

Housing Enterprise Oversight shall transfer to the Director of the Federal Housing 

Finance Agency. 

Subtitle B—Federal Housing Finance Board 

SEC. 321. ABOLISHMENT OF THE FEDERAL HOUSING FINANCE BOARD. 

(a) IN GENERAL.—Effective at the end of the 1-year period beginning on the date 

of enactment of this Act, the Federal Housing Finance Board (in this title referred 

to as the ‘‘Board’’) is abolished. 

(b) DISPOSITION OF AFFAIRS.—During the 1-year period beginning on the date of 

enactment of this Act, the Board, solely for the purpose of winding up the affairs 

of the Board— 

(1) shall manage the employees of such Board and provide for the payment 

of the compensation and benefits of any such employee which accrue before the 

effective date of the transfer of such employee under section 323; and 

(2) may take any other action necessary for the purpose of winding up the 

affairs of the Board. 

(c) STATUS OF EMPLOYEES BEFORE TRANSFER.—The amendments made by titles 

I and II and the abolishment of the Board under subsection (a) may not be construed to affect the status of any employee of such Board as employees of an agency 

of the United States for purposes of any other provision of law before the effective 

date of the transfer of any such employee under section 323. 

(d) USE OF PROPERTY AND SERVICES.— 

(1) PROPERTY.—The Director of the Federal Housing Finance Agency may use 

the property of the Board to perform functions which have been transferred to 

the Director of the Federal Housing Finance Agency for such time as is reasonable to facilitate the orderly transfer of functions transferred under any other 

provision of this Act or any amendment made by this Act to any other provision 

of law. 

(2) AGENCY SERVICES.—Any agency, department, or other instrumentality of 

the United States, and any successor to any such agency, department, or instrumentality, which was providing supporting services to the Board before the expiration of the 1-year period under subsection (a) in connection with functions 

that are transferred to the Director of the Federal Housing Finance Agency 

shall— 

78 

(A) continue to provide such services, on a reimbursable basis, until the 

transfer of such functions is complete; and 

(B) consult with any such agency to coordinate and facilitate a prompt 

and reasonable transition. 

(e) SAVINGS PROVISIONS.— (1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—Subsection (a) 

shall not affect the validity of any right, duty, or obligation of the United States, 

a member of the Board, or any other person, which— 

(A) arises under the Federal Home Loan Bank Act or any other provision 

of law applicable with respect to such Board; and 

(B) existed on the day before the effective date of the abolishment under 

subsection (a). 

(2) CONTINUATION OF SUITS.—No action or other proceeding commenced by or 

against the Board in connection with functions that are transferred to the Director of the Federal Housing Finance Agency shall abate by reason of the enactment of this Act, except that the Director of the Federal Housing Finance 

Agency shall be substituted for the Board or any member thereof as a party to 

any such action or proceeding. 

SEC. 322. CONTINUATION AND COORDINATION OF CERTAIN REGULATIONS. 

(a) IN GENERAL.—All regulations, orders, and determinations described under subsection (b) shall remain in effect according to the terms of such regulations, orders, 

determinations, and resolutions, and shall be enforceable by or against the Director 

of the Federal Housing Finance Agency until modified, terminated, set aside, or superseded in accordance with applicable law by such Director, any court of competent 

jurisdiction, or operation of law. 

(b) APPLICABILITY.—A regulation, order, or determination is described under this 

subsection if it— 

(1) was issued, made, prescribed, or allowed to become effective by— 

(A) the Board; or 

(B) a court of competent jurisdiction and relates to functions transferred 

by this subtitle; and 

(2) is in effect on the effective date of the abolishment under section 321(a). 

SEC. 323. TRANSFER AND RIGHTS OF EMPLOYEES OF THE FEDERAL HOUSING FINANCE 

BOARD. 

(a) TRANSFER.—Each employee of the Board shall be transferred to the Federal 

Housing Finance Agency for employment not later than the effective date of the 

abolishment under section 321(a), and such transfer shall be deemed a transfer of 

function for purposes of section 3503 of title 5, United States Code. 

(b) GUARANTEED POSITIONS.—Each employee transferred under subsection (a) 

shall be guaranteed a position with the same status, tenure, grade, and pay as that 

held on the day immediately preceding the transfer. Each such employee holding 

a permanent position shall not be involuntarily separated or reduced in grade or 

compensation for 12 months after the date of transfer, except for cause or, if the 

employee is a temporary employee, separated in accordance with the terms of the 

appointment. 

(c) APPOINTMENT AUTHORITY FOR EXCEPTED AND SENIOR EXECUTIVE SERVICE EMPLOYEES.— 

(1) IN GENERAL.—In the case of employees occupying positions in the excepted 

service or the Senior Executive Service, any appointment authority established 

under law or by regulations of the Office of Personnel Management for filling 

such positions shall be transferred, subject to paragraph (2). 

(2) DECLINE OF TRANSFER.—The Director of the Federal Housing Finance 

Agency may decline a transfer of authority under paragraph (1) to the extent 

that such authority relates to positions excepted from the competitive service 

because of their confidential, policymaking, policy-determining, or policy-advocating character, and noncareer positions in the Senior Executive Service (within the meaning of section 3132(a)(7) of title 5, United States Code). 

(d) REORGANIZATION.—If the Director of the Federal Housing Finance Agency determines, after the end of the 1-year period beginning on the effective date of the 

abolishment under section 321(a), that a reorganization of the combined workforce 

is required, that reorganization shall be deemed a major reorganization for purposes 

of affording affected employees retirement under section 8336(d)(2) or 8414(b)(1)(B) 

of title 5, United States Code. 

(e) EMPLOYEE BENEFIT PROGRAMS.— 

(1) IN GENERAL.—Any employee of the Board accepting employment with the 

Federal Housing Finance Agency as a result of a transfer under subsection (a) 

may retain for 12 months after the date on which such transfer occurs membership in any employee benefit program of the Federal Housing Finance Agency 

79 

or the Board, as applicable, including insurance, to which such employee belongs on the effective date of the abolishment under section 321(a) if— 

(A) the employee does not elect to give up the benefit or membership in 

the program; and 

(B) the benefit or program is continued by the Director of the Federal 

Housing Finance Agency. 

(2) COST DIFFERENTIAL.—The difference in the costs between the benefits 

which would have been provided by the Board and those provided by this section shall be paid by the Director of the Federal Housing Finance Agency. If 

any employee elects to give up membership in a health insurance program or 

the health insurance program is not continued by such Director, the employee 

shall be permitted to select an alternate Federal health insurance program 

within 30 days after such election or notice, without regard to any other regularly scheduled open season. 

SEC. 324. TRANSFER OF PROPERTY AND FACILITIES. 

Upon the effective date of the abolishment under section 321(a), all property of 

the Board shall transfer to the Director of the Federal Housing Finance Agency. 

Subtitle C—Department of Housing and Urban 

Development 

SEC. 341. TERMINATION OF ENTERPRISE-RELATED FUNCTIONS. 

(a) TERMINATION DATE.—For purposes of this subtitle, the term ‘‘termination 

date’’ means the date that occurs one year after the date of the enactment of this 

Act. 

(b) DETERMINATION OF TRANSFERRED FUNCTIONS AND EMPLOYEES.— 

(1) IN GENERAL.—Not later than the expiration of the 6-month period beginning on the date of the enactment of this Act, the Secretary, in consultation 

with the Director of the Office of Federal Housing Enterprise Oversight, shall 

determine— 

(A) the functions, duties, and activities of the Secretary of Housing and 

Urban Development regarding oversight or regulation of the enterprises 

under or pursuant to the authorizing statutes, title XIII of the Housing and 

Community Development Act of 1992, and any other provisions of law, as 

in effect before the date of the enactment of this Act, but not including any 

such functions, duties, and activities of the Director of the Office of Federal 

Housing Enterprise Oversight of the Department of Housing and Urban Development and such Office; and 

(B) the employees of the Department of Housing and Urban Development 

necessary to perform such functions, duties, and activities. 

(2) ENTERPRISE-RELATED FUNCTIONS.—For purposes of this subtitle, the term 

‘‘enterprise-related functions of the Department’’ means the functions, duties, 

and activities of the Department of Housing and Urban Development determined under paragraph (1)(A). 

(3) ENTERPRISE-RELATED EMPLOYEES.—For purposes of this subtitle, the term 

‘‘enterprise-related employees of the Department’’ means the employees of the 

Department of Housing and Urban Development determined under paragraph 

(1)(B). 

(c) DISPOSITION OF AFFAIRS.—During the 1-year period beginning on the date of 

enactment of this Act, the Secretary of Housing and Urban Development (in this 

title referred to as the ‘‘Secretary’’), solely for the purpose of winding up the affairs 

of the Secretary regarding the enterprise-related functions of the Department of 

Housing and Urban Development (in this title referred to as the ‘‘Department)’’ — 

(1) shall manage the enterprise-related employees of the Department and provide for the payment of the compensation and benefits of any such employee 

which accrue before the effective date of the transfer of any such employee 

under section 343; and 

(2) may take any other action necessary for the purpose of winding up the 

enterprise-related functions of the Department. 

(d) STATUS OF EMPLOYEES BEFORE TRANSFER.—The amendments made by titles 

I and II and the termination of the enterprise-related functions of the Department 

under subsection (b) may not be construed to affect the status of any employee of 

the Department as employees of an agency of the United States for purposes of any 

other provision of law before the effective date of the transfer of any such employee 

under section 343. 

(e) USE OF PROPERTY AND SERVICES.— 

80 

(1) PROPERTY.—The Director of the Federal Housing Finance Agency may use 

the property of the Secretary to perform functions which have been transferred 

to the Director of the Federal Housing Finance Agency for such time as is reasonable to facilitate the orderly transfer of functions transferred under any 

other provision of this Act or any amendment made by this Act to any other 

provision of law. 

(2) AGENCY SERVICES.—Any agency, department, or other instrumentality of 

the United States, and any successor to any such agency, department, or instrumentality, which was providing supporting services to the Secretary regarding 

enterprise-related functions of the Department before the termination date 

under subsection (a) in connection with such functions that are transferred to 

the Director of the Federal Housing Finance Agency shall— 

(A) continue to provide such services, on a reimbursable basis, until the 

transfer of such functions is complete; and 

(B) consult with any such agency to coordinate and facilitate a prompt 

and reasonable transition. 

(f) SAVINGS PROVISIONS.— (1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—Subsection (a) 

shall not affect the validity of any right, duty, or obligation of the United States, 

the Secretary, or any other person, which— 

(A) arises under the authorizing statutes, title XIII of the Housing and 

Community Development Act of 1992, or any other provision of law applicable with respect to the Secretary, in connection with the enterprise-related 

functions of the Department; and 

(B) existed on the day before the termination date under subsection (a). 

(2) CONTINUATION OF SUITS.—No action or other proceeding commenced by or 

against the Secretary in connection with the enterprise-related functions of the 

Department shall abate by reason of the enactment of this Act, except that the 

Director of the Federal Housing Finance Agency shall be substituted for the 

Secretary or any member thereof as a party to any such action or proceeding. 

SEC. 342. CONTINUATION AND COORDINATION OF CERTAIN REGULATIONS. 

(a) IN GENERAL.—All regulations, orders, and determinations described in subsection (b) shall remain in effect according to the terms of such regulations, orders, 

determinations, and resolutions, and shall be enforceable by or against the Director 

of the Federal Housing Finance Agency until modified, terminated, set aside, or superseded in accordance with applicable law by such Director, any court of competent 

jurisdiction, or operation of law. 

(b) APPLICABILITY.—A regulation, order, or determination is described under this 

subsection if it— 

(1) was issued, made, prescribed, or allowed to become effective by— 

(A) the Secretary; or 

(B) a court of competent jurisdiction and that relate to the enterprise-related functions of the Department; and 

(2) is in effect on the termination date under section 341(a). 

SEC. 343. TRANSFER AND RIGHTS OF EMPLOYEES. 

(a) TRANSFER.— 

(1) IN GENERAL.—Except as provided in paragraph (2), each enterprise-related 

employee of the Department shall be transferred to the Federal Housing Finance Agency for employment not later than the termination date under section 

341(a) and such transfer shall be deemed a transfer of function for purposes of 

section 3503 of title 5, United States Code. 

(2) AUTHORITY TO DECLINE.—An enterprise-related employee of the Department may, in the discretion of the employee, decline transfer under paragraph 

(1) to a position in the Federal Housing Finance Agency and shall be guaranteed a position in the Department with the same status, tenure, grade, and pay 

as that held on the day immediately preceding the date that such declination 

was made. Each such employee holding a permanent position shall not be involuntarily separated or reduced in grade or compensation for 12 months after the 

date that the transfer would otherwise have occurred, except for cause or, if the 

employee is a temporary employee, separated in accordance with the terms of 

the appointment. 

(b) GUARANTEED POSITIONS.—Each enterprise-related employee of the Department 

transferred under subsection (a) shall be guaranteed a position with the same status, tenure, grade, and pay as that held on the day immediately preceding the 

transfer. Each such employee holding a permanent position shall not be involuntarily separated or reduced in grade or compensation for 12 months after the date 

of transfer, except for cause or, if the employee is a temporary employee, separated 

in accordance with the terms of the appointment. 

81 

(c) APPOINTMENT AUTHORITY FOR EXCEPTED AND SENIOR EXECUTIVE SERVICE EMPLOYEES.— 

(1) IN GENERAL.—In the case of employees occupying positions in the excepted 

service or the Senior Executive Service, any appointment authority established 

under law or by regulations of the Office of Personnel Management for filling 

such positions shall be transferred, subject to paragraph (2). 

(2) DECLINE OF TRANSFER.—The Director of the Federal Housing Finance 

Agency may decline a transfer of authority under paragraph (1) to the extent 

that such authority relates to positions excepted from the competitive service 

because of their confidential, policymaking, policy-determining, or policy-advocating character, and noncareer positions in the Senior Executive Service (within the meaning of section 3132(a)(7) of title 5, United States Code). 

(d) REORGANIZATION.—If the Director of the Federal Housing Finance Agency determines, after the end of the 1-year period beginning on the termination date under 

section 341(a), that a reorganization of the combined workforce is required, that reorganization shall be deemed a major reorganization for purposes of affording affected employees retirement under section 8336(d)(2) or 8414(b)(1)(B) of title 5, 

United States Code. 

(e) EMPLOYEE BENEFIT PROGRAMS.— 

(1) IN GENERAL.—Any enterprise-related employee of the Department accepting employment with the Federal Housing Finance Agency as a result of a 

transfer under subsection (a) may retain for 12 months after the date on which 

such transfer occurs membership in any employee benefit program of the Federal Housing Finance Agency or the Department, as applicable, including insurance, to which such employee belongs on the termination date under section 

341(a) if— 

(A) the employee does not elect to give up the benefit or membership in 

the program; and 

(B) the benefit or program is continued by the Director of the Federal 

Housing Finance Agency. 

(2) COST DIFFERENTIAL.—The difference in the costs between the benefits 

which would have been provided by the Department and those provided by this 

section shall be paid by the Director of the Federal Housing Finance Agency. 

If any employee elects to give up membership in a health insurance program 

or the health insurance program is not continued by such Director, the employee shall be permitted to select an alternate Federal health insurance program within 30 days after such election or notice, without regard to any other 

regularly scheduled open season. 

SEC. 344. TRANSFER OF APPROPRIATIONS, PROPERTY, AND FACILITIES. 

Upon the termination date under section 341(a), all assets, liabilities, contracts, 

property, records, and unexpended balances of appropriations, authorizations, allocations, and other funds employed, held, used, arising from, available to, or to be 

made available to the Department in connection with enterprise-related functions 

of the Department shall transfer to the Director of the Federal Housing Finance 

Agency. Unexpended funds transferred by this section shall be used only for the 

purposes for which the funds were originally authorized and appropriated. 

PURPOSE AND SUMMARY

H.R. 1461, the Federal Housing Finance Reform Act of 2005, establishes the Federal Housing Finance Agency, an independent 

agency to oversee the safe and sound operation as well as the mission functions of the government sponsored enterprises (GSEs)— 

Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks. 

The Agency assumes the supervisory duties of the Office of Federal 

Housing Enterprise Oversight (OFHEO), the Federal Housing Finance Board (FHFB), and the Department of Housing and Urban 

Development (HUD). 

H.R. 1461 was introduced on April 5, 2005, by Capital Markets, 

Insurance, and Government Sponsored Enterprises Subcommittee 

Chairman Richard Baker. The Agency created in this legislation is 

headed by a Director appointed by the President and confirmed by 

the Senate. There will be three deputy directors appointed by the 

Director. Additionally, an oversight board is created that will adVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00081 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
82 

vise the Director on the supervision of the regulated entities. The 

oversight board will consist of the Director of the Agency, the Secretaries of Treasury and HUD, and 2 additional appointed directors. 

The Director of the Agency has several important supervisory 

powers: (1) to adjust risk-based capital standards; (2) to adjust 

minimum capital levels on a permanent or temporary basis for the 

entities, as well as for specific programs of the enterprises; (3) to 

monitor and adjust the portfolio holdings of the enterprises in accordance with safety and soundness or mission related considerations; (4) to place a critically undercapitalized entity into receivership; (5) to set prudential management and operations standards; 

(6) to initiate prompt corrective actions for undercapitalized entities; (7) to take enforcement actions, such as cease-and-desist orders, civil money and criminal penalties; (8) to hire examiners and 

accountants; and (9) to prohibit or withhold executive compensation 

for wrongdoing. The regulated entities must also register at least 

one class of stock with the SEC under the Securities Exchange Act 

of 1934; the enterprises must make several corporate governance 

improvements and disclose charitable donations by an enterprise 

and enterprise insiders. 

Under the legislation, the authority to review and approve new 

programs and activities is transferred from HUD to the Agency. 

New programs will be subject to a public notice and comment period prior to a determination by the Agency whether the program 

is permissible. The Agency must be notified of any new activities 

and an enterprise may not engage in a new activity until 30 days 

after notifying the Agency. The legislation permits the director to 

review existing activities to ensure that they are operating in a 

safe and sound manner and are in compliance with the mission of 

the enterprises. 

The bill authorizes the Director to raise loan limits in areas that 

meet the definition of high-cost. A high-cost area would be one 

where the median home sales price exceeds the current national 

conforming loan limit. The high-cost area loan limit would be allowed to rise to the area’s median home price but increases would 

be capped at 150 percent of the statutory loan limit—the same 

limit that now applies to Alaska, Hawaii, and the two island territories. For purposes of clarity and consistency, the Director should, 

to the maximum degree possible, utilize the same housing price 

methodology used to determine the national conforming loan limit 

in determining the high-cost area limit. 

The affordable housing goals rewrite existing law to provide clarity and realign with the needs of low-income communities as well 

as financial institutions who are serving these low- and very-low 

income communities and families. 

Under existing law, the enterprises were directed to meet three 

housing goals established by HUD. To meet these affordable housing goals, the enterprises were directed to purchase mortgages for 

households representing three income strata, commonly measured 

as area median income (AMI). These three income strata are: (1) 

moderate-income (100 percent AMI); (2) low-income (80 percent of 

AMI); and (3) very-low income (60 percent of AMI). In addition to 

these income based goals, the current law also directed the enterprises through goals to purchase mortgages in central cities, rural 

83 

areas and other underserved housing goals. These goals have been 

established by HUD as percentage-of-business requirements. In addition, HUD has established by regulation a multi-family subgoal, 

which was volume-based. The existing statute needed clarity to ensure that the enterprises, the public, as well as the regulator, could 

easily interpret and implement the intended affordable housing 

mission. 

The bill generally realigns the affordable housing goals with the 

same regulatory requirements for Community Reinvestment Acttype loans; this approach should enable financial institutions to leverage more capital to meet the increasing needs in very-low income and low-income households and communities. 

This legislation simplifies the affordable housing goals to require 

the enterprises to meet goals established by the Director for single 

and multifamily areas in low-income (80 percent of AMI) or verylow income (redefined as 50 percent of AMI), or in cases where low 

income housing tax credits properties are involved (60 percent of 

AMI). This simplification will place the enterprises on par with financial institutions, which also must meet affordable housing 

needs under CRA. 

In establishing these goals, the legislation also recognizes that a 

verifiable measurement baseline is necessary to ensure consistency 

and accuracy over time. The Director must base the single-family 

goals on Home Mortgage Disclosure Act (HMDA) data by using 3– 

year averages to determine the market. 

The Director may increase single-family goals above the averages 

established by the HMDA data to reflect expected changes in market performance based on various factors. This provision should 

provide the Director flexibility to continue the practice of considering the enterprises’ penetration into the subprime and other markets. 

While the legislation requires the Director to establish annual 

housing goals, the Director continues to have discretion to set goals 

for a multi-year period. Setting multi-year goals may be a more 

reasonable approach because it allows the enterprises time to plan 

and incorporate goal-qualifying activities into their longer-term 

business strategies. 

The enterprises are required to serve underserved markets, such 

as manufactured housing, affordable housing preservation, and 

rural and other underserved markets. While the enterprises are required to develop loan products and flexible underwriting guidelines and to lead the industry, it is not intended that the Director 

would create percent-of-business or other numeric goals. 

The Director may remove as well as add designated markets that 

reflect contemporary market needs, as identified by the Agency’s 

data as well as information submitted by the public. 

The legislation requires each enterprise to allocate 3.5 percent of 

its after-tax income during the first year after enactment, and 5 

percent in subsequent years, to a new affordable housing fund, 

modeled after the Affordable Housing Program of the Federal 

Home Loan Banks. No allocation to this fund is required when an 

enterprise is less than adequately capitalized. 

The enterprises’ Affordable Housing Fund (AHF) will be targeted 

to those families that fall within extremely low- (30% of AMI) and 

very low-income (50% of AMI) levels. The very- and extremely-low 

84 

income families are traditionally the hardest groups to serve, and 

existing programs are often unable to provide the deep targeting 

necessary to address those incomes. With respect to rental housing 

projects, funding will be prioritized to the extent rents are affordable, especially for extremely low-income families. 

The AHF provides resources to address the nation’s most pressing housing problems. To promote new and innovative ways to address affordable housing needs, the bill is deliberately flexible. For 

example, the funds can be made available as grants, loans, or other 

forms of assistance for a specific project identified in a fund application. Amounts could also be used to fund loan loss reserves, revolving loans, and other forms of use which will leverage the funding of multiple projects under an investment plan identifying both 

the types of activities being undertaken and the expected time 

frame of such plan. No less than 10 percent of each enterprise’s 

fund can be allocated for homeownership purposes such as down 

payment assistance, closing costs, and assistance for interest-rate 

buy-downs for very low and extremely low income households who 

are first-time homebuyers. 

The Director shall establish criteria to ensure that AHF monies 

will be awarded through a competitive application process, similar 

to the FHLBs’ AHP, taking into consideration prioritization of 

funding based on greatest impact, geographic diversity, the ability 

of an entity to obligate amounts and undertake activities in a timely manner, and, in the case of rental housing, the extent to which 

rents will remain affordable. 

Like AHP, the enterprises will control distribution of their funds. 

However, the bill includes safeguards against possible abuses of the 

fund. First, the Director will appoint an affordable housing board, 

whose members will include the Secretaries of HUD and Agriculture, and two persons each from businesses and non-profits actively engaged in providing housing for very- or extremely-low income households. The board will be responsible for determining 

very- and extremely-low income housing needs and will advise the 

director on priorities for the use of funds. Second, the enterprises 

must submit quarterly public reports on how they are distributing 

the funds. Funds can only be used for production, preservation, and 

rehabilitation of affordable housing. Third, no amounts can be used 

for administrative costs or fees, or for activities outside the charters of the enterprises. If there is a finding that funds were improperly used, an enterprise must repay the funds to the AHF. 

Requiring a percentage of funds to be directed for affordable 

housing will ensure that the enterprises’ subsidies flow more effectively to homebuyers and renters. The restructured goals and the 

AHF will direct the enterprises to segments of the market that 

they have not previously reached. 

A separate component of the AHF allows for use of a percentage 

of the funds for leveraged grants for affordable housing and community development purposes. No more than 12.5 percent of the 

AHF may be used for these activities. 

Recipients of community development funds may include low-income housing funds, state or local housing finance agencies, affordable housing nonprofit organizations, community development financial institutions, national non-profit housing intermediaries, 

community development corporations, and community development 

85 

entities. Any funds awarded to a national non-profit housing intermediary may not be used to distribute sub-grants to other non-profit entities. Any returns from the community development grants 

accrue to the AHF. 

H.R. 1461 permits the Director to establish capital classifications 

for the regulated entities similar to those which exist for financial 

institutions. If a regulated entity becomes undercapitalized or significantly undercapitalized, the Director may take actions to return 

the enterprise to financial health. If a regulated entity becomes 

critically undercapitalized, the Director may place the enterprise 

into conservatorship or receivership. The legislation specifically 

outlines how a receivership would function in such a situation. The 

receivership language was modeled after similar provisions in the 

Federal Deposit Insurance Act that apply to federally insured depositories. 

The Agency is vested with cease-and-desist powers, if the Director has reasonable cause to believe that the regulated entity or an 

affiliated party is engaged in an unsafe or unsound practice or 

other violation of law. Additionally, violations of this Act may result in civil money and/or criminal penalties. 

H.R. 1461 improves the operations of the Federal Home Loan 

Bank System by permitting the formation of joint offices by two or 

more Banks, requiring sharing of information among the Banks, 

and raising the eligibility cap for community financial institution 

members that use advances for additional lending activities. The 

legislation reforms the method by which each Bank elects its board 

of directors, requiring that one-third be independent directors with 

at least two being public interest directors. 

The bill ensures that OFHEO, the FHFB, and the offices in HUD 

that oversee Fannie Mae and Freddie Mac will continue their supervisory roles during the one-year period between the enactment 

and effective dates. During this time, OFHEO, the FHFB, and 

HUD will have continued authority to issue regulations, ensure the 

safe and sound operation, and monitor the mission functions of the 

GSEs. On the effective date, all OFHEO, FHFB, and HUD employees involved in the oversight of the GSEs will be transferred to the 

new Agency. All of the existing regulations from the former regulatory agencies will remain in force under the new Agency. 

BACKGROUND AND NEED FOR LEGISLATION

Fannie Mae and Freddie Mac were chartered by Congress in 

order to create a secondary market and increase liquidity in the 

home mortgage markets. Through their charters, the GSEs are 

granted special privileges not available to other private-sector 

firms. Both enterprises have a $2.25 billion line-of-credit with the 

Treasury Department and they are exempt from state regulation, 

state income taxation, and SEC registration. The enterprises are 

able to borrow funds at a lower rate than other financial institutions primarily due to the perception that their debt is backed by 

the federal government. Additionally, these enterprises are exempt 

from the privacy protections provided to consumers through the 

Gramm-Leach-Biliey Act of 1999. 

Fannie Mae and Freddie Mac are the dominant institutions in 

the secondary mortgage market. They buy residential mortgages 

from lenders and finance the purchases either by issuing debt secuVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00085 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
86 

rities or by packaging mortgages in the form of mortgage backed 

securities (MBS), on which they guarantee payment for a fee. Purchasers of the debt and MBS include mutual funds, major financial 

institutions, pension funds, insurance companies, individual investors, central banks, and other institutions in foreign countries. The 

safety and soundness of the enterprises is regulated by the Office 

of Federal Housing Enterprise Oversight (OFHEO). HUD is responsible for mission regulation of the enterprises. 

In 2003, the Congressional Budget Office estimated that GSE 

status provided Fannie Mae and Freddie Mac a $23 billion federal 

subsidy, of which $13.6 billion was passed through to borrowers as 

lower mortgage rates; the remainder of the subsidy was retained 

for management compensation and shareholder returns ($9.4 billion). Federal Reserve Board studies estimate that less than half of 

this subsidy actually passes through to borrowers. 

The Federal Home Loan Bank System was established by Congress in 1932 to provide liquidity to home mortgage lenders. The 

Banks issue debt for which they are jointly and severally liable, 

and use the proceeds principally to make advances to their members. Member institutions primarily secure advances with residential mortgages and other housing-related assets. The Federal Home 

Loan Banks are supervised by the Federal Housing Finance Board, 

an independent agency of the executive branch consisting of 5 appointed members. The System fulfills its mission by providing 

members with access to funding, technical assistance, and special 

affordable housing and community development programs. The 

System encompasses twelve separate, regional Federal Home Loan 

Banks (FHLBs, or Banks), each of which is a member-owned cooperative. There are over 8,000 members in the System comprised of 

commercial banks, savings institutions, credit unions, and insurance companies. 

The Affordable Housing Program (AHP) of the twelve FHLBanks 

is the largest private sector grant program for housing in the nation. The AHP is funded with 10 percent each of the FHLBanks’ 

annual earnings and has been a significant source of funds for financing the production and revitalization of affordable housing for 

people with low- and moderate-incomes. The AHP is a competitive 

program that provides grants to finance the purchase, construction, 

or rehabilitation of owner-occupied or rental housing. Grants can 

also be used to lower the interest rate on loans or cover down payment and closing costs. AHP grants are flexible and often serve as 

a ‘‘bridge’’ for housing projects, providing ‘‘gap’’ financing to make 

thousands of housing projects and home purchases. In 2005, approximately $230 million was made available for regional housing 

projects, creating almost 40,000 affordable housing units. Since the 

program’s inception in 1991, over $2.1 billion dollars in AHP funds 

have been awarded, creating almost 430,000 affordable housing 

units. H.R. 1461 creates a similar program for Fannie Mae and 

Freddie Mac to provide affordable housing investments. 

As of June 30, 2004, Fannie Mae had total assets of $940 billion, 

Freddie Mac $805 billion, and the twelve FHLBs $896 billion. As 

of the same date, Fannie Mae held $940 billion in outstanding 

debt, Freddie Mac $744 billion, and the FHLBs $816 billion in 

debt. 

87 

Federal law explicitly exempts Fannie Mae, Freddie Mac, and 

the Federal Home Loan Banks from the 10% of assets statutory 

limitation on commercial banks’ holdings of the ‘‘investment securities’’ of individual firms. That exemption and the perception of a 

federal guarantee of the enterprises’ obligations result in investors 

not limiting their holdings of those securities in the same way they 

limit their investments in debt issued by non-GSEs. In March 

2000, the Undersecretary of the Treasury for Domestic Finance reported that at mid-year 1999 commercial banks held over $210 billion in GSE debt, representing almost 4% of total bank assets and 

over one-third of total bank capital. In 2003, OFHEO determined 

that over 1,600 commercial banks held at least 51% of their capital 

in the form of debt issued by Fannie Mae and almost 1,000 commercial banks held at least 51% of their capital in the form of debt 

issued by Freddie Mac. 

The GSEs hold mortgages and MBS in their retained, investment 

portfolios. By exploiting their borrowing advantage in the marketplace, the GSEs are able to purchase mortgages more profitably 

than others in the market. The GSEs then earn profits on the regular payments made on the mortgages. The combined portfolios of 

Fannie Mae and Freddie Mac have grown from $138 billion in 1990 

to $1.6 trillion at yearend 2004. The Federal Home Loan Banks 

held $115 billion at yearend 2004. 

The result of these massive debt obligations and mortgage holdings is a large amount of risk being concentrated in very few institutions. An adverse market action or ill-advised investment could 

result in widespread losses to holders of this debt. Additionally, 

spikes or dips in interest rates could result in a very negative impact on the value of the retained portfolio. It is this overconcentration that has raised systemic risk concerns for Federal Reserve 

Board Chairman Greenspan and Treasury Secretary Snow. 

In 1992, Congress established affordable housing goals for the 

enterprises to ensure a more targeted transfer of GSE benefits to 

the housing market. Even though the enterprises are required by 

charter to help facilitate affordable housing, HUD has found that 

the enterprises lag behind the private sector in their affordable 

housing performance. Each enterprise must create an affordable 

housing fund in order for more of the subsidy to pass through to 

consumers. 

A report by the majority staff of the Committee found that the 

enterprises boosted their affordable housing performance by double 

counting loans, purchasing pools that were revocable, and acquiring decades-old mortgages. 

In January 2003, Freddie Mac began a restatement of earnings 

following a refusal by its outside auditor to sign off on its financial 

statement. On June 9, 2003, the company announced that it would 

undertake a management reorganization because of accounting 

irregularities discovered during the company’s restatement process. 

OFHEO initiated a special review of Freddie Mac to determine the 

extent of the wrongdoing. OFHEO also demanded the removal of 

additional members of the management team, who were involved 

in improper accounting practices. 

In November 2003, Freddie Mac announced that they had overstated earnings by $1 billion in 2001. The company said the error 

88 

in its 2001 earnings—restated to $3.16 billion from $4.15 billion— 

stemmed from failure to properly account for derivatives activity. 

In December 2003, OFHEO released a report on the special examination of Freddie Mac finding that the enterprise disregarded 

accounting rules, internal controls, disclosure standards, and ultimately, the public trust in the pursuit of steady earnings growth. 

Furthermore, the report found that the Board of Directors was 

complacent and failed to exercise adequate oversight. It was determined that Freddie Mac had misstated its earnings by $5 billion 

between 2001–2003. 

OFHEO initiated a special examination of Fannie Mae shortly 

after completing its exam of Freddie Mac. A report of initial findings on Fannie Mae in September 2004 cited internal control deficiencies, violations of GAAP accounting standards, earnings manipulations to meet compensation targets, and questionable management oversight. Fannie Mae disputed these findings and sought a 

review of OFHEO’s findings by the SEC. 

The SEC concurred with OFHEO’s findings of GAAP violations 

and directed Fannie Mae to restate its earnings for 2001–2003. As 

a result, Fannie Mae has been forced to recognize nearly $12 billion in losses and has reorganized its senior management. 

OFHEO concluded in December 2004 that Fannie Mae was ‘‘significantly undercapitalized’’ in the third quarter of 2004, and required that the enterprise’s minimum capital requirement be increased by 30% to strengthen its financial position. 

Since 2002 the Federal Home Loan Bank System has experienced several restatements and significant losses at some Banks. 

In 2004, the FHLBanks of Chicago and Seattle entered into written 

supervisory agreements with the FHFB to implement changes to 

improve their risk management, capital structure, governance, and 

other practices and procedures. 

HEARINGS

The Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises held a hearing on February 9, 2005, 

titled, ‘‘Accounting Irregularities at Fannie Mae and the Impact on 

Investors’’. The following witness testified: Donald T. Nicolaisen, 

Chief Accountant, U.S. Securities and Exchange Commission. 

The Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises held a hearing on March 9, 2005, titled ‘‘GSE Reform and the Federal Home Loan Bank System.’’ The 

following witnesses testified: The Honorable Ronald A. Rosenfeld, 

Chairman, Federal Housing Finance Board; Mr. David H. Hehman, 

President and Chief Executive Officer, Federal Home Loan Bank of 

Cincinnati; Mr. F. Weller Meyer, President and Chief Executive Officer, Acacia Federal Savings Bank; Mr. Jan Miller, President and 

Chief Executive Officer, Wainwright Bank; and Mr. Joseph F. 

Conners, Executive Vice President and Chief Financial Officer, 

Beneficial Savings Bank. 

The Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises held a hearing on April 6, 2005, titled, 

‘‘Additional Accounting and Management Failures at Fannie MaeOFHEO’s Efforts to Ensure Safe and Sound Operations.’’ The following witness testified: the Honorable Armando Falcon, Director, 

Office of Federal Housing Enterprise Oversight. 

89 

The Financial Services Committee held a hearing on April 13, 

2005, titled ‘‘The Administration’s Perspective on GSE Regulatory 

Reform.’’ The following witnesses testified: The Honorable John 

Snow, Secretary of the Treasury, and the Honorable Alfonso Jackson, Secretary of the Department of Housing and Urban Development. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

May 25, 2005, and ordered HR 1461, the Federal Housing Finance 

Reform Act of 2005, favorably reported to the House with an 

amendment by a record vote of 65 yeas and 5 nays. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. A motion by Mr. 

Oxley to report the bill, with an amendment, to the House with a 

favorable recommendation was agreed to by a record vote of 65 

yeas and 5 nays (Record vote no. FC–5). The names of Members 

voting for and against follow: 

RECORD VOTE NO. FC–5 

Representative Aye Nay Representative Aye Nay 

Mr. Oxley .................................................. X ........... Mr. Frank (MA) ........................................ X ............

Mr. Leach ................................................. X ........... Mr. Kanjorski ........................................... X ............

Mr. Baker ................................................. X ........... Ms. Waters .............................................. X ............

Ms. Pryce (OH) ......................................... X ........... Mr. Sanders ............................................ X ............

Mr. Bachus .............................................. X ........... Mrs. Maloney ........................................... X ............

Mr. Castle ................................................ X ........... Mr. Gutierrez ........................................... X ............

Mr. King (NY) ........................................... X ........... Ms. Vela ́zquez ......................................... X ............

Mr. Royce ................................................. ........... X Mr. Watt .................................................. X ............

Mr. Lucas ................................................. X ........... Mr. Ackerman .......................................... X ............

Mr. Ney ..................................................... X ........... Ms. Hooley ............................................... X ............

Mrs. Kelly ................................................. X ........... Ms. Carson .............................................. X ............

Mr. Paul ................................................... ........... X Mr. Sherman ........................................... X ............

Mr. Gillmor ............................................... X ........... Mr. Meeks (NY) ....................................... X ............

Mr. Ryun (KS) .......................................... X ........... Ms. Lee ................................................... X ............

Mr. LaTourette .......................................... X ........... Mr. Moore (KS) ........................................ X ............

Mr. Manzullo ............................................ X ........... Mr. Capuano ........................................... X ............

Mr. Jones (NC) ......................................... X ........... Mr. Ford .................................................. X ............

Mrs. Biggert ............................................. X ........... Mr. Hinojosa ............................................ X ............

Mr. Shays ................................................. X ........... Mr. Crowley ............................................. X ............

Mr. Fossella ............................................. X ........... Mr. Clay .................................................. X ............

Mr. Gary G. Miller (CA) ............................ X ........... Mr. Israel ................................................ X ............

Mr. Tiberi ................................................. X ........... Mrs. McCarthy ......................................... X ............

Mr. Kennedy (MN) .................................... X ........... Mr. Baca ................................................. X ............

Mr. Feeney ................................................ ........... X Mr. Matheson .......................................... X ............

Mr. Hensarling ......................................... ........... X Mr. Lynch ................................................ X ............

Mr. Garrett (NJ) ........................................ ........... X Mr. Miller (NC) ........................................ X ............

Ms. Brown-Waite (FL) .............................. X ........... Mr. Scott (GA) ......................................... X ............

Mr. Barrett (SC) ....................................... X ........... Mr. Davis (AL) ......................................... X ............

Ms. Harris ................................................ X ........... Mr. Al Green (TX) .................................... X ............

Mr. Renzi .................................................. X ........... Mr. Cleaver ............................................. X ............

Mr. Gerlach .............................................. X ........... Ms. Bean ................................................. X ............

Mr. Pearce ................................................ X ........... Ms. Wasserman Schultz ......................... X ............

Mr. Neugebauer ....................................... X ........... Ms. Moore (WI) ........................................ X ............

Mr. Price (GA) .......................................... X 

Mr. Fitzpatrick (PA) .................................. X 

Mr. Davis (KY) ......................................... X 

90 

RECORD VOTE NO. FC–5—Continued 

Representative Aye Nay Representative Aye Nay 

Mr. McHenry ............................................. X 

Note: Mr. Sanders is an independent, but caucuses with the Democratic Caucus. 

The following amendments were considered by record votes. The 

names of Members voting for and against follow: 

An amendment to the amendment in the nature of a 

substitute by Mr. Kanjorski, No. 1e, establishing boards of 

enterprises, was NOT AGREED TO by a record vote of 35 

yeas and 35 nays (Record vote no. FC–1). 

RECORD VOTE NO. FC–1 

Representative Aye Nay Representative Aye Nay 

Mr. Oxley .................................................. ........... X Mr. Frank (MA) ........................................ X ............

Mr. Leach ................................................. ........... X Mr. Kanjorski ........................................... X ............

Mr. Baker ................................................. ........... X Ms. Waters .............................................. X ............

Ms. Pryce (OH) ......................................... ........... X Mr. Sanders ............................................ X ............

Mr. Bachus .............................................. ........... X Mrs. Maloney ........................................... X ............

Mr. Castle ................................................ ........... X Mr. Gutierrez ........................................... X ............

Mr. King (NY) ........................................... ........... X Ms. Vela ́zquez ......................................... X ............

Mr. Royce ................................................. ........... X Mr. Watt .................................................. X ............

Mr. Lucas ................................................. ........... X Mr. Ackerman .......................................... X ............

Mr. Ney ..................................................... ........... X Ms. Hooley ............................................... X ............

Mrs. Kelly ................................................. ........... X Ms. Carson .............................................. X ............

Mr. Paul ................................................... ........... X Mr. Sherman ........................................... X ............

Mr. Gillmor ............................................... ........... X Mr. Meeks (NY) ....................................... X ............

Mr. Ryun (KS) .......................................... ........... X Ms. Lee ................................................... X ............

Mr. LaTourette .......................................... X ........... Mr. Moore (KS) ........................................ X ............

Mr. Manzullo ............................................ ........... X Mr. Capuano ........................................... X ............

Mr. Jones (NC) ......................................... ........... X Mr. Ford .................................................. X ............

Mrs. Biggert ............................................. ........... X Mr. Hinojosa ............................................ X ............

Mr. Shays ................................................. ........... X Mr. Crowley ............................................. X ............

Mr. Fossella ............................................. ........... X Mr. Clay .................................................. X ............

Mr. Gary G. Miller (CA) ............................ ........... X Mr. Israel ................................................ X ............

Mr. Tiberi ................................................. X ........... Mrs. McCarthy ......................................... X ............

Mr. Kennedy (MN) .................................... ........... X Mr. Baca ................................................. X ............

Mr. Feeney ................................................ ........... X Mr. Matheson .......................................... X ............

Mr. Hensarling ......................................... ........... X Mr. Lynch ................................................ X ............

Mr. Garrett (NJ) ........................................ ........... X Mr. Miller (NC) ........................................ X ............

Ms. Brown-Waite (FL) .............................. ........... X Mr. Scott (GA) ......................................... X ............

Mr. Barrett (SC) ....................................... ........... X Mr. Davis (AL) ......................................... X ............

Ms. Harris ................................................ ........... X Mr. Al Green (TX) .................................... X ............

Mr. Renzi .................................................. ........... X Mr. Cleaver ............................................. X ............

Mr. Gerlach .............................................. ........... X Ms. Bean ................................................. X ............

Mr. Pearce ................................................ ........... X Ms. Wasserman Schultz ......................... X ............

Mr. Neugebauer ....................................... ........... X Ms. Moore (WI) ........................................ X ............

Mr. Price (GA) .......................................... ........... X 

Mr. Fitzpatrick (PA) .................................. ........... X 

Mr. Davis (KY) ......................................... ........... X 

Mr. McHenry ............................................. ........... X 

Note: Mr. Sanders is an independent, but caucuses with the Democratic Caucus 

An amendment to the amendment in the nature of a 

substitute by Mr. Paul, No. 1h, eliminating authority to 

borrow from the Treasury of the United States was NOT 

AGREED TO by a record vote of 14 yeas and 56 nays (FC– 

2). 

91 

RECORD VOTE NO. FC–2 

Representative Aye Nay Representative Aye Nay 

Mr. Oxley .................................................. ........... X Mr. Frank (MA) ........................................ ............ X 

Mr. Leach ................................................. X ........... Mr. Kanjorski ........................................... ............ X 

Mr. Baker ................................................. X ........... Ms. Waters .............................................. ............ X 

Ms. Pryce (OH) ......................................... ........... X Mr. Sanders ............................................ ............ X 

Mr. Bachus .............................................. ........... X Mrs. Maloney ........................................... ............ X 

Mr. Castle ................................................ ........... X Mr. Gutierrez ........................................... ............ X 

Mr. King (NY) ........................................... ........... X Ms. Vela ́zquez ......................................... ............ X 

Mr. Royce ................................................. X ........... Mr. Watt .................................................. ............ X 

Mr. Lucas ................................................. X ........... Mr. Ackerman .......................................... ............ X 

Mr. Ney ..................................................... ........... X Ms. Hooley ............................................... ............ X 

Mrs. Kelly ................................................. ........... X Ms. Carson .............................................. ............ X 

Mr. Paul ................................................... X ........... Mr. Sherman ........................................... ............ X 

Mr. Gillmor ............................................... X ........... Mr. Meeks (NY) ....................................... ............ X 

Mr. Ryun (KS) .......................................... ........... X Ms. Lee ................................................... ............ X 

Mr. LaTourette .......................................... ........... X Mr. Moore (KS) ........................................ ............ X 

Mr. Manzullo ............................................ ........... X Mr. Capuano ........................................... ............ X 

Mr. Jones (NC) ......................................... X ........... Mr. Ford .................................................. ............ X 

Mrs. Biggert ............................................. ........... X Mr. Hinojosa ............................................ ............ X 

Mr. Shays ................................................. X ........... Mr. Crowley ............................................. ............ X 

Mr. Fossella ............................................. ........... X Mr. Clay .................................................. ............ X 

Mr. Gary G. Miller (CA) ............................ ........... X Mr. Israel ................................................ ............ X 

Mr. Tiberi ................................................. ........... X Mrs. McCarthy ......................................... ............ X 

Mr. Kennedy (MN) .................................... ........... X Mr. Baca ................................................. ............ X 

Mr. Feeney ................................................ X ........... Mr. Matheson .......................................... ............ X 

Mr. Hensarling ......................................... X ........... Mr. Lynch ................................................ ............ X 

Mr. Garrett (NJ) ........................................ X ........... Mr. Miller (NC) ........................................ ............ X 

Ms. Brown-Waite (FL) .............................. ........... X Mr. Scott (GA) ......................................... ............ X 

Mr. Barrett (SC) ....................................... ........... X Mr. Davis (AL) ......................................... ............ X 

Ms. Harris ................................................ ........... X Mr. Al Green (TX) .................................... ............ X 

Mr. Renzi .................................................. ........... X Mr. Cleaver ............................................. ............ X 

Mr. Gerlach .............................................. ........... X Ms. Bean ................................................. ............ X 

Mr. Pearce ................................................ X ........... Ms. Wasserman Schultz ......................... ............ X 

Mr. Neugebauer ....................................... ........... X Ms. Moore (WI) ........................................ ............ X 

Mr. Price (GA) .......................................... X 

Mr. Fitzpatrick (PA) .................................. ........... X 

Mr. Davis (KY) ......................................... ........... X 

Mr. McHenry ............................................. X ...........

Note: Mr. Sanders is an independent, but caucuses with the Democratic Caucus. 

An amendment to the amendment in the nature of a 

substitute by Mr. Royce, No. 1l, striking the Affordable 

Housing Fund was NOT AGREED TO by a record vote of 

17 yeas and 53 nays (FC–3). 

RECORD VOTE NO. FC–3 

Representative Aye Nay Representative Aye Nay 

Mr. Oxley .................................................. ........... X Mr. Frank (MA) ........................................ ............ X 

Mr. Leach ................................................. ........... X Mr. Kanjorski ........................................... ............ X 

Mr. Baker ................................................. X ........... Ms. Waters .............................................. ............ X 

Ms. Pryce (OH) ......................................... X ........... Mr. Sanders ............................................ ............ X 

Mr. Bachus .............................................. X ........... Mrs. Maloney ........................................... ............ X 

Mr. Castle ................................................ ........... X Mr. Gutierrez ........................................... ............ X 

Mr. King (NY) ........................................... ........... X Ms. Vela ́zquez ......................................... ............ X 

Mr. Royce ................................................. X ........... Mr. Watt .................................................. ............ X 

Mr. Lucas ................................................. X ........... Mr. Ackerman .......................................... ............ X 

Mr. Ney ..................................................... ........... X Ms. Hooley ............................................... ............ X 

Mrs. Kelly ................................................. ........... X Ms. Carson .............................................. ............ X 

Mr. Paul ................................................... X ........... Mr. Sherman ........................................... ............ X 

Mr. Gillmor ............................................... ........... X Mr. Meeks (NY) ....................................... ............ X 

Mr. Ryun (KS) .......................................... X ........... Ms. Lee ................................................... ............ X 

Mr. LaTourette .......................................... ........... X Mr. Moore (KS) ........................................ ............ X 

Mr. Manzullo ............................................ X ........... Mr. Capuano ........................................... ............ X 

92 

RECORD VOTE NO. FC–3—Continued 

Representative Aye Nay Representative Aye Nay 

Mr. Jones (NC) ......................................... X ........... Mr. Ford .................................................. ............ X 

Mrs. Biggert ............................................. ........... X Mr. Hinojosa ............................................ ............ X 

Mr. Shays ................................................. ........... X Mr. Crowley ............................................. ............ X 

Mr. Fossella ............................................. ........... X Mr. Clay .................................................. ............ X 

Mr. Gary G. Miller (CA) ............................ ........... X Mr. Israel ................................................ ............ X 

Mr. Tiberi ................................................. ........... X Mrs. McCarthy ......................................... ............ X 

Mr. Kennedy (MN) .................................... ........... X Mr. Baca ................................................. ............ X 

Mr. Feeney ................................................ X ........... Mr. Matheson .......................................... ............ X 

Mr. Hensarling ......................................... X ........... Mr. Lynch ................................................ ............ X 

Mr. Garrett (NJ) ........................................ X ........... Mr. Miller (NC) ........................................ ............ X 

Ms. Brown-Waite (FL) .............................. X ........... Mr. Scott (GA) ......................................... ............ X 

Mr. Barrett (SC) ....................................... X ........... Mr. Davis (AL) ......................................... ............ X 

Ms. Harris ................................................ ........... X Mr. Al Green (TX) .................................... ............ X 

Mr. Renzi .................................................. ........... X Mr. Cleaver ............................................. ............ X 

Mr. Gerlach .............................................. ........... X Ms. Bean ................................................. ............ X 

Mr. Pearce ................................................ X ........... Ms. Wasserman Schultz ......................... ............ X 

Mr. Neugebauer ....................................... ........... X Ms. Moore (WI) ........................................ ............ X 

Mr. Price (GA) .......................................... X ...........

Mr. Fitzpatrick (PA) .................................. ........... X 

Mr. Davis (KY) ......................................... ........... X 

Mr. McHenry ............................................. X ...........

Note: Mr. Sanders is an independent, but caucuses with the Democratic Caucus 

An amendment to the amendment in the nature of a 

substitute by Mr. Frank, No. 1o, establishing a Federal 

Housing Finance Oversight Board as the regulator was 

NOT AGREED TO by a record vote of 33 yeas and 37 nays 

(FC–4). 

RECORD VOTE NO. FC–4 

Representative Aye Nay Representative Aye Nay 

Mr. Oxley .................................................. ........... X Mr. Frank (MA) ........................................ X ............

Mr. Leach ................................................. ........... X Mr. Kanjorski ........................................... X ............

Mr. Baker ................................................. ........... X Ms. Waters .............................................. X ............

Ms. Pryce (OH) ......................................... ........... X Mr. Sanders ............................................ X ............

Mr. Bachus .............................................. ........... X Mrs. Maloney ........................................... X ............

Mr. Castle ................................................ ........... X Mr. Gutierrez ........................................... X ............

Mr. King (NY) ........................................... ........... X Ms. Vela ́zquez ......................................... X ............

Mr. Royce ................................................. ........... X Mr. Watt .................................................. X ............

Mr. Lucas ................................................. ........... X Mr. Ackerman .......................................... X ............

Mr. Ney ..................................................... ........... X Ms. Hooley ............................................... X ............

Mrs. Kelly ................................................. ........... X Ms. Carson .............................................. X ............

Mr. Paul ................................................... ........... X Mr. Sherman ........................................... X ............

Mr. Gillmor ............................................... ........... X Mr. Meeks (NY) ....................................... X ............

Mr. Ryun (KS) .......................................... ........... X Ms. Lee ................................................... X ............

Mr. LaTourette .......................................... ........... X Mr. Moore (KS) ........................................ X ............

Mr. Manzullo ............................................ ........... X Mr. Capuano ........................................... X ............

Mr. Jones (NC) ......................................... ........... X Mr. Ford .................................................. X ............

Mrs. Biggert ............................................. ........... X Mr. Hinojosa ............................................ X ............

Mr. Shays ................................................. ........... X Mr. Crowley ............................................. X ............

Mr. Fossella ............................................. ........... X Mr. Clay .................................................. X ............

Mr. Gary G. Miller (CA) ............................ ........... X Mr. Israel ................................................ X ............

Mr. Tiberi ................................................. ........... X Mrs. McCarthy ......................................... X ............

Mr. Kennedy (MN) .................................... ........... X Mr. Baca ................................................. X ............

Mr. Feeney ................................................ ........... X Mr. Matheson .......................................... X ............

Mr. Hensarling ......................................... ........... X Mr. Lynch ................................................ X ............

Mr. Garrett (NJ) ........................................ ........... X Mr. Miller (NC) ........................................ X ............

Ms. Brown-Waite (FL) .............................. ........... X Mr. Scott (GA) ......................................... X ............

Mr. Barrett (SC) ....................................... ........... X Mr. Davis (AL) ......................................... X ............

Ms. Harris ................................................ ........... X Mr. Al Green (TX) .................................... X ............

Mr. Renzi .................................................. ........... X Mr. Cleaver ............................................. X ............

Mr. Gerlach .............................................. ........... X Ms. Bean ................................................. X ............

93 

RECORD VOTE NO. FC–4—Continued 

Representative Aye Nay Representative Aye Nay 

Mr. Pearce ................................................ ........... X Ms. Wasserman Schultz ......................... X ............

Mr. Neugebauer ....................................... ........... X Ms. Moore (WI) ........................................ X ............

Mr. Price (GA) .......................................... ........... X 

Mr. Fitzpatrick (PA) .................................. ........... X 

Mr. Davis (KY) ......................................... ........... X 

Mr. McHenry ............................................. ........... X 

Note: Mr. Sanders is an independent, but caucuses with the Democratic Caucus 

The following other amendments were also considered by the 

Committee: 

An amendment in the nature of a substitute by Mr. 

Oxley, No. 1, making various substantive and technical 

changes to the bill, was AGREED TO, as amended, by a 

voice vote. 

An en bloc amendment to the amendment in the nature 

of a substitute by Mr. Oxley, No. 1a, was AGREED TO by 

a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Gillmor, No. 1b, regarding disclosure of 

charitable contributions was AGREED TO by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Gutierrez, No. 1c, regarding single family housing subgoals was AGREED TO by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Bachus, No. 1d, requiring a guarantee 

fee study was AGREED TO by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Royce, No. 1f, establishing a FHFA ombudsman was WITHDRAWN. 

An amendment to the amendment in the nature of a 

substitute by Mr. Davis of Alabama, No. 1g, requiring an 

annual housing report was AGREED TO, as modified, by 

a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Leach, No. 1i, regarding GSE mission 

oversight had a point of order sustained against its consideration. 

An amendment to the amendment in the nature of a 

substitute by Mr. Royce, No. 1j, regarding Federal Financial Institutions Examination Council membership was 

AGREED TO by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Meeks, No. 1k, eliminating interest rate 

disparities was AGREED TO, as modified, by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Ms. Waters, No. 1m, placing a limitation on 

subgrants was AGREED TO by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Renzi, No. 1n, modifying the definition 

of rural was AGREED TO by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. McHenry, No. 1p, requiring a GSE study 

was WITHDRAWN. 

94 

An amendment to the amendment in the nature of a 

substitute by Mr. Gutierrez, No. 1q, regarding liability for 

certain reports of fraudulent financial transactions was 

AGREED TO, as modified, by voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Garrett, No. 1r, establishing portfolio 

limitations was WITHDRAWN. 

An amendment to the amendment in the nature of a 

substitute by Mr. Gerlach, No. 1s, requiring a study of affordable housing program use for long-term care facilities 

was AGREED TO by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Royce, No. 1t, striking age limitations on 

enterprise boards of directors was AGREED TO by a voice 

vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Hensarling, No. 1u, requiring a study of 

alternative secondary market systems was AGREED TO 

by a voice vote. 

An amendment to the amendment in the nature of a 

substitute by Mr. Pearce, No. 1v, requiring recipient reports, was WITHDRAWN. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee held a hearing and made findings that are reflected in this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

The Federal Housing Finance Agency will oversee the safe and 

sound operation as well as the mission functions of Fannie Mae, 

Freddie Mac, and the Federal Home Loan Bank System. The Agency will be equipped with the tools and powers possessed by a world 

class financial regulator. The Agency will ensure that the GSEs do 

not pose a significant risk to the domestic or international financial 

system. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

95 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, June 30, 2005. 

Hon. MICHAEL G. OXLEY, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1461, the Federal Housing Finance Reform Act of 2005. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contacts are Susanne S. Mehlman 

(for federal costs), Mark Booth (for revenues), Sarah Puro (for the 

state and local impact), and Paige Piper/Bach (for the private-sector impact). 

Sincerely, 

DOUGLAS HOLTZ-EAKIN, Director. 

Enclosure. 

H.R. 1461—Federal Housing Finance Reform Act of 2004 

Summary: Enacting H.R. 1461 would establish a single regulator—the Federal Housing Finance Agency (FHFA)—for government-sponsored enterprises (GSEs) involved in the home mortgage 

market. GSEs are privately owned, Congressionally chartered financial institutions created to enhance the availability of credit in 

the economy. The GSEs that would be regulated by FHFA under 

the bill include the Federal National Mortgage Association (Fannie 

Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), 

and the Federal Home Loan Banks (FHLBs). These GSEs were created to increase the availability of credit for home mortgages. 

FHFA would be an independent agency within the federal government with the authority to oversee the safety, soundness, and 

housing mission of these GSEs. Under H.R. 1461, FHFA would be 

authorized to collect fees from the GSEs and to spend such fees to 

pay for its operating costs. Because the GSEs would be compelled 

by the government to pay those fees, the amounts collected and 

spent should be recorded on the federal budget as governmental 

revenues and outlays, respectively. CBO estimates that the operations of FHFA would cost about $100 million a year starting in 

2007 and that fees collected by the agency would cover that spending. 

The legislation also would require Fannie Mae and Freddie Mac 

to contribute 5 percent (3.5 percent in 2006) of their after-tax income, generally as reported to the Securities and Exchange Commission (SEC), to new affordable housing funds created by the bill. 

These funds would be used to provide grants and other types of financial assistance to increase home ownership among low-income 

households. Because these entities would be compelled to spend 

specified amounts of funds to meet a specific governmental purVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00095 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
96 

pose, the collections and spending of the affordable housing funds 

should also be recorded on the federal budget. Spending from the 

funds should be recorded as federal outlays, and deposits to the 

funds should be shown as governmental revenues. As a result of 

the fees that would be collected and spent by FHFA and the transactions of the affordable housing funds, CBO estimates that enacting this legislation would increase direct spending by $2.3 billion 

over the 2006–2010 period and by $6.3 billion over the 2006–2015 

period. We further estimate that the collection of the fees by FHFA 

and the creation of the affordable housing funds would increase 

federal revenues by $2.7 billion over the 2006–2010 period and by 

$6.0 billion over the 2006–2015 period. 

Pursuant to section 407 of H. Con. Res. 95 (the Concurrent Resolution on the Budget, Fiscal Year 2006), CBO estimates that enacting H.R. 1461 would cause an increase in direct spending greater 

than $5 billion in at least one of the 10-year periods between 2016 

and 2056. 

Finally, CBO estimates that implementing H.R. 1461 would result in net savings of about $22 million in discretionary spending 

over the next five years, assuming that appropriations are reduced 

to reflect the changes in regulatory structure that would be established in the legislation. Those savings would result from a reduction in the regulatory responsibilities of the Department of Housing 

and Urban Development (HUD). 

H.R. 1461 contains several intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA), but CBO estimates that the aggregate costs to state, local, and tribal governments would be minimal and would not exceed the threshold established in that act ($62 million in 2005, adjusted annually for inflation). 

The bill also would impose several private-sector mandates as defined in UMRA on Fannie Mae, Freddie Mac, and the FHLBs. CBO 

estimates that the aggregate direct cost of those mandates would 

exceed the annual threshold established by UMRA ($123 million in 

2005, adjusted annually for inflation) in each of the first five years 

the mandates are in effect. 

Estimated cost to the Federal Government: For this estimate, 

CBO assumes that H.R. 1461 will be enacted by the end of fiscal 

year 2005, that FHFA would become operational beginning in fiscal 

year 2007, and that appropriation actions consistent with this bill 

will occur. The bill’s estimated budgetary impact is shown in Table 

1. The costs of this legislation fall within budget function 370 (commerce and housing credit). 

TABLE 1. ESTIMATED BUDGETARY IMPACT OF H.R. 1461 

By fiscal year, in millions of dollars— 

2006 2007 2008 2009 2010 

CHANGES IN DIRECT SPENDING 

Estimated Budget Authority .................................................................................... 360 650 680 710 750 

Estimated Outlays ................................................................................................... 0 340 590 670 710 

CHANGES IN REVENUES 

Estimated Revenues ................................................................................................ 360 590 560 570 600 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Estimated Authorization Level ................................................................................ ¥4 ¥3 ¥5 ¥5 ¥5 

97 

TABLE 1. ESTIMATED BUDGETARY IMPACT OF H.R. 1461—Continued 

By fiscal year, in millions of dollars— 

2006 2007 2008 2009 2010 

Estimated Outlays ................................................................................................... ¥4 ¥3 ¥5 ¥5 ¥5 

Basis of estimate: The budgetary impact of the bill would stem 

mostly from the establishment of a new regulator for the GSEs and 

from the creation of the affordable housing funds of Fannie Mae 

and Freddie Mac. 

Background on GSE regulation 

Currently, HUD is responsible for setting affordable housing 

goals for Fannie Mae and Freddie Mac and ensuring that these two 

GSEs meet such goals. HUD’s oversight activities are funded from 

the agency’s annual appropriation. (In 2004, HUD spent about $4 

million to perform those oversight responsibilities.) In addition, the 

Office of Federal Housing Enterprise Oversight (OFHEO), an independent agency within HUD, currently oversees the financial safety and soundness of these two GSEs. OFHEO is funded through 

annual assessments collected from Fannie Mae and Freddie Mac; 

the collection and spending of those assessments are subject to appropriation actions. In 2005, OFHEO was authorized to collect and 

spend about $60 million to perform its duties. 

The FHLB system, which consists of 12 regionally based banks, 

is currently regulated by the Federal Housing Finance Board 

(FHFB). FHFB is an independent agency that oversees the financial safety and soundness of the FHLBs as well as their mission 

compliance; it is funded through annual assessments collected from 

the earnings of the FHLBs. The collection and spending of these 

annual assessment are not subject to appropriation action. In 2005, 

FHFB anticipates that assessments and spending will total about 

$36 million. 

Under H.R. 1461, beginning in 2007, FHFA would assume all of 

the responsibilities associated with oversight of the GSEs’ housing 

mission, which are currently under HUD’s jurisdiction. Additionally, enacting H.R. 1461 would abolish OFHEO and FHFB one year 

following its enactment, and their functions and current staff 

would be transferred to FHFA. The legislation also would establish 

an Inspector General within FHFA. 

Direct spending and revenues 

CBO estimates that the collection and spending of fees by FHFA 

would increase direct spending and revenues by about $980 million 

over the next 10 years. 

We also estimate that enacting the affordable housing fund provisions of H.R. 1461 would increase direct spending by about $5.4 

billion over the next 10 years and increase federal revenues by $5.1 

billion over the same period. CBO assumes that Fannie Mae and 

Freddie Mac would begin making deposits to their affordable housing funds in 2006, and that spending from the funds would begin 

in 2007 after FHFA becomes operational and issues regulations 

governing the administration of the affordable housing funds. The 

estimated impact of the bill on direct spending and revenues over 

the 2006–2015 period is shown in Table 2. 

98 

FHFA Fees and Spending. While many of the activities currently 

performed by HUD, OFHEO, and FHFB would continue under 

H.R. 1461, enacting this legislation also would establish some new 

authorities, such as the authority to liquidate a troubled or insolvent GSE and the authority to limit the portfolio holdings of the 

GSEs (that is, the amount of mortgages that are held instead of repackaged and then sold as mortgage-backed securities) to ensure financial soundness. In addition, the GSEs would not be able to undertake any new program or business activity without prior approval from the Director of FHFA. Also, section 106 of this legislation would authorize the Director of FHFA to assess fees on the 

housing-related GSEs each year to obtain funding for reasonable 

costs and expenses associated with FHFA’s responsibilities. Those 

fees paid by the GSEs should be classified as governmental revenues because they would be imposed through the exercise of the 

government’s sovereign power. The expenditure of the fees collected 

by FHFA would be government spending. 

TABLE 2. ESTIMATED IMPACT OF H.R. 1461 ON DIRECT SPENDING AND REVENUES 

By fiscal year, in millions of dollars— 

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 

FHFA fees: 

Estimated Budget Authority 0 100 100 100 110 110 110 110 120 120 

Estimated Outlays ................ 0 100 100 100 110 110 110 110 120 120 

Estimated Revenues ............. 0 100 100 100 110 110 110 110 120 120 

Affordable housing funds: 

Estimated Budget Authority 360 550 580 610 640 670 700 730 760 800 

Estimated Outlays ................ 0 240 490 570 600 630 660 690 720 750 

Estimated Revenues ............. 360 490 460 470 490 510 540 560 580 610 

Total: 

Estimated Budget Authority 360 650 680 710 750 780 810 840 880 920 

Estimated Outlays ................ 0 340 590 670 710 740 770 800 840 870 

Estimated Revenues ............. 360 590 560 570 600 620 650 670 700 730 

Revenue Effects of the Fees Assessed by FHFA. CBO estimates 

that FHFA would require annual funding in the neighborhood of 

$100 million, approximately the amount that will be spent under 

current law to oversee the GSEs in 2005. Under the bill, the first 

assessment by FHFA would occur in 2007, and CBO estimates that 

resulting collections would total $980 million over the 2007–2015 

period. We expect that the fees assessed by FHFA would be roughly the same amount currently paid to OFHEO and FHFB. CBO estimates that any increase in costs stemming from the new responsibilities of FHFA would be offset by savings from merging the 

technical and administrative functions of OFHEO and FHFB. 

The new collections under the bill should be treated as governmental revenues in the budget. Because the new fees paid by the 

GSEs to FHFA would be approximately equal to the amounts they 

would pay to OFHEO and FHFB under current law, taxable incomes of Fannie Mae and Freddie Mac or of other entities in the 

economy would not change significantly. 

Spending Effects of the Fees Assessed by FHFA. CBO expects 

that such spending would begin in 2007 after FHFA is established. 

We estimate that, in most years, FHFA would spend the total 

amount of fees it collects from the GSEs. Thus, enacting this provision would increase federal outlays by about $410 million over the 

99 

2007–2010 period and by about $980 million over the 2007–2015 

period. 

Affordable Housing Funds. Section 128 of this legislation would 

establish affordable housing funds at both Fannie Mae and Freddie 

Mac. To support such funds, each of these GSEs would be required 

to contribute 5 percent (3.5 percent in 2006) of their after-tax income for the preceding year, provided that the GSE is adequately 

capitalized and has generated after-tax income for the year. The 

funds could be used to provide grants and subsidies to state and 

local agencies, nonprofit groups that are dedicated to increasing 

home ownership for extremely low- and very low-income families, 

and community development financial institutions that support investment in regions with a significant population of households 

below the poverty level. Such grants could be used, for example, to 

contribute to loan loss reserves, provide down-payment assistance, 

and subsidize the cost of certain home loans. 

The funds’ resources could not be used to purchase mortgages or 

pay other corporate expenses other than maintaining the fund. Because the affordable housing goals that would be established by 

section 125 of this legislation could only be met by Fannie Mae and 

Freddie Mac through the purchase of certain types of mortgages, 

the new affordable housing funds would not directly contribute to 

meeting those goals. (However, any mortgages that are made possible by the funds and are subsequently purchased by the GSEs 

could be used to meet the new affordable housing goals.) 

The Director of FHFA would promulgate the regulations governing how the GSEs administer the affordable housing funds. The 

Director also would appoint a board consisting of 7, 9, or 11 persons, including the Director and the Secretaries of HUD and Agriculture, that would advise the Director on criteria for appropriate 

uses of the funds and review reports submitted by Fannie Mae and 

Freddie Mac to determine compliance with the regulations governing the funds. 

The allocations to the affordable housing funds should be considered governmental revenues because the bill mandates their expenditure for a governmental purpose. Although the funds would 

remain in the possession of the GSEs, they are removed from private control and converted to government use through an exercise 

of sovereign power. The deposit of specific amounts into the new 

funds would be compulsory, not voluntary. Likewise, expenditures 

from the funds would be a form of federal spending because the affordable housing funds may be obligated only for purposes specified 

in the bill. FHFA would enforce the requirement for deposits into 

the affordable housing funds and would oversee spending of those 

funds to ensure compliance with federal purposes. 

Revenue Effects of the Affordable Housing Funds. The estimated 

revenue effect of establishing the funds consists of two broad components. First, the levy of 5 percent of after-tax net income (3.5 

percent in 2006) would be accounted for as a revenue when credited to the affordable housing funds. The total combined after-tax 

income for these GSEs has averaged $10 billion over the past five 

years. Assuming that future income would continue around this average and increase by CBO’s forecast of the growth in gross domestic product (GDP), CBO estimates that in 2005 the GSEs would 

have available about $10 billion in after-tax income. The first asVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00099 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
100 

sessment for the affordable housing funds would be mandated to 

occur in 2006 and would total an estimated $360 million. Over the 

2006–2015 period, assessments would total an estimated $6.4 billion. 

Second, the spending of amounts from the affordable housing 

funds would generate deductions against taxable corporate profits 

for the two GSEs. If the GSEs’ taxable profits were reduced as a 

result of the affordable housing program, they would pay lower corporate income taxes. If the GSEs passed through some of the assessments to customers in the form of higher fees, other taxable incomes in the economy would presumably be lower. Therefore, CBO 

estimates that the payments from the affordable housing funds 

would reduce total taxable incomes in the economy and thus diminish federal tax receipts by 25 percent of the amount of those payments. In 2007, CBO estimates that about $240 million would be 

spent from the funds, reducing revenues by about $60 million in 

that year. Over the 2006–2015 period, CBO estimates that this second effect would reduce revenues by about $1.3 billion. 

Spending Effects of the Affordable Housing Funds. Expenditures 

from the funds should be treated as direct spending of the federal 

government. CBO expects that such spending would begin in 2007 

after FHFA is established. We estimate that enacting this provision 

would increase federal outlays by $1.9 billion over the 2006–2010 

period and $5.4 billion over the 2006–2015 period. 

The bill requires that amounts allocated to the affordable housing funds be committed for use within two years. CBO estimates 

that the lag between the recording of federal revenues and the 

spending of amounts in fund would result in a net reduction in the 

federal deficit in 2006 and 2007. After 2007, the estimated reduction in taxable income and its effect on tax revenues would result 

in increased deficits. Over the 2006–2015 period, CBO estimates 

that revenues would be increased by about $5.1 billion and direct 

spending would be increased by $5.4 billion, for a net increase in 

the deficit of almost $300 million. 

Other effects on spending 

Enacting H.R. 1461 also could further affect direct spending and 

revenues because this bill would provide for civil and criminal penalties against GSEs or a party affiliated with them for various violations of law. While enacting the legislation would expand the 

number of possible violations, CBO has no reason to expect that 

the amount of fines assessed would significantly increase under the 

bill. In fact, prior to the large fine paid by Freddie Mac in 2003 

($125 million) and the amount paid by one of its former employees 

($125,000), no fines had been collected from any of the housing-related GSEs. 

Section 115 of the bill would direct GSEs to register their capital 

stock with the SEC under the Securities Act of 1934. Registering 

under this act involves standardized disclosure of certain financial 

information but does not include any payment of fees associated 

with other securities laws. 

Under current law, GSEs are exempt from registering their capital stock with the SEC. However, Fannie Mae is currently registering with the SEC voluntarily, and Freddie Mac intends to do 

the same in the near future. In addition, the FHLBs are expected 

101 

to register by August 2005. Based on information provided by the 

SEC, CBO estimates that implementing section 115 of H.R. 1461 

would impose no significant costs on the SEC. 

In addition, enacting this legislation would abolish FHFB and 

thus the receipts collected and spent by this regulatory body would 

no longer appear in the budget beginning in 2007. Because collections and spending by FHFB are about equal, eliminating FHFB 

would have no net budgetary effect. 

Spending subject to appropriation 

Changes in HUD’s Regulatory Responsibilities. Beginning in 

2007, CBO estimates that implementing the bill would reduce 

HUD spending by about $5 million a year because FHFA would 

take over HUD’s current GSE-oversight responsibilities. 

GAO Studies and Audits. Enacting H.R. 1461 would require GAO 

to conduct several studies and audits over the next five years, including a study that would examine the practices used by the GSEs 

to set guarantee fees and an audit of the methodology used by 

FHFA to calculate changes in housing prices. Based on information 

from GAO, CBO estimates that GAO would incur costs of about $3 

million over the next five years to carry out its responsibilities 

under this legislation. The bill also would require GAO to conduct 

annual audits of the financial transactions associated with the new 

regulator. However, the costs associated with the annual audits 

could be funded through the assessments collected by FHFA. 

Elimination of OFHEO. After OFHEO is abolished, beginning in 

2007, the collections received and spent by this regulatory body will 

no longer appear in the budget. Because collections are about equal 

to spending, the elimination of OFHEO would have no net budgetary effect. 

Estimated long-term effects on direct spending: Pursuant to section 407 of H. Con. Res. 95 (the Concurrent Resolution on the 

Budget, Fiscal Year 2006), CBO estimates that enacting H.R. 1461 

would cause an increase in direct spending greater than $5 billion 

in at least one of the 10-year periods between 2016 and 2056. 

Estimated impact on state, local, and tribal governments: Several 

provisions of H.R. 1461 would preempt state law and thus constitute intergovernmental mandates as defined in UMRA. Those 

provisions would allow FHFA to act outside the authority of state 

law in some circumstances and would preempt state statute-of-limitation and contract laws. Those preemptions would primarily occur 

in the unlikely instance that FHFA serves as the receiver or conservator of a regulated entity. CBO estimates that the aggregate 

costs to states of complying with these mandates would be minimal 

and would not exceed the threshold established in UMRA ($62 million in 2005, adjusted annually for inflation). 

Estimated impact on the private sector: H.R. 1461 would impose 

several private-sector mandates, as defined in UMRA, on Fannie 

Mae, Freddie Mac, and the FHLBs. CBO estimates that the aggregate direct cost of those mandates would exceed the annual threshold established by UMRA ($123 million in 2005, adjusted annually 

for inflation) in each of the first five years the mandates are in effect. 

102 

Affordable housing funds 

The most costly mandate is the requirement that Fannie Mae 

and Freddie Mac establish and manage affordable housing funds to 

increase homeownership for low-income families and to increase investment in low-income areas. The bill would require the GSEs to 

contribute 5 percent of their annual after-tax income for the preceding year to the fund beginning in 2007. (That percentage would 

be 3.5 percent in 2006.) Based on their historical net earnings, 

CBO estimates that the direct cost of those mandatory contributions would be approximately $360 million in 2006. Assuming continued growth in net earnings for those GSEs, the cost of those contributions could increase to more than $600 million in 2010. 

Regulatory functions 

The bill would establish a new federal regulator for Fannie Mae, 

Freddie Mac, and the FHLBs. Under current law, those GSEs pay 

assessments to their regulators. Under the bill, they would pay assessments for the operation of their new regulator—the Federal 

Housing Finance Agency. The duty to pay those fees would be a 

private-sector mandate, but CBO expects that the new fees would 

not differ significantly from the amounts the GSEs would otherwise 

pay to their current regulators. 

The bill also would authorize FHFA to liquidate an insolvent 

GSE, to increase the amount of capital GSEs must hold, and to 

limit the portfolio holdings of the GSEs to ensure financial soundness. In addition, the GSEs would be required to receive approval 

from FHFA before beginning any new program or activity. Such 

new authority would impose private-sector mandates on the GSEs 

when it is utilized. The cost to the GSEs would depend on how the 

regulations governing such authority are implemented. Because 

that information is not available, CBO cannot determine the cost 

of those mandates. 

In addition, the bill would impose new mandates on the housingrelated GSEs by requiring them to report in a timely manner the 

discovery of certain fraudulent financial transactions and by requiring Fannie Mae and Freddie Mac to submit an annual report 

to FHFA on certain charitable contributions. According to industry 

sources, the direct cost of providing those reports would be minimal. 

Registration of capital stock 

The bill also would require the housing-related GSEs to register 

at least one class of their capital stock with the SEC under the Securities Act of 1934. Registering under this act involves standardized disclosure of certain financial information but does not include 

payment of fees associated with other securities laws. According to 

the SEC, Fannie Mae has registered, Freddie Mac intends to do so 

in the near future, and the FHLBs are expected to register by August 2005. Therefore, the direct cost to the GSEs to comply with 

the mandate would be minimal. 

Estimate prepared by: Federal Costs: Susanne S. Mehlman; Revenues: Mark Booth; Impact on State, Local, and Tribal Governments: Sarah Puro; and Impact on the Private Sector: Paige Piper/ 

Bach. 

103 

Estimate approved by: Robert A. Sunshine, Assistant Director for 

Budget Analysis and G. Thomas Woodward, Assistant Director for 

Tax Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the Constitutional 

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the general welfare of the 

United States) and clause 3 (relating to the power to regulate interstate commerce). 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

EXCHANGE OF COMMITTEE CORRESPONDENCE

HOUSE OF REPRESENTATIVES, COMMITTEE ON GOVERNMENT REFORM, Washington, DC, July 14, 2005. 

Hon. MICHAEL G. OXLEY, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: On May 25, the Committee on Financial 

Services ordered H.R. 1461, ‘‘Federal Housing Finance Reform Act 

of 2005,’’ reported to the House. Thank you for consulting with the 

Committee on Government Reform on those matters in H.R. 1461 

within the Committee’s jurisdiction including provisions regarding 

the civil service and the Freedom of Information Act. I am writing 

to confirm our mutual understanding with respect to the consideration of H.R. 1461. 

In the interest of expediting the House’s consideration of H.R. 

1461, the Committee on Government Reform will not request a sequential referral of the bill. However, the Committee does so only 

with the understanding that this procedural route will not prejudice the Committee’s jurisdictional interest and its prerogatives in 

this bill or similar legislation. 

I respectfully request your support for the appointment of outside 

conferees from the Committee on Government Reform should H.R. 

1461 or a similar Senate bill be considered in conference with the 

Senate. Finally, I request that you include our exchange of letters 

on this matter in the Financial Services Committee Report on H.R. 

104 

1461 and in the Congressional Record during consideration of this 

bill on the House floor. Thank you for your attention to these matters. 

Sincerely, 

TOM DAVIS, Chairman. 

HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, DC, July 14, 2005. 

Hon. TOM DAVIS, 

Chairman, Committee on Government Reform, 

Rayburn House Office Building, Washington, DC. 

DEAR CHAIRMAN DAVIS: Thank you for your letter concerning 

H.R. 1461, the ‘‘Federal Housing Finance Reform Act of 2005,’’ 

which the Committee on Financial Services has ordered reported. 

This bill will be considered by the House shortly. 

I want to confirm our mutual understanding with respect to the 

consideration of this bill. I acknowledge that portions of the bill as 

reported fall within the jurisdiction of the Committee on Government Reform, and I appreciate your cooperation in moving the bill 

to the House floor expeditiously. I further agree that your decision 

to not to proceed on this bill will not prejudice the Committee on 

Government Reform with respect to its prerogatives on this or 

similar legislation. I would support your request for conferees on 

those provisions within your jurisdiction in the event of a HouseSenate conference. 

I will include a copy of this letter and your response in the Congressional Record and in the Committee on Financial Services report on the bill. Thank you again for your assistance. 

Yours truly, 

MICHAEL G. OXLEY, Chairman. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section establishes the short title of the bill, the ‘‘Federal 

Housing Finance Reform Act of 2005.’’ 

Section 2. Definitions 

This section defines various terms referred to in the bill, including ‘‘regulated entities’’ that refer to Fannie Mae, Freddie Mac, and 

the Federal Home Loan Banks. 

TITLE I—REFORM OF REGULATION OF ENTERPRISES 

AND FEDERAL HOME LOAN BANKS 

Subtitle A—Improvement of Safety and Soundness 

Section 101. Establishment of the Federal Housing Finance Agency 

Creates the Federal Housing Finance Agency as an independent 

Agency of the Federal government, headed by a presidentially appointed Director, to oversee Fannie Mae, Freddie Mac and the Federal Home Loan Bank System. The Director has a term of 5 years 

and can be removed only for cause. There are three Deputy DirecVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00104 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
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tors, appointed by the Director, for the Division of Enterprise Regulation, the Division of Federal Home Loan Bank Regulation, and 

for Housing. 

Section 102. Duties and authorities of Director 

The principal duties of the Director will be to oversee the operations of the regulated entities and ensure their safe and sound operation as well as oversee their housing mission. Regarding their 

housing mission, the Director must ensure that ‘‘the operations and 

activities of each regulated entity foster liquid, efficient, competitive, and resilient national housing finance markets that minimize 

the cost of housing finance.’’ The phrase ‘‘minimize the cost of housing finance’’ is not intended to be a separate or additional duty, but 

simply acknowledges that lower housing costs are a natural consequence of liquid, efficient, competitive, and resilient national 

housing finance markets. The Director will establish prudential 

management and operations standards for each regulated entity. 

The Director is given enforcement authority for failure to meet 

those standards and will have general regulatory authority. 

Section 103. Housing Finance Oversight Board 

A board, consisting of the Director, as chair, the Secretaries of 

Treasury and HUD, and two additional appointed members, will 

advise the Director on strategies and policies in carrying out the 

duties of the Director. The additional directors are presidentially 

appointed, have a term of 3 years, and can be removed only for 

cause. The board meets by notice of the Director, but at least every 

three months. 

Section 104. Authority to require reports by regulated entities 

The Director may require the regulated entities to submit regular reports on condition, management, activities, or operations, 

and any special reports. Reports of fraudulent financial transactions must be submitted to the Director. 

Section 105. Disclosure of charitable contributions by enterprises 

The enterprises must submit annually to the Director a report on 

the total value of contributions made by the enterprise to non-profit 

organizations during its previous fiscal year. This report must also 

include contributions given to charities affiliated with enterprise 

insiders. 

Section 106. Assessments 

Permits the Agency to obtain funding for reasonable costs and 

expenses on an annual basis through assessments on the regulated 

entities. The amounts received by the Director are not to be considered government funds or appropriated monies. In making annual 

assessments and disbursing funds for agency expenses, the Director should, as much as possible, have assessments from Fannie 

Mae and Freddie Mac be used for supervision of those regulated 

entities and assessments from the Federal Home Loan Banks be 

used for supervision of those entities. 

106 

Section 107. Examiners and accountants 

Grants the Agency special authority to hire examiners, accountants, economists, and experts in financial markets and technology. 

Section 108. Prohibition and withholding of executive compensation 

Grants the Agency the authority to require a regulated entity to 

withhold compensation for wrongdoing by an executive of a regulated entity. The Agency may take into consideration any factors 

it deems relevant in making a determination to withhold compensation. The approval of an agreement or contract does not preclude the Agency’s ability to make such a determination. 

Section 109. Reviews of regulated entities 

The Director may contract with any entity that the Director considers appropriate to conduct a review. 

Section 110. Regulations and orders 

The Director will issue any regulations, guidelines, and orders 

necessary to carry out the duties of the Director. 

Section 111. Risk-based capital requirements 

The Agency is authorized to establish risk-based capital requirements for the regulated entities to ensure they operate in a safe 

and sound manner with sufficient permanent capital to support 

risk-taking. This section does not eliminate current risk-based capital regulations, which will remain in effect unless amended by the 

Director. 

Section 112. Minimum and critical capital levels 

The Director is permitted to raise minimum capital levels, by 

regulation, to ensure the regulated entities operate in a safe and 

sound manner, notwithstanding their capital classifications. The 

Director may, by order, also require temporary increases in minimum capital or, by order or regulation, require that additional 

capital be held for a particular program. The Director will periodically review the capital levels of the regulated entities and may, by 

regulation, make adjustments based on the review. The Director 

cannot lower minimum capital levels below current statutory levels. 

Section 113. Review of and authority over enterprise assets and liabilities 

The Director will periodically review the assets and liabilities of 

Fannie Mae and Freddie Mac and, upon review and notwithstanding capital classifications, may require the disposition or acquisition of certain assets and liabilities, if the Director determines 

such action is consistent with the safety and soundness or mission 

of the enterprise. 

Section 114. Corporate governance of enterprises 

This section codifies the recent rulemaking by OFHEO for improvements in corporate governance, regarding boards of directors, 

compensation, codes of conduct, audits, compliance, risk management, and other matters. 

107 

Section 115. Required registration under Securities Exchange Act of 

1934 

Requires each regulated entity to register at least one class of 

stock with the SEC. 

Section 116. Financial Institutions Examination Council 

The Director is provided membership on the Federal Financial 

Institutions Examination Council (FFIEC), which prescribes uniform standards for examination of financial institutions, with federal financial regulators as members. 

Section 117. Guarantee fee study 

The Government Accountability Office (GAO), in consultation 

with federal financial regulators and HUD, will, within one year of 

enactment, submit to Congress a study concerning the pricing, 

transparency, and reporting of Fannie Mae, Freddie Mac, and the 

Federal Home Loan Banks regarding guarantee fees and the practices of other participants in the business of mortgage purchases 

and securitization. 

Section 118. Conforming amendments 

Makes changes that are necessary to conform existing law with 

new provisions in H.R. 1461, such as eliminating references to the 

‘‘Office of Federal Housing Enterprise Oversight’’ and replacing 

them with the ‘‘Federal Housing Finance Agency,’’ striking sections 

made unnecessary by earlier parts of the bill, and striking outdated 

provisions pertaining to the issuance of regulations. 

Subtitle B—Improvement of Mission Supervision 

Section 121. Transfer of program and activities approval and housing goal oversight 

This section transfers authority to approve programs and to oversee the mission requirements of Fannie Mae and Freddie Mac from 

HUD to the Agency. 

Section 122. Review by Director of new programs and activities of 

enterprises 

An enterprise may not undertake a new program, including a 

pilot program, until there has been a determination by the Director, following public notice and a 30-day comment period, that the 

new program is permissible. The Director may approve, or conditionally approve, a new program, only if: (1) the new program does 

not contravene and is not inconsistent with this Act or the enterprise’s chartering act, taking into consideration the terms ‘‘mortgage loan origination’’ and ‘‘secondary mortgage market;’’ (2) is not 

inconsistent with the safety and soundness of the enterprise; and 

(3) is in the public interest. The Director may not prevent an enterprise from continuing to offer the automated underwriting system 

in existence on the date of enactment or continuing to engage in 

counseling or education activities. The Committee does not intend 

that the regulations required under new Section 1303(16) would 

prohibit Fannie Mae or Freddie Mac from offering existing automated loan underwriting systems to any originator of mortgage 

loans including mortgage brokers. Nonmaterial changes to autoVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00107 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
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mated underwriting systems would not be subject to new program 

or new activity review under this section. 

The Director may prohibit a new business activity, if: (1) it contravenes or is inconsistent with this Act or the enterprise’s chartering act; (2) is inconsistent with the safety and soundness of the 

enterprise; or (3) is not in the public interest. Notice of new business activities must be filed with the Director, who has 30 days to 

approve, conditionally approve, or disapprove any new activity. If 

the Director does not act within the 30-day time period, the enterprise may commence the new activity. Immediately upon receipt of 

the notice of the new activity, the Director must determine if the 

proposed activity consists of, relates to, or involves a new program. 

If such a determination is made, the approval procedures for new 

programs will apply. 

Business activities of the enterprises mean any offering, undertaking, transacting, conducting, or engaging in any conduct, activity or product. New activities are material changes to activities engaged in on the effective date and any activities that the enterprises have not been authorized to undertake. The Director is also 

required to define the terms ‘‘mortgage loan origination’’ and ‘‘secondary mortgage market’’ consistent with the chartering acts. None 

of this section’s provisions limits the Director’s ability to review existing programs or activities to ensure that they are being conducted in a safe and sound manner and in compliance with the 

mission of the enterprises. 

Section 123. Conforming loan limit 

Subsections (a) and (b) of this section update statutory language 

from 1981 that set conforming loan limits for Fannie Mae and 

Freddie Mac, and provided for adjustments upward through an 

index/housing survey. While the conforming loan limit has been 

raised every year since 1981, this section merely inserts 2005 conforming loan limits that were set by the current regulator at 

$359,650 for a one-unit single family residence; $460,400 for a twounit family residence; $556,500 for a three-unit family residence 

and $691,600 for a four-unit family residence. The subsections 

allow for these limits to be adjusted annually, starting on January 

1 after the effective date of this legislation, to reflect increases and, 

for the first time, decreases in housing prices, and a new method 

for establishing annual adjustments authorized in subsection (c). 

These subsections also authorize Fannie Mae and Freddie Mac to 

further increase loan limits above the conforming loan limits in an 

area in which the median home price is greater than the conforming loan limit. The enterprises may adjust loan limits in any 

such area up to the lesser of 150 percent of the conforming loan 

limit or the area median home price. This increase applies only to 

mortgages on which are based securities issued and sold by an enterprise. This provision is different than current law that provides 

similar loan limit adjustments for Alaska, Hawaii, Guam and the 

Virgin Islands set at 150 percent of the conforming loan limit, 

without any relationship to median home prices. 

Subsection (c) requires the Director to develop a Housing Price 

Index, which would be subject to a GAO audit on the methodology 

and timing of the index followed by a report to Congress. Subsection (d) requires the Director to conduct a study, within six 

109 

months of the effective date, of issues related to loan limits in high 

cost areas. If the study concludes that the restriction only to mortgages securitized by an enterprise causes an increase in the cost 

to borrowers, the Director would have authority to terminate restrictions. 

Subsection (e) allows adjustment of conforming loan limits under 

current law during the interim period between the enactment and 

effective dates to account for increases in home prices under the existing index. 

Section 124. Annual housing report regarding regulated entities 

The Director must submit an annual report to Congress after reviewing the Affordable Housing Activities Reports (AHARs) submitted by Fannie Mae and Freddie Mac and certain reports on the 

FHLBs in supporting low income housing and community development. 

The Director’s report will examine the affordable housing goals 

and how each enterprise is complying with those goals and the 

housing fund provisions, the progress of the FHLBs in their Affordable Housing Program (AHP), and whether the regulated entities 

are achieving their respective missions. The bill requires detailed 

reporting by the Agency on housing and affordable housing issues 

and requires a detailed monthly survey of mortgage markets to assist the Agency in this report and in the establishment of the housing price index methodology to determine loan limits. Data collected for the monthly survey must be made public, but the Agency 

may modify the data in order to not reveal a borrower’s identity. 

This provision also requires the Agency, consistent with the Administrative Procedures Act, to formulate standards by which loans 

purchased and/or securitized by the enterprises shall be characterized as subprime loans. These standards are solely to provide data 

to identify the extent to which each enterprise is engaged in purchasing or other secondary market activities involving subprime 

loans. 

The Agency must also in its report identify the extent to which 

each enterprise is purchasing and securitizing subprime loans, and 

compare the characteristics of subprime loans purchased and 

securitized by the enterprises with other loans. 

Section 125. Revision of housing goals 

This section eliminates the current housing goals and replaces 

them with three single-family housing goals and a multifamily special affordable housing goal, to be established annually. A deadline 

for the annual goals must be adopted to allow sufficient planning 

by the enterprises to meet the goals. 

In establishing and implementing the goals, the Director must 

require the enterprises to disclose appropriate information to allow 

the Director to assess if there are any disparities in interest rates 

between minorities and non-minorities of similar creditworthiness. 

If the Director determines that interest rate disparities exist, those 

findings must be reported to Congress and the Director must instruct the enterprise to take appropriate action to remedy the interest rate disparities identified. 

This section requires the Director to establish three single-family 

purchase goals for conventional, conforming, single-family, ownerVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00109 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
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occupied, purchase money mortgages, financing housing for: (1) 

families with incomes of 80 percent or less of area median income 

(AMI); (2) families in census tracts with median incomes of 80 percent or less of AMI and families with incomes less than 100 percent 

of AMI who reside in minority tracts; and (3) families with incomes 

of 50 percent or less of AMI. 

Compliance with the single-family goals for each year will be 

measured by whether the numerical target established by the Director is met or exceeded. Such targets are to be established prospectively, using a rolling average of data derived from the Home 

Mortgage Disclosure Act (HMDA) for the three immediately preceding years for which information under HMDA is publicly available, except that the Director may increase such targets to reflect 

expected changes in market performance. 

The Director will notify each enterprise 30 days prior to determination of compliance with the single-family goals, and before 

public notice. The enterprises have 30 days from receipt of notice 

to comment on the determination. 

The Director is required to establish a Multifamily Special Affordable Goal for each of the following types of multifamily housing: (1) mortgages that finance dwelling units for families with incomes of 50 percent or less of AMI, and (2) mortgages that finance 

dwelling units assisted by the low-income housing tax credit, which 

are affordable to under 60 percent of AMI. The Director is also instructed to establish additional requirements within the Multifamily Special Affordable Goal for small loans measured by either 

mortgage amounts or number of dwelling units in the project or 

both. 

The establishment of the multifamily goals must be based on certain statutory factors including national multifamily mortgage 

credit needs, the size of the multifamily market, the ability of enterprises to lead the industry in making multifamily mortgage 

credit available for underserved markets, such as for small multifamily projects of 5–50 units, multifamily projects in need of rehabilitation, and properties located in rural areas defined to include 

micropolitan areas and tribal lands. 

The Director is instructed to determine compliance with both the 

Multifamily Special Affordable Goal and the additional requirement to purchase smaller multifamily loans. 

Under this section, an enterprise may petition the Director, in 

writing, for a reduction in the housing goals. The Director may reduce the goal level only if market and economic conditions or the 

financial condition of the enterprise requires such action, or if efforts to meet the goal would result in liquidity constraints, overinvestment in certain market segments, or other consequences contrary to the enterprise’s purpose. The Director is required to make 

a determination regarding any proposed reduction within 30 days 

of receipt of the petition. The 30-day period may be extended, only 

if the Director requires additional information from the enterprise. 

A denial from the Director to reduce the level of the goal may be 

appealed in the courts. 

Section 126. Duty to serve underserved markets 

This section adds a duty to increase liquidity of mortgage investments and improve the distribution of investment capital available 

111 

for mortgage financing for underserved markets. This section instructs the enterprises to undertake activities relating to mortgages 

on housing for very low (50 percent and less of AMI), low (80 percent and less of AMI) and moderate (100 percent and less of AMI) 

income families. 

To meet this duty, each enterprise must lead the industry in developing loan products and flexible underwriting guidelines to facilitate a secondary market in manufactured housing, preservation 

of affordable housing (including through current government programs), and rural housing. The Director is also authorized to establish other underserved markets that lack adequate credit through 

conventional lending sources. 

Within six months of the effective date, the Director must establish a manner for evaluating compliance of the enterprises under 

each of the three categories of the duty to serve provisions. When 

evaluating compliance, the Director will take into consideration: (1) 

the development of loan products and more flexible underwriting 

guidelines; (2) the extent of outreach to qualified loan sellers in underserved markets; and (3) the volume of loans purchased in such 

underserved markets. 

The Director must report to Congress annually on this evaluation 

and the duty to serve provisions are enforceable under the same 

provisions as the housing goals. 

Section 127. Monitoring and enforcing compliance with housing 

goals 

The Director is authorized to take a number of steps to enforce 

compliance, including cease-and-desist orders, refusal to authorize 

new activities or programs, and civil money penalties not to exceed 

$50,000 per day, if the enterprise has failed to meet a housing goal, 

has failed to submit a housing plan if required, submits an unacceptable plan, fails to comply with the plan, or violates any other 

rule, regulation, or order relative to the housing goals. 

Section 128. Affordable housing fund 

Subsections (a) through (d) establish the affordable housing fund, 

outline eligible activities, and specify the amounts to be allocated 

by each enterprise. 

The purpose of the affordable housing fund is to: (1) increase 

homeownership for extremely low-income families, defined as 30 

percent of area median income (AMI) and very low-income families, 

defined as 50 percent of AMI; (2) increase investment in housing 

in low-income areas and areas designated as qualified census tracts 

or an area of chronic economic distress; (3) increase and preserve 

the supply of rental and owner-occupied housing for extremely lowand very low-income families; and (4) increase investment in economic and community development in economically underserved 

areas. ‘‘Economically underserved areas’’ are defined as census 

tracts where 20 percent of the population is below the poverty line 

or median family income does not exceed the greater of 80 percent 

of AMI or 80 percent of state median income. 

In 2006, each enterprise will reserve 3.5 percent of its 2005 aftertax income for the fund. After establishing the affordable housing 

fund, each enterprise allocates 5 percent of after-tax income annuVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00111 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
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ally to the fund, provided each enterprise is adequately capitalized 

and generates after-tax income for the preceding year. 

Fund monies will be used only for: (1) the production, preservation, and rehabilitation of rental housing for extremely low- and 

very low-income families; (2) the production, preservation and rehabilitation of housing for homeownership, such as down payment assistance, closing costs, and assistance for interest-rate buy-downs, 

for extremely low- and very-low income families who are first-time 

homebuyers; and (3) leveraged grants. At least 10% of the affordable housing fund monies must be used for homeownership activities. 

In subsection (e), each enterprise is authorized to distribute no 

more than 12.5 percent of the overall fund monies for leveraged 

grants. Eligible purposes for leveraged grants are: (1) development, 

preservation, rehabilitation, or purchase of affordable housing that 

meets underserved needs for affordable housing; and (2) community 

or economic development activities in economically underserved 

areas; or (3) a combination of those two. Recipients of leveraged 

grants shall include only certain entities, such as a low income 

housing funds, state or local housing finance agencies, non-profit 

affordable housing organizations, community development financial 

institutions, national non-profit housing intermediaries, community 

development corporations, and community development entities. 

Eligible uses of leveraged grants are limited to providing loan 

loss reserves, capitalizing a revolving loan fund, providing equity 

capitalization to an affordable housing fund, capitalizing a community development or economic development fund, establishing risk 

sharing loans, and funding specific investment plans. The distribution of leveraged grants is subject to an application process established through regulation by the Agency and any returns from leveraged grants accrue to the affordable housing fund. 

In subsection (f), any amounts allocated from the affordable 

housing fund must be used or committed within two years, and any 

return on investment from fund monies shall be used only for eligible uses of the fund. The Director shall issue regulations to ensure 

that monies may not be used for administrative, outreach, or other 

costs incurred by the enterprises or any fund recipients, except that 

the Director may allow certain administrative costs to be used by 

the enterprises for maintaining the affordable housing fund and 

carrying out the program. This subsection also specifically prohibits 

the use of the affordable housing fund monies to count toward 

housing goals, unless non-fund monies are used to purchase the 

mortgages. 

The Director, through regulation, must ensure that funds awarded to a national non-profit housing intermediary are not used to 

distribute sub-grants to other non-profit entities. 

Subsection (g) requires the enterprises to submit quarterly reports to the Director and the Affordable Housing Board outlining 

the activities funded through the affordable housing fund. These 

reports will be made publicly available. The Affordable Housing 

Board shall review each report to determine whether the funded 

activities are consistent with the criteria established by the Director. Any failure to use these funds properly will result in an enterprise having to replace those funds. 

113 

Subsection (j) requires the Director to appoint an Affordable 

Housing Board comprised of 7, 9, or 11 persons. The Board shall 

at least include the Director, the Secretaries of HUD and Agriculture, two persons from for-profit housing organizations, and 2 

persons from non-profit housing organizations. The non-governmental members of the Affordable Housing Board shall be limited 

to a term of three years. The Affordable Housing Board shall meet 

at least four times a year to determine extremely low- and very 

low-income housing needs and to provide advice to the Director on 

establishing the selection criteria for the affordable housing fund. 

Additional tasks of the Affordable Housing Board shall include a 

review of the operations under the affordable housing fund and a 

review of the quarterly reports submitted by the enterprises that 

outline activities funded by the affordable housing fund. 

The Director shall issue regulations to carry out the affordable 

housing fund, including an annual audit of each enterprise’s affordable housing fund activities. The Director shall also issue regulations outlining that the selection of funded activities shall be based 

on a specific criteria, including a prioritization of funding based 

upon greatest impact, geographic diversity, the ability of an entity 

to obligate amounts and undertake activities in a timely manner, 

and, in the case of rental housing, the extent and duration for 

which rents will remain affordable. 

Section 129. Consistency with mission 

This section clarifies that the changes made relating to housing 

goals, duty to serve, and the affordable housing fund should not be 

construed to authorize an enterprise to engage in any program or 

activity that contravenes or is inconsistent with the charter acts of 

the enterprises. 

Section 130. Enforcement 

This section expands the enforcement authority currently provided the HUD Secretary with respect to enforcement of the enterprises’ housing goals. The expanded authority allows the Director 

to issue and serve a notice of charges and to impose cease and desist and civil money penalties on an enterprise, if the Director determines that the enterprise has: (1) failed to meet a housing goal; 

(2) failed to submit a report under section 1314 or certain other 

sections; (3) failed to submit an acceptable housing plan, if required; or (4) fails to comply with the plan or any other order, rule, 

or regulation under sections 1321 through 1348 of the Housing and 

Community Development Act of 1992, as amended by this bill. 

The Director may directly seek enforcement in the United States 

District Court for the District of Columbia or the United States 

District Court within the jurisdiction of which the headquarters of 

the enterprise is located. 

Section 131. Conforming amendments 

Makes changes that are necessary to conform existing law with 

new provisions in H.R. 1461, such as eliminating references to the 

‘‘Secretary of HUD’’ and replacing them with the ‘‘Director,’’ striking sections made unnecessary by earlier parts of the bill, and 

striking outdated provisions pertaining to the issuance of regulations. 

114 

Subtitle C—Prompt Corrective Action 

Section 141. Capital classifications 

This section establishes capital classifications for the Federal 

Home Loan Banks as well as for Fannie Mae and Freddie Mac. 

Those regulated entities can be classified as: adequately capitalized, undercapitalized, significantly undercapitalized, and critically 

undercapitalized. The Director may reclassify a regulated entity at 

any time, if: (1) the Director determines in writing that a regulated 

entity is engaging in conduct that could result in a rapid depletion 

of core or total capital or, in the case of an enterprise, the value 

of the property securitized has decreased significantly; (2) after notice and hearing, the Director determines that the entity is in an 

unsafe or unsound condition; or (3) if the entity is engaging in an 

unsafe or unsound practice, as deemed by the Director under section 1371(b). 

A regulated entity will make no capital distribution if, after making the distribution, the entity would be undercapitalized. 

Section 142. Supervisory actions applicable to undercapitalized regulated entities 

If a regulated entity becomes undercapitalized, it will be monitored for compliance with a capital restoration plan and will require prior approval of any new programs or activities. Additionally, the Director will have the authority to restrict the asset 

growth of an undercapitalized entity. Undercapitalized entities may 

not acquire any interest in any entity or engage in a new program 

or activity without prior approval from the Director. If the Director 

determines it is necessary, the Director also may use authority and 

take actions applicable to significantly undercapitalized enterprises. 

Section 143. Supervisory actions applicable to significantly undercapitalized regulated entities 

This section makes existing discretionary actions mandatory for 

significantly undercapitalized entities. The Director must take one 

or more supervisory actions to improve the management of the entity, including the ordering of a new election for the board of directors, dismissal of directors or executive officers, or requiring the entity to employ qualified management. Additionally, a significantly 

undercapitalized regulated entity cannot, without prior written approval by the Director, pay any bonus to any executive officer or 

provide compensation to any executive officer that exceeds that officer’s average rate of compensation from the preceding calendar 

year. 

Section 144. Authority over critically undercapitalized regulated entities 

The Director may establish a conservatorship or receivership 

over critically undercapitalized entities for the purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity. The grounds for appointing a conservator or receiver include: 

assets are insufficient to cover obligations; there is a substantial 

dissipation of assets due to violations of law or unsafe or unsound 

practices; an unsafe or unsound condition; violations of cease-andVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00114 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
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desist orders; concealment of books, papers, records or assets; the 

inability to meet obligations; losses that will deplete all of its capital; any violation of law likely to cause insolvency or substantial 

dissipation of assets or earnings; by resolution of a regulated entity’s board of directors; undercapitalization; critical undercapitalization; or a determination that an entity is guilty of money laundering. 

The Agency, as conservator or receiver, may issue regulations as 

appropriate for the conduct of the conservatorship or receivership. 

The Agency succeeds to all the rights, titles, powers, and privileges 

of the regulated entity and of any stockholder, officer, or director 

of such regulated entity, and title to the books, records, and assets 

of any other legal custodian of such regulated entity. The Agency 

shall take over all assets and obligations of the regulated entity, 

perform all functions of the regulated entity, and preserve and conserve the assets and property of the regulated entity. 

The Agency, as conservator, may take such action as may be necessary to put the regulated entity into a sound and solvent condition, and to carry out the business of the entity. As receiver, the 

Agency may place a regulated entity into liquidation having due regard for the housing finance market and may organize a successor 

entity. 

The Agency, as conservator or receiver, may transfer any asset 

or liability of the regulated entity in default without any approval, 

assignment or consent. Any Federal Home Loan Bank may acquire 

the assets of any Bank with the approval of the Agency. The Agency, as conservator or receiver, shall pay all valid obligations of the 

regulated entity, to the extent proceeds of operations or sales are 

available. The Agency shall have the authority to issue subpoenas 

for the purposes of carrying out its authorities, and may contract 

for services relating to the carrying out of its functions, actions, activities, or duties. The Agency also is granted any incidental authorities it may need to carry out its powers as conservator or receiver. 

The Agency, as receiver, must promptly publish and mail notice 

to the creditors of the regulated entities to present their claims to 

the receiver. The receiver may allow or disallow claims by creditors 

according to the provisions set forth in this section. The right of a 

conservator or receiver shall be subject to the limitations on the 

powers of a receiver under section 402 through 407 of the Federal 

Deposit Insurance Corporation Improvement Act of 1991 concerning financial system risk. Also, mortgages, or interest in a pool 

of mortgages, held in trust, custodial, or agency capacity by a regulated entity shall not be available to satisfy the claims of creditors 

generally. Such mortgages or interest in a pool of mortgages shall 

be held by the conservator or receiver for the beneficial owners of 

such mortgages in accordance with the terms of the agreement creating such trust, custodial, or agency agreement. 

The Agency as conservator or receiver may disaffirm or repudiate 

any contract or lease to which the regulated entity is a party the 

performance of which the conservator or receiver determines to be 

burdensome and the repudiation of which will promote the orderly 

administration of the affairs of the regulated entity. Specific provisions are established for the treatment of qualified financial contracts, including swap agreements and master agreements. 

116 

The Agency may organize a limited-life regulated entity (LLRE) 

if a regulated entity is in default or it is in danger of default. The 

Director shall grant a temporary charter to the LLRE and the 

LLRE shall assume the liabilities of the regulated entity, purchase 

the assets of the regulated entity, and perform any other temporary functions which the Agency may prescribe. The Agency will 

not have the authority to revoke the charter of a regulated entity. 

Section 145. Conforming amendments 

This section makes changes that are necessary to conform existing law with the new provisions included in H.R. 1461. 

Subtitle D—Enforcement Actions 

Section 161. Cease-and-desist proceedings 

If a regulated entity or regulated entity affiliated party is engaged in, has engaged in, or is about to engage in, an unsafe or 

unsound practice or is violating, has violated, or is about to violate 

a law, rule, or condition, the Director may issue and serve a notice 

of charges with respect to these actions. The Director may deem an 

entity to be engaged in unsafe and unsound practices if the entity 

receives a less than satisfactory rating for asset quality, management, earnings, or liquidity in its most recent exam. 

Section 162. Temporary cease-and-desist proceedings 

Whenever the Director determines that the violation or threatened violation or unsafe or unsound practice specified in the notice 

of charges is likely to cause insolvency or a significant dissipation 

of assets or earnings or is likely to weaken the condition of the regulated entity prior to completion of the proceedings for issuance of 

a permanent cease-and-desist order, the Director may issue a temporary cease-and-desist order requiring the regulated entity to discontinue such violation or practice and to take affirmative action 

to prevent or remedy such condition. The Agency may enforce these 

orders through its independent litigation authority. 

Section 163. Prejudgment attachment 

In any action brought pursuant to this title, or to enforce an 

order for money damages, restitution, or civil money penalties, the 

Director or the Attorney General may seek prohibitions against the 

withdrawal, transfer, removal, dissipation of any funds, assets, or 

other property. 

Section 164. Enforcement and jurisdiction 

The Director is granted independent litigation authority to enforce the provisions under this title. 

Section 165. Civil money penalties 

Violations of this title, the authorizing statutes, or any order, 

condition, rule, regulation, or the engaging in unsafe or unsound 

practices shall result in civil money penalties of not more than 

$10,000 for each day which the violation continues. 

If a regulated entity or regulated entity affiliated party commits 

any violation described above, recklessly engages in unsafe or unsound practices, or breaches any fiduciary duty and these actions 

117 

are part of a pattern of misconduct, will result in more than a 

minimal loss, or result in a pecuniary gain or other benefit, the 

party shall forfeit and pay a civil penalty of not more than $50,000 

for each day which the violation continues. 

If a regulated entity or regulated entity affiliated party knowingly commits any violation described above, engages in unsafe or 

unsound practices, or breaches any fiduciary duty, and knowingly 

and recklessly causes a substantial loss to such regulated entity results in a substantial pecuniary gain or other benefit, the party by 

reason of such violation, practice, or breach shall forfeit the gain 

and pay a civil penalty in an amount not to exceed the maximum 

amount permitted for each day which the violation continues. The 

maximum daily amount for any civil money penalty that can be assessed is not to exceed $2,000,000 for any individual and shall be 

$2,000,000 for any regulated entity. 

Section 166. Removal and prohibition authority 

The Director may by order suspend a party from office or prohibit such party from further participation in the affairs of the regulated entity, if the Director determines that the party has violated 

a law, order, or condition; engaged in any unsafe and unsound activity; or committed a violation of fiduciary duty and that such action is necessary for the protection of the regulated entity, there 

has been an adverse financial impact on the entity, or such breach 

was willful and dishonest. 

A party that is suspended and/or prohibited from participation in 

the affairs of a regulated entity under this section may apply to the 

courts for a stay of such suspension. 

Section 167. Criminal penalty 

This section provides that a person, who is subject to a removal 

or prohibition order and who knowingly participated directly or indirectly in the conduct of the affairs of any regulated entity, shall 

be fined not more than $1,000,000, imprisoned for not more than 

5 years, or both. 

Section 168. Subpoena authority 

The Agency is granted the power to issue and enforce subpoenas. 

Section 169. Conforming amendments 

This section includes various conforming amendments. 

Subtitle E—General Provisions 

Section 181. Presidentially appointed directors of enterprises 

The boards of Fannie Mae and Freddie Mac will no longer have 

presidentially appointed directors. The size of the boards may vary 

from 7–15 members. 

Section 182. Report on portfolio operations, safety and soundness, 

and mission of enterprises 

Within a year, the Agency must submit a report to Congress on 

the portfolio holdings of Fannie Mae and Freddie Mac, a description of risk implications, and analyses of safety and soundness, 

mission, and systemic risk factors. 

118 

Section 183. Conforming and technical amendments 

This section includes various conforming amendments. 

Section 184. Study of alternative secondary market systems 

The Agency, in consultation with the Federal Reserve, the Department of Treasury, and the Department of Housing and Urban 

Development, shall conduct a study of the effects on financial and 

housing finance markets of alternatives to the current secondary 

market system for housing finance. 

Section 185. Effective date 

Except as specifically provided, this legislation shall take effect 

on the expiration of the 1-year period beginning on the date of enactment. 

TITLE II—FEDERAL HOME LOAN BANKS 

Section 201. Definitions 

New definitions are provided. 

Section 202. Directors 

The board of a Federal Home Loan Bank will have 13 elected directors, unless the Director otherwise decides, with terms of four 

years. The members of a Federal Home Loan Bank shall have a 

majority of the board seats. One-third of the directors will be independent with at least 2 being public interest directors. Each Bank 

may pay directors for reasonable compensation and expenses. 

Section 203. Federal Housing Finance Agency oversight of Federal 

Home Loan Banks 

The Federal Housing Finance Board is abolished and replaced by 

the Federal Housing Finance Agency. 

Section 204. Joint activities of banks 

Any two or more Federal Home Loan Banks may establish a 

joint office for the purpose of performing functions for or providing 

services to the Banks on a common or collective basis. This section 

is not intended to broaden the activities of the Banks, but to provide the Banks a means through which they can more efficiently 

conduct some of their business operations. 

Section 205. Sharing of information between Federal Home Loan 

Banks 

The Director shall prescribe rules to ensure that each Federal 

Home Loan Bank has access to information that the Bank needs 

to determine the nature and extent of its joint and several liability 

within the Bank System. 

Section 206. Reorganization of banks and voluntary merger 

Any Federal Home Loan Bank may merge with another upon approval of their boards and of the Director of the Agency. 

Section 207. Securities and Exchange Commission disclosure 

The Federal Home Loan Banks are exempted from compliance 

with some disclosures under the Securities and Exchange Act of 

119 

1934 and some SEC regulations relating to capital stock registered 

pursuant to this act and other obligations. 

Section 208. Community financial institution members 

Eligibility for Federal Home Loan Bank members to use advances for small businesses, farms, and agribusinesses, or use such 

loans as collateral for advances, is raised to $1 billion in assets and 

such community financial institutions may also use advances for 

community development lending and such loans as collateral for 

advances. 

Section 209. Technical and conforming amendments 

Makes changes that are necessary to conform existing law with 

new provisions included in H.R. 1461, such as eliminating references to the ‘‘Office of Federal Housing Enterprise Oversight’’ 

and the ‘‘Federal Housing Finance Board,’’ replacing them with the 

‘‘Director of the Federal Housing Finance Agency,’’ setting the pay 

scale for the Director and Deputy Directors, striking sections made 

unnecessary by other parts of the bill, and establishing an Office 

of the Inspector General. 

Section 210. Study of affordable housing program use for long-term 

care facilities 

GAO is required to study the use of the Federal Home Loan 

Banks’ Affordable Housing Program to fund long-term care facilities for low- and moderate-income individuals and its applicability 

to the affordable housing funds of the enterprises. 

Section 211. Effective date 

This title will be effective one year from the date of enactment. 

TITLE III—TRANSFER OF FUNCTIONS, PERSONNEL, AND 

PROPERTY OF OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, FEDERAL HOUSING FINANCE 

BOARD AND DEPARTMENT OF HOUSING AND URBAN 

DEVELOPMENT 

Subtitle A—Office of Federal Housing Enterprise Oversight 

Section 301. Abolishment of OFHEO 

The Office of Federal Housing Enterprise Oversight (OFHEO) is 

abolished one year after the date of enactment. During that oneyear period, OFHEO will continue to have oversight and regulatory 

authority for the safety and soundness of Fannie Mae and Freddie 

Mac; OFHEO will fulfill all its current duties during this time period. 

Section 302. Continuation and coordination of certain regulations 

All regulations and other regulatory actions relating to the oversight of the enterprises will remain in effect and be enforceable at 

the Agency. 

120 

Section 303. Transfer and rights of employees of OFHEO 

Employees transferred will be guaranteed a position with the 

Agency and will retain their benefits for one year following the 

transfer. 

Section 304. Transfer of property and facilities 

The property of OFHEO will become the property of the Agency. 

Subtitle B—Federal Housing Finance Board 

Section 321. Abolishment of the Federal Housing Finance Board 

The Federal Housing Finance Board is abolished one year after 

the date of enactment. During that one-year period, the Finance 

Board will continue to have oversight and regulatory authority for 

the safety and soundness and mission of the Federal Home Loan 

Bank System. 

Section 322. Continuation and coordination of certain regulations 

All regulations and other regulatory actions relating to the oversight of the Federal Home Loan Banks will remain in effect and 

be enforceable at the Agency. 

Section 323. Transfer and rights of employees of the Federal Housing Finance Board 

Employees transferred will be guaranteed a position with the 

Agency and will retain their benefits for one year following the 

transfer. 

Section 324. Transfer of property and facilities 

The property of FHFB will become the property of the Agency. 

Subtitle C—Department of Housing and Urban Development 

Section 341. Termination of enterprise-related functions 

The Secretary of HUD, in consultation with the Director of 

OFHEO, will determine, within 6 months of enactment, which 

functions and employees of HUD are ‘‘enterprise-related’’ and will 

transfer to the Agency on the effective date. During the one-year 

period between the enactment and effective dates, HUD will continue to oversee the affordable housing goals, new programs, and 

mission of the enterprises. 

Section 342. Continuation and coordination of certain regulations 

All regulations and other regulatory actions relating to oversight 

of the enterprises will remain in effect and be enforceable at the 

Agency. 

Section 343. Transfer and rights of employees 

Employees transferring will be guaranteed a position in the 

Agency and will retain their benefits for one year following the 

transfer. 

Section 344. Transfer of appropriations, property, and facilities 

The property and unexpended appropriations of HUD related to 

enterprise oversight will transfer to the Agency. 

121 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1992 

* * * * * * * 

TITLE XIII—GOVERNMENT SPONSORED 

ENTERPRISES 

* * * * * * * 

SEC. 1303. DEFINITIONS. 

For purposes of this title: 

(1) * * * 

(2) AGENCY.—The term ‘‘Agency’’ means the Federal Housing 

Finance Agency. 

(3) AUTHORIZING STATUTES.—The term ‘‘authorizing statutes’’ 

means— 

(A) the Federal National Mortgage Association Charter 

Act; 

(B) the Federal Home Loan Mortgage Corporation Act; 

and 

(C) the Federal Home Loan Bank Act. 

(4) BOARD.—The term ‘‘Board’’ means the Housing Finance 

Oversight Board established under section 1313B. 

(5) BUSINESS ACTIVITY.—The term ‘‘business activity’’ means, 

with respect to an enterprise, any offering, undertaking, 

transacting, conducting, or engaging in any conduct, activity, or 

product by the enterprise, as the Director shall provide. 

ø(2)¿ (6) CAPITAL DISTRIBUTION.— 

(A) IN GENERAL.—The term ‘‘capital distribution’’ 

means— 

(i) any dividend or other distribution in cash or in 

kind made with respect to any shares of, or other ownership interest in, an enterprise, except a dividend 

consisting only of shares of øthe enterprise¿ the regulated entity; 

(ii) any payment made by an enterprise to repurchase, redeem, retire, or otherwise acquire any of its 

shares, including any extension of credit made to finance an acquisition by øthe enterprise¿ the regulated 

entity of such shares; and 

* * * * * * * 

(B) EXCEPTION.—Any payment made by an enterprise to 

repurchase its shares for the purpose of fulfilling an obligation of øthe enterprise¿ the regulated entity under an 

employee stock ownership plan that is qualified under section 401 of the Internal Revenue Code of 1986 or any subVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00121 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
122 

stantially equivalent plan, as determined by the Director, 

shall not be considered a capital distribution. 

ø(3)¿ (7) COMPENSATION.—The term ‘‘compensation’’ means 

any payment of money or the provision of any other thing of 

current or potential value in connection with employment. 

(8) CONFORMING MORTGAGE.—The term ‘‘conforming mortgage’’ means, with respect to an enterprise, a conventional mortgage having an original principal obligation that does not exceed the dollar limitation, in effect at the time of such origination, under, as applicable— 

(A) section 302(b)(2) of the Federal National Mortgage 

Association Charter Act; or 

(B) section 305(a)(2) of the Federal Home Loan Mortgage 

Corporation Act. 

ø(4)¿ (9) CORE CAPITAL.—The term ‘‘core capital’’ means, 

with respect to an enterprise, the sum of the following (as determined in accordance with generally accepted accounting 

principles): 

(A) * * * 

* * * * * * * 

ø(5)¿ (10) DIRECTOR.—The term ‘‘Director’’ means the Director of the øOffice of Federal Housing Enterprise Oversight of 

the Department of Housing and Urban Development¿ Federal 

Housing Finance Agency. ø(6)¿ (11) ENTERPRISE.—The term ‘‘enterprise’’ means— 

(A) * * * 

* * * * * * * 

ø(7)¿ (12) EXECUTIVE OFFICER.—The term ‘‘executive officer’’ 

means, with respect to øan enterprise¿ a regulated entity, the 

chairman of the board of directors, chief executive officer, chief 

financial officer, president, vice chairman, any executive vice 

president, and any senior vice president in charge of a principal business unit, division, or function. 

(13) EXTREMELY LOW-INCOME.—The term ‘‘extremely low-income’’ means— 

(A) in the case of owner-occupied units, income not in excess of 30 percent of the area median income; and 

(B) in the case of rental units, income not in excess of 30 

percent of the area median income, with adjustments for 

smaller and larger families, as determined by the Secretary. 

(14) FEDERAL HOME LOAN BANK.—The term ‘‘Federal home 

loan bank’’ means a bank established under the authority of the 

Federal Home Loan Bank Act. 

ø(8)¿ (15) LOW-INCOME.—The term ‘‘low-income’’ means— 

(A) * * * 

(B) in the case of rental units, income not in excess of 

80 percent of area median income, with adjustments for 

smaller and larger families, as determined by the 

øSecretary¿ Director. 

(16) LOW-INCOME AREA.—The term ‘‘low income area’’ means 

a census tract or block numbering area in which the median income does not exceed 80 percent of the median income for the 

area in which such census tract or block numbering area is loVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00122 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
123 

cated, and, for the purposes of section 1332(a)(2), shall include 

families having incomes not greater than 100 percent of the 

area median income who reside in minority census tracts. 

ø(9)¿ (17) MEDIAN INCOME.—The term ‘‘median income’’ 

means, with respect to an area, the unadjusted median family 

income for the area, as determined and published annually by 

the øSecretary¿ Director. 

ø(10)¿ (18) MODERATE-INCOME.—The term ‘‘moderate-income’’ means— 

(A) * * * 

(B) in the case of rental units, income not in excess of 

area median income, with adjustments for smaller and 

larger families, as determined by the øSecretary¿ Director. 

(19) MORTGAGE MARKETS.—The terms ‘‘mortgage loan origination’’ and ‘‘secondary mortgage market’’ shall have such 

meanings as the Director shall, by regulation, prescribe consistent with the Federal National Mortgage Association Charter 

Act and the Federal Home Loan Mortgage Corporation Act. The 

Director shall issue such regulations not later than the expiration of the 12-month period beginning on the effective date 

under section 185 of the Federal Housing Finance Reform Act 

of 2005, and the Director shall review such regulations on a 

periodic basis. 

ø(11)¿ (20) MORTGAGE PURCHASES.—The term ‘‘mortgage 

purchases’’ includes mortgages purchased for portfolio or 

securitization. 

ø(12)¿ (21) MULTIFAMILY HOUSING.—The term ‘‘multifamily 

housing’’ means a residence consisting of more than 4 dwelling 

units. 

(22) NEW BUSINESS ACTIVITY.—The term ‘‘new business activity’’ means, with respect to an enterprise, a business activity 

that— 

(A) is materially changed or materially different from 

any of the business activities that the enterprise was engaging in on the effective date under section 185 of the Federal 

Housing Finance Reform Act of 2005; and 

(B) the enterprise has not previously obtained authorization, pursuant to the provisions of section 1321(c), to offer, 

undertake, transact, conduct, or engage in. 

ø(13)¿ (23) NEW PROGRAM.—The term ‘‘new program’’ means, 

with respect to an enterprise, any program for the purchasing, 

servicing, selling, lending on the security of, or otherwise dealing in, conventional mortgages that— 

(A) * * * 

* * * * * * * 

ø(14) OFFICE.—The term ‘‘Office’’ means the Office of Federal 

Housing Enterprise Oversight of the Department of Housing 

and Urban Development. 

ø(15) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of Housing and Urban Development.¿ 

(24) REGULATED ENTITY.—The term ‘‘regulated entity’’ 

means— 

(A) the Federal National Mortgage Association and any 

affiliate thereof; 

124 

(B) the Federal Home Loan Mortgage Corporation and 

any affiliate thereof; and 

(C) each Federal home loan bank. 

(25) REGULATED ENTITY-AFFILIATED PARTY.—The term ‘‘regulated entity-affiliated party’’ means— 

(A) any director, officer, employee, or controlling stockholder of, or agent for, a regulated entity; 

(B) any shareholder, affiliate, consultant, or joint venture 

partner of a regulated entity, and any other person, as determined by the Director (by regulation or on a case-by-case 

basis) that participates in the conduct of the affairs of a 

regulated entity; and 

(C) any independent contractor for a regulated entity (including any attorney, appraiser, or accountant); and 

(D) any not-for-profit corporation that receives its principal funding, on an ongoing basis, from any regulated entity. 

(26) RURAL AREAS.—The term ‘‘rural areas’’ means any areas 

that are non-metropolitan areas (as such term is defined by the 

Director of the Office of Management and Budget), including 

micropolitan areas and tribal trust lands. 

ø(16)¿ (27) SINGLE FAMILY HOUSING.—The term ‘‘single family housing’’ means a residence consisting of 1 to 4 dwelling 

units. 

ø(17)¿ (28) STATE.—The term ‘‘State’’ means the States of 

the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern 

Mariana Islands, Guam, the Virgin Islands, American Samoa, 

the Trust Territory of the Pacific Islands, and any other territory or possession of the United States. 

ø(18)¿ (29) TOTAL CAPITAL.—The term ‘‘total capital’’ means, 

with respect to an enterprise, the sum of the following: 

(A) * * * 

* * * * * * * 

ø(19)¿ (30) VERY LOW-INCOME.—The term ‘‘very low-income’’ 

means— 

(A) in the case of owner-occupied units, income not in excess of ø60¿ 50 percent of area median income; and 

(B) in the case of rental units, income not in excess of 

ø60¿ 50 percent of area median income, with adjustments 

for smaller and larger families, as determined by the 

øSecretary¿ Director. 

* * * * * * * 

125 

Subtitle A—Supervision and Regulation of 

Enterprises 

PART 1—FINANCIAL SAFETY AND SOUNDNESS 

REGULATOR 

øSEC. 1311. ESTABLISHMENT OF OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT. 

øThere is hereby established an office within the Department of 

Housing and Urban Development, which shall be known as the Office of Federal Housing Enterprise Oversight. 

øSEC. 1312. DIRECTOR. 

ø(a) APPOINTMENT.—The Office shall be under the management 

of a Director, who shall be appointed by the President, by and with 

the advice and consent of the Senate, from among individuals who 

are citizens of the United States, have a demonstrated understanding of financial management or oversight, and have a demonstrated understanding of mortgage security markets and housing 

finance. An individual may not be appointed as Director if the individual has served as an executive officer or director of an enterprise at any time during the 3-year period ending upon the nomination of such individual for appointment as Director. 

ø(b) TERM.—The Director shall be appointed for a term of 5 

years. 

ø(c) VACANCY.—A vacancy in the position of Director shall be 

filled in the manner in which the original appointment was made 

under subsection (a). 

ø(d) SERVICE AFTER END OF TERM.—A Director may serve after 

the expiration of the term for which the Director was appointed 

until a successor Director has been appointed. 

ø(e) DEPUTY DIRECTOR.— 

ø(1) IN GENERAL.—The Office shall have a Deputy Director 

who shall be appointed by the Director from among individuals 

who are citizens of the United States, have a demonstrated understanding of financial management or oversight, and have a 

demonstrated understanding of mortgage security markets and 

housing finance. An individual may not be appointed as Deputy Director if the individual has served as an executive officer 

or director of an enterprise at any time during the 3-year period ending upon the appointment of such individual as Deputy 

Director. 

ø(2) FUNCTIONS.—The Deputy Director shall have such functions, powers, and duties as the Director shall prescribe. In the 

event of the death, resignation, sickness, or absence of the Director, the Deputy Director shall serve as acting Director until 

the return of the Director or the appointment of a successor 

pursuant to subsection (c). 

øSEC. 1313. DUTY AND AUTHORITY OF DIRECTOR. 

ø(a) DUTY.—The duty of the Director shall be to ensure that the 

enterprises are adequately capitalized and operating safely, in accordance with this title. 

ø(b) AUTHORITY EXCLUSIVE OF SECRETARY.—The Director is authorized, without the review or approval of the Secretary, to make 

126 

such determinations, take such actions, and perform such functions 

as the Director determines necessary regarding— 

ø(1) the issuance of regulations to carry out this part, subtitle B, and subtitle C (including the establishment of capital 

standards pursuant to subtitle B); 

ø(2) examinations of the enterprises under section 1317; 

ø(3) determining the capital levels of the enterprises and 

classification of the enterprises within capital classifications 

established under subtitle B; 

ø(4) decisions to appoint conservators for the enterprises; 

ø(5) administrative and enforcement actions under subtitle 

B, actions taken under subtitle C with respect to enforcement 

of subtitle B, and other matters relating to safety and 

soundness; 

ø(6) approval of payments of capital distributions by the enterprises under section 303(c)(2) of the Federal National Mortgage Association Charter Act and section 303(b)(2) of the Federal Home Loan Mortgage Corporation Act; 

ø(7) requiring the enterprises to submit reports under section 1314 of this title, section 309(k) of the Federal National 

Mortgage Association Charter Act, and section 307(c) of the 

Federal Home Loan Mortgage Corporation Act; 

ø(8) prohibiting the payment of excessive compensation by 

the enterprises to any executive officer of the enterprises under 

section 1318; 

ø(9) the management of the Office, including the establishment and implementation of annual budgets, the hiring of, and 

compensation levels for, personnel of the Office, and annual assessments for the costs of the Office; 

ø(10) conducting research and financial analysis; and 

ø(11) the submission of reports required by the Director 

under this title. 

ø(c) AUTHORITY SUBJECT TO APPROVAL OF SECRETARY.—Any determinations, actions, and functions of the Director not referred to 

in subsection (b) shall be subject to the review and approval of the 

Secretary. 

ø(d) DELEGATION OF AUTHORITY.—The Director may delegate to 

officers and employees of the Office any of the functions, powers, 

and duties of the Director, as the Director considers appropriate. 

ø(e) INDEPENDENCE IN PROVIDING INFORMATION TO CONGRESS.— 

The Director shall not be required to obtain the prior approval, 

comment, or review of any officer or agency of the United States 

before submitting to the Congress, or any committee or subcommittee thereof, any reports, recommendations, testimony, or 

comments if such submissions include a statement indicating that 

the views expressed therein are those of the Director and do not 

necessarily represent the views of the Secretary or the President.¿ 

SEC. 1311. ESTABLISHMENT OF THE FEDERAL HOUSING FINANCE 

AGENCY. 

(a) ESTABLISHMENT.—There is established the Federal Housing 

Finance Agency, which shall be an independent agency of the Federal Government. 

(b) GENERAL SUPERVISORY AND REGULATORY AUTHORITY.— 

127 

(1) IN GENERAL.—Each regulated entity shall, to the extent 

provided in this title, be subject to the supervision and regulation of the Agency. 

(2) AUTHORITY OVER FANNIE MAE, FREDDIE MAC, AND FEDERAL

HOME LOAN BANKS.—The Director of the Federal Housing Finance Agency shall have general supervisory and regulatory authority over each regulated entity and shall exercise such general regulatory authority, including such duties and authorities 

set forth under section 1313 of this Act, to ensure that the purposes of this Act, the authorizing statutes, and any other applicable law are carried out. 

(c) SAVINGS PROVISION.—The authority of the Director to take actions under subtitles B and C shall not in any way limit the general 

supervisory and regulatory authority granted to the Director. 

SEC. 1312. DIRECTOR. 

(a) ESTABLISHMENT OF POSITION.—There is established the position of the Director of the Federal Housing Finance Agency, who 

shall be the head of the Agency. 

(b) APPOINTMENT; TERM.— 

(1) APPOINTMENT.—The Director shall be appointed by the 

President, by and with the advice and consent of the Senate, 

from among individuals who are citizens of the United States, 

have a demonstrated understanding of financial management 

or oversight, and have a demonstrated understanding of capital 

markets, including the mortgage securities markets and housing finance. 

(2) TERM AND REMOVAL.—The Director shall be appointed for 

a term of 5 years and may be removed by the President only for 

cause. 

(3) VACANCY.—A vacancy in the position of Director that occurs before the expiration of the term for which a Director was 

appointed shall be filled in the manner established under paragraph (1), and the Director appointed to fill such vacancy shall 

be appointed only for the remainder of such term. 

(4) SERVICE AFTER END OF TERM.—An individual may serve 

as the Director after the expiration of the term for which appointed until a successor has been appointed. 

(5) TRANSITIONAL PROVISION.—Notwithstanding paragraphs 

(1) and (2), the Director of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development shall serve as the Director until a successor has been 

appointed under paragraph (1). 

(c) DEPUTY DIRECTOR OF THE DIVISION OF ENTERPRISE REGULATION.— 

(1) IN GENERAL.—The Agency shall have a Deputy Director of 

the Division of Enterprise Regulation, who shall be appointed 

by the Director from among individuals who are citizens of the 

United States, have a demonstrated understanding of financial 

management or oversight and of mortgage securities markets 

and housing finance. 

(2) FUNCTIONS.—The Deputy Director of the Division of Enterprise Regulation shall have such functions, powers, and duties with respect to the oversight of the enterprises as the Director shall prescribe. 

128 

(d) DEPUTY DIRECTOR OF THE DIVISION OF FEDERAL HOME LOAN

BANK REGULATION.— (1) IN GENERAL.—The Agency shall have a Deputy Director of 

the Division of Federal Home Loan Bank Regulation, who shall 

be appointed by the Director from among individuals who are 

citizens of the United States, have a demonstrated understanding of financial management or oversight and of the Federal Home Loan Bank System and housing finance. 

(2) FUNCTIONS.—The Deputy Director of the Division of Federal Home Loan Bank Regulation shall have such functions, 

powers, and duties with respect to the oversight of the Federal 

home loan banks as the Director shall prescribe. 

(e) DEPUTY DIRECTOR FOR HOUSING.— (1) IN GENERAL.—The Agency shall have a Deputy Director 

for Housing, who shall be appointed by the Director from 

among individuals who are citizens of the United States, and 

have a demonstrated understanding of the housing markets 

and housing finance. 

(2) FUNCTIONS.—The Deputy Director for Housing shall have 

such functions, powers, and duties with respect to the oversight 

of the housing mission and goals of the enterprises, and with 

respect to oversight of the housing mission of the Federal home 

loan banks, as the Director shall prescribe. 

(f) LIMITATIONS.—The Director and each of the Deputy Directors 

may not— 

(1) have any direct or indirect financial interest in any regulated entity or regulated entity-affiliated party; 

(2) hold any office, position, or employment in any regulated 

entity or regulated entity-affiliated party; or 

(3) have served as an executive officer or director of any regulated entity, or regulated entity-affiliated party, at any time 

during the 3-year period ending on the date of appointment of 

such individual as Director or Deputy Director. 

SEC. 1313. DUTIES AND AUTHORITIES OF DIRECTOR. 

(a) DUTIES.— (1) PRINCIPAL DUTIES.—The principal duties of the Director 

shall be— 

(A) to oversee the operations of each regulated entity; and 

(B) to ensure that— 

(i) each regulated entity operates in a safe and sound 

manner, including maintenance of adequate capital 

and internal controls; 

(ii) the operations and activities of each regulated entity foster liquid, efficient, competitive, and resilient 

national housing finance markets that minimize the 

cost of housing finance (including activities relating to 

mortgages on housing for low- and moderate- income 

families involving a reasonable economic return that 

may be less than the return earned on other activities); 

(iii) each regulated entity complies with this title and 

the rules, regulations, guidelines, and orders issued 

under this title and the authorizing statutes; and 

(iv) each regulated entity carries out its statutory 

mission only through activities that are consistent with 

this title and the authorizing statutes. 

129 

(2) SCOPE OF AUTHORITY.—The authority of the Director shall 

include the authority— 

(A) to review and, if warranted based on the principal 

duties described in paragraph (1), reject any acquisition or 

transfer of a controlling interest in an enterprise; and 

(B) to exercise such incidental powers as may be necessary or appropriate to fulfill the duties and responsibilities of the Director in the supervision and regulation of 

each regulated entity. 

(b) DELEGATION OF AUTHORITY.—The Director may delegate to officers or employees of the Agency, including each of the Deputy Directors, any of the functions, powers, or duties of the Director, as the 

Director considers appropriate. 

(c) LITIGATION AUTHORITY.— (1) IN GENERAL.—In enforcing any provision of this title, any 

regulation or order prescribed under this title, or any other provision of law, rule, regulation, or order, or in any other action, 

suit, or proceeding to which the Director is a party or in which 

the Director is interested, and in the administration of 

conservatorships and receiverships, the Director may act in the 

Director’s own name and through the Director’s own attorneys. 

(2) SUBJECT TO SUIT.—Except as otherwise provided by law, 

the Director shall be subject to suit (other than suits on claims 

for money damages) by a regulated entity or director or officer 

thereof with respect to any matter under this title or any other 

applicable provision of law, rule, order, or regulation under this 

title, in the United States district court for the judicial district 

in which the regulated entity has its principal place of business, 

or in the United States District Court for the District of Columbia, and the Director may be served with process in the manner 

prescribed by the Federal Rules of Civil Procedure. 

SEC. 1313A. PRUDENTIAL MANAGEMENT AND OPERATIONS STANDARDS. 

(a) STANDARDS.—The Director shall establish standards, by regulation, guideline, or order, for each regulated entity relating to— 

(1) adequacy of internal controls and information systems 

taking into account the nature and scale of business operations; 

(2) independence and adequacy of internal audit systems; 

(3) management of credit and counterparty risk, including 

systems to identify concentrations of credit risk and prudential 

limits to restrict exposure of the regulated entity to a single 

counterparty or groups of related counterparties; 

(4) management of interest rate risk exposure; 

(5) management of market risk, including standards that provide for systems that accurately measure, monitor, and control 

market risks and, as warranted, that establish limitations on 

market risk; 

(6) adequacy and maintenance of liquidity and reserves; 

(7) management of any asset and investment portfolio; 

(8) investments and acquisitions by a regulated entity, to ensure that they are consistent with the purposes of this Act and 

the authorizing statutes; 

(9) maintenance of adequate records, in accordance with consistent accounting policies and practices that enable the Director to evaluate the financial condition of the regulated entity; 

130 

(10) issuance of subordinated debt by that particular regulated entity, as the Director considers necessary; 

(11) overall risk management processes, including adequacy 

of oversight by senior management and the board of directors 

and of processes and policies to identify, measure, monitor, and 

control material risks, including reputational risks, and for 

adequate, well-tested business resumption plans for all major 

systems with remote site facilities to protect against disruptive 

events; and 

(12) such other operational and management standards as 

the Director determines to be appropriate. 

(b) FAILURE TO MEET STANDARDS.— (1) PLAN REQUIREMENT.— (A) IN GENERAL.—If the Director determines that a regulated entity fails to meet any standard established under 

subsection (a)— 

(i) if such standard is established by regulation, the 

Director shall require the regulated entity to submit an 

acceptable plan to the Director within the time allowed 

under subparagraph (C); and 

(ii) if such standard is established by guideline, the 

Director may require the regulated entity to submit a 

plan described in clause (i). 

(B) CONTENTS.—Any plan required under subparagraph 

(A) shall specify the actions that the regulated entity will 

take to correct the deficiency. If the regulated entity is 

undercapitalized, the plan may be a part of the capital restoration plan for the regulated entity under section 1369C. 

(C) DEADLINES FOR SUBMISSION AND REVIEW.—The Director shall by regulation establish deadlines that— 

(i) provide the regulated entities with reasonable 

time to submit plans required under subparagraph (A), 

and generally require a regulated entity to submit a 

plan not later than 30 days after the Director determines that the entity fails to meet any standard established under subsection (a); and 

(ii) require the Director to act on plans expeditiously, 

and generally not later than 30 days after the plan is 

submitted. 

(2) REQUIRED ORDER UPON FAILURE TO SUBMIT OR IMPLEMENT PLAN.—If a regulated entity fails to submit an acceptable 

plan within the time allowed under paragraph (1)(C), or fails 

in any material respect to implement a plan accepted by the Director, the following shall apply: 

(A) REQUIRED CORRECTION OF DEFICIENCY.—The Director 

shall, by order, require the regulated entity to correct the 

deficiency. 

(B) OTHER AUTHORITY.—The Director may, by order, take 

one or more of the following actions until the deficiency is 

corrected: 

(i) Prohibit the regulated entity from permitting its 

average total assets (as such term is defined in section 

1316(b)) during any calendar quarter to exceed its average total assets during the preceding calendar quarter, or restrict the rate at which the average total assets 

131 

of the entity may increase from one calendar quarter to 

another. 

(ii) Require the regulated entity— 

(I) in the case of an enterprise, to increase its 

ratio of core capital to assets. 

(II) in the case of a Federal home loan bank, to 

increase its ratio of total capital (as such term is 

defined in section 6(a)(5) of the Federal Home 

Loan Bank Act (12 U.S.C. 1426(a)(5)) to assets. 

(iii) Require the regulated entity to take any other action that the Director determines will better carry out 

the purposes of this section than any of the actions described in this subparagraph 

(3) MANDATORY RESTRICTIONS.—In complying with paragraph (2), the Director shall take one or more of the actions described in clauses (i) through (iii) of paragraph (2)(B) if— 

(A) the Director determines that the regulated entity fails 

to meet any standard prescribed under subsection (a); 

(B) the regulated entity has not corrected the deficiency; 

and 

(C) during the 18-month period before the date on which 

the regulated entity first failed to meet the standard, the 

entity underwent extraordinary growth, as defined by the 

Director. 

(c) OTHER ENFORCEMENT AUTHORITY NOT AFFECTED.—The authority of the Director under this section is in addition to any other 

authority of the Director. 

SEC. 1313B. HOUSING FINANCE OVERSIGHT BOARD. 

(a) IN GENERAL.—There is established the Housing Finance Oversight Board. 

(b) DUTIES.— (1) IN GENERAL.—The Board shall advise the Director with 

respect to overall strategies and policies in carrying out the duties of the Director under this title, at the request of the Director 

and at the initiative of the Board, and shall carry out such 

functions as otherwise provided by law. 

(2) LIMITATION.—The Director may not delegate to the Board 

any of the functions, powers, or duties of the Director. 

(c) COMPOSITION.—The Board shall be comprised of 5 members, 

as follows: 

(1) One member shall be the Director, who shall serve as the 

Chairperson of the Board. 

(2) One member shall be the Secretary of the Treasury or the 

designee of the Secretary. 

(3) One member shall be the Secretary of Housing and Urban 

Development or the designee of the Secretary. 

(4) Two members shall be appointed by the President, by and 

with the advice and consent of the Senate, who shall include— 

(A) one individual who has extensive experience and expertise in the capital markets (including debt markets), the 

secondary mortgage market, and mortgage-backed securities; and 

(B) one individual who has extensive experience and expertise in mortgage finance (including single family and 

multifamily housing mortgage finance), development of afVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00131 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
132 

fordable housing, and economic development and revitalization. 

(d) TERMS AND VACANCIES.— 

(1) TERMS.—Each member of the Board pursuant to paragraph (4) shall be appointed for a term of 3 years, and may be 

removed by the President only for cause. 

(2) VACANCIES.—A member of the Board appointed to fill a 

vacancy occurring before the expiration of the term for which 

the member’s predecessor was appointed shall be appointed only 

for the remainder of that term. A member of the Board may 

serve after the expiration of the member’s term until a successor 

has been appointed. 

(e) PROHIBITION OF ADDITIONAL COMPENSATION.—Notwithstanding any other provision of law, members of Board pursuant to 

paragraphs (1), (2), and (3) shall not receive additional compensation by reason of service on the Board. 

(f) LIMITATIONS.—Each member of the Board may not— 

(1) have any direct or indirect financial interest in any regulated entity or regulated entity-affiliated party; or 

(2) hold any office, position, or employment in any regulated 

entity or regulated entity-affiliated party. 

(g) FULL-TIME MEMBERS AND STAFF.— 

(1) FULL-TIME MEMBERS.—The members of the Board pursuant to subsection (c)(4) shall serve on a full-time basis. 

(2) STAFF.—The staff of the Board shall be appointed subject 

to the provisions of title 5, United States Code, governing appointments in the competitive service, and shall be paid in accordance with the provisions of chapter 51 and subchapter III 

of chapter 53 of that title relating to classification and General 

Schedule pay rates, except that each member of the Board pursuant to paragraph (4) may appoint one staff member without 

regard to the such provisions governing appointments in the 

competitive service and such staff members may be paid by the 

Board without regard to the such provisions relating to classification and General Schedule pay rates. 

(h) MEETINGS.— 

(1) IN GENERAL.—The Board shall meet upon notice by the 

Director, but in no event shall the Board meet less frequently 

than once every 3 months. 

(2) SPECIAL MEETINGS.—Any member of the Board may, upon 

giving written notice to the Director, require a special meeting 

of the Board, which shall be convened by the Director within 30 

days after such notice. 

(i) TESTIMONY.—On an annual basis, the Board shall testify before Congress regarding— 

(1) the safety and soundness of the regulated entities; 

(2) any material deficiencies in the conduct of the operations 

of the regulated entities; 

(3) the overall operational status of the regulated entities; 

(4) an evaluation of the performance of the regulated entities 

in carrying out their respective missions; 

(5) operations, resources, and performance of the Agency and 

the Board; and 

133 

(6) such other matters relating to the Agency, the Board, and 

the regulated entities, and their fulfillment of their missions, as 

the Board determines appropriate. 

(j) COSTS.—Costs of the Board, including staff, shall be paid by 

the Agency as a cost and expense of the Agency. 

(k) EXEMPTION.—Notwithstanding any other provision of law, the 

provisions of section 552b of title 5, United States Code, shall not 

apply to the Board. 

SEC. 1314. AUTHORITY TO REQUIRE REPORTS BY øENTERPRISES¿ 

REGULATED ENTITIES. 

(a) øSPECIAL REPORTS AND REPORTS OF FINANCIAL CONDITION¿ 

REGULAR AND SPECIAL REPORTS.— (1) øFINANCIAL CONDITION¿ REGULAR REPORTS.—The Director may require øan enterprise¿ a regulated entity to submit 

øreports of financial condition and operations¿ regular reports 

on the condition (including financial condition), management, 

activities, or operations of the regulated entity, as the Director 

considers appropriate (in addition to the annual and quarterly 

reports required under section 309(k) of the Federal National 

Mortgage Association Charter Act and section 307(c) of the 

Federal Home Loan Mortgage Corporation Act). 

(2) SPECIAL REPORTS.—The Director may also require øan enterprise¿ a regulated entity to submit special reports on any of 

the topics specified in paragraph (1) or such other topics whenever, in the judgment of the Director, such reports are necessary to carry out the purposes of this title. 

(3) LIMITATION.—The Director may not require the inclusion, 

in any report pursuant to paragraph (1) or (2), of any information that is not reasonably obtainable by øthe enterprise¿ the 

regulated entity. 

(4) NOTICE AND DECLARATION.—The Director shall notify 

øthe enterprise¿ the regulated entity, a reasonable period in advance of the date for submission of any report under this subsection, of any specific information to be contained in the report and the date for the submission of the report. Each report 

under this subsection shall contain a declaration by the president, vice president, treasurer, or any other officer designated 

by the board of directors of øthe enterprise¿ the regulated entity to make such declaration, that the report is true and correct 

to the best of such officer’s knowledge and belief. 

(b) CAPITAL DISTRIBUTIONS.—The Director may require øan enterprise¿ a regulated entity to submit a report to the Director after 

the declaration of any capital distribution by øthe enterprise¿ the 

regulated entity and before making the capital distribution. The report shall be made in such form and under such circumstances and 

shall contain such information as the Director shall require. 

(c) REPORTS OF FRAUDULENT FINANCIAL TRANSACTIONS.— 

(1) REQUIREMENT TO REPORT.—The Director shall require a 

regulated entity to submit to the Director a timely report upon 

discovery by the regulated entity that it has purchased or sold 

a fraudulent loan or financial instrument or suspects a possible 

fraud relating to a purchase or sale of any loan or financial instrument. The Director shall require the regulated entities to establish and maintain procedures designed to discover any such 

transactions. 

134 

(2) PROTECTION FROM LIABILITY FOR REPORTS.— 

(A) IN GENERAL.—If a regulated entity makes a report 

pursuant to paragraph (1), or a regulated entity-affiliated 

party makes, or requires another to make, such a report, 

and such report is made in a good faith effort to comply 

with the requirements of paragraph (1), such regulated entity or regulated entity-afffiliated party shall not be liable 

to any person under any law or regulation of the United 

States, any constitution, law, or regulation of any State or 

political subdivision of any State, or under any contract or 

other legally enforceable agreement (including any arbitration agreement), for such report or for any failure to provide notice of such report to the person who is the subject 

of such report or any other person identified in the report. 

(B) RULE OF CONSTRUCTION.—Subparagraph (A) shall 

not be construed as creating— 

(i) any inference that the term ‘‘person’’, as used in 

such subparagraph, may be construed more broadly 

than its ordinary usage so as to include any government or agency of government; or 

(ii) any immunity against, or otherwise affecting, any 

civil or criminal action brought by any government or 

agency of government to enforce any constitution, law, 

or regulation of such government or agency. 

(d) DISCLOSURE OF CHARITABLE CONTRIBUTIONS BY ENTERPRISES.— 

(1) REQUIRED DISCLOSURE.—The Director shall, by regulation, require each regulated entity to submit a report annually, 

in a format designated by the Director, containing the following 

information: 

(A) TOTAL VALUE.—The total value of contributions made 

by the regulated entity to nonprofit organizations during its 

previous fiscal year. 

(B) SUBSTANTIAL CONTRIBUTIONS.—If the value of contributions made by the regulated entity to any nonprofit organization during its previous fiscal year exceeds the designated amount, the name of that organization and the 

value of contributions. 

(C) SUBSTANTIAL CONTRIBUTIONS TO INSIDER-AFFILIATED

CHARITIES.—Identification of each contribution whose value 

exceeds the designated amount that were made by the regulated entity during the enterprise’s previous fiscal year to 

any nonprofit organization of which a director, officer, or 

controlling person of the regulated entity, or a spouse thereof, was a director or trustee, the name of such nonprofit organization, and the value of the contribution. 

(2) DEFINITIONS.—For purposes of this subsection— 

(A) the term ‘‘designated amount’’ means such amount as 

may be designated by the Director by regulation, consistent 

with the public interest and the protection of investors for 

purposes of this subsection; and 

(B) the Director may, by such regulations as the Director 

deems necessary or appropriate in the public interest, define the terms officer and controlling person. 

135 

(3) PUBLIC AVAILABILITY.—The Director shall make the information submitted pursuant to this subsection publicly available. 

SEC. 1315. PERSONNEL. 

(a) øOFFICE PERSONNEL.—THE¿ IN GENERAL.—Subject to titles 

III and IV of the Federal Housing Finance Reform Act of 2005, the 

Director may appoint and fix the compensation of such officers and 

employees of the øOffice¿ Agency as the Director considers necessary to carry out the functions of the Director and the øOffice¿ 

Agency. Officers and employees may be paid without regard to the 

provisions of chapter 51 and subchapter III of chapter 53 of title 

5, United States Code, relating to classification and General Schedule pay rates. 

(b) COMPARABILITY OF COMPENSATION WITH FEDERAL BANKING

AGENCIES.—In fixing and directing compensation under subsection 

(a), the Director shall consult with, and maintain comparability 

with compensation of officers and employees of the Office of the 

Comptroller of the Currency, the Board of Governors of the Federal 

Reserve System, the Federal Deposit Insurance Corporation, and 

the Office of Thrift Supervision. 

(c) PERSONNEL OF OTHER FEDERAL AGENCIES.—In carrying out 

the duties of the øOffice¿ Agency, the Director may use information, services, staff, and facilities of any executive agency, independent agency, or department on a reimbursable basis, with the 

consent of such agency or department. 

ø(d) REIMBURSEMENT OF HUD.—The Director shall reimburse 

the Department of Housing and Urban Development for reasonable 

costs incurred by the Department that are directly related to the 

operations of the Office.¿ 

ø(e)¿ (d) OUTSIDE EXPERTS AND CONSULTANTS.—Notwithstanding 

any provision of law limiting pay or compensation, the Director 

may appoint and compensate such outside experts and consultants 

as the Director determines necessary to assist the work of the øOffice¿ Agency. 

ø(f) EQUAL OPPORTUNITY REPORT.—Not later than the expiration 

of the 180-day period beginning upon the appointment of the Director under section 1312, the Director shall submit to the Committee 

on Banking, Finance and Urban Affairs of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs 

of the Senate a report containing— 

ø(1) a complete description of the equal opportunity, affirmative action, and minority business enterprise utilization programs of the Office; and 

ø(2) such recommendations for administrative and legislative 

action as the Director determines appropriate to carry out such 

programs.¿ 

SEC. 1316. FUNDING. 

ø(a) ANNUAL ASSESSMENTS.—The Director may, to the extent 

provided in appropriation Acts, establish and collect from the enterprises annual assessments in an amount not exceeding the 

amount sufficient to provide for reasonable costs and expenses of 

the Office, including the expenses of any examinations under section 1317. The initial annual assessment shall include any startup 

136 

costs of the Office and any anticipated costs and expenses of the 

Office for the following fiscal year.¿ 

(a) ANNUAL ASSESSMENTS.—The Director shall establish and collect from the regulated entities annual assessments in an amount 

not exceeding the amount sufficient to provide for reasonable costs 

and expenses of the Agency, including— 

(1) the expenses of any examinations under section 1317 of 

this Act and under section 20 of the Federal Home Loan Bank 

Act; 

(2) the expenses of obtaining any reviews and credit assessments under section 1319; and 

(3) such amounts in excess of actual expenses for any given 

year as deemed necessary by the Director to maintain a working 

capital fund in accordance with subsection (e). 

(b) ALLOCATION OF ANNUAL ASSESSMENT TO øENTERPRISES¿ REG- ULATED ENTITIES.— (1) AMOUNT OF PAYMENT.—øEach enterprise¿ Each regulated 

entity shall pay to the Director a proportion of the annual assessment made pursuant to subsection (a) that bears the same 

ratio to the total annual assessment that the total assets of 

øeach enterprise¿ each regulated entity bears to the total assets of øboth enterprises¿ all of the regulated entities. (2) TIMING OF PAYMENT.—The annual assessment shall be 

payable semiannually for each fiscal year, on October 1 and 

April 1. 

ø(3) DEFINITION.—For the purpose of this section, the term 

‘‘total assets’’ means, with respect to an enterprise, the sum 

of—¿ 

(3) DEFINITION OF TOTAL ASSETS.—For purposes of this section, the term ‘‘total assets’’ means as follows: 

(A) Enterprises.—With respect to an enterprise, the sum 

of— 

ø(A)¿ (i) on-balance-sheet assets of the enterprise, as 

determined in accordance with generally accepted accounting principles; 

ø(B)¿ (ii) the unpaid principal balance of outstanding mortgage-backed securities issued or guaranteed by the enterprise that are not included in øsubparagraph (A)¿ clause (i); and 

ø(C)¿ (iii) other off-balance-sheet obligations as determined by the Director. 

(B) FEDERAL HOME LOAN BANKS.—With respect to a Federal home loan bank, the total assets of the Bank, as determined by the Director in accordance with generally accepted accounting principles. 

ø(c) DEFICIENCIES DUE TO INCREASED COSTS OF REGULATION.— 

The semiannual payments made pursuant to subsection (b) by any 

enterprise that is not classified (for purposes of subtitle B) as adequately capitalized may be increased, as necessary, in the discretion of the Director to pay additional estimated costs of regulation 

of the enterprise.¿ 

(c) INCREASED COSTS OF REGULATION.— (1) INCREASE FOR INADEQUATE CAPITALIZATION.—The semiannual payments made pursuant to subsection (b) by any regulated entity that is not classified (for purposes of subtitle B) as 

137 

adequately capitalized may be increased, as necessary, in the 

discretion of the Director to pay additional estimated costs of 

regulation of the regulated entity. 

(2) ADJUSTMENT FOR ENFORCEMENT ACTIVITIES.—The Director may adjust the amounts of any semiannual assessments for 

an assessment under subsection (a) that are to be paid pursuant 

to subsection (b) by a regulated entity, as necessary in the discretion of the Director, to ensure that the costs of enforcement 

activities under subtitle B and C for a regulated entity are 

borne only by such regulated entity. 

(3) ADDITIONAL ASSESSMENT FOR DEFICIENCIES.—If at any 

time, as a result of increased costs of regulation of a regulated 

entity that is not classified (for purposes of subtitle B) as adequately captitalized or as the result of supervisory or enforcement activities under subtitle B or C for a regulated entity, the 

amount available from any semiannual payment made by such 

regulated entity pursuant to subsection (b) is insufficient to 

cover the costs of the Agency with respect to such entity, the Director may make and collect from such regulated entity an immediate assessment to cover the amount of such deficiency for 

the semiannual period. If, at the end of any semiannual period 

during which such an assessment is made, any amount remains from such assessment, such remaining amount shall be 

deducted from the assessment for such regulated entity for the 

following semiannual period. 

(d) SURPLUS.—øIf¿ Except with respect to amounts collected pursuant to subsection (a)(3), if any amount from any annual assessment collected from øan enterprise¿ a regulated entity remains unobligated at the end of the year for which the assessment was collected, such amount shall be credited to the assessment to be collected from øthe enterprise¿ the regulated entity for the following 

year. 

ø(e) INITIAL SPECIAL ASSESSMENT.—Not later than the expiration 

of the 30-day period beginning on the date of the enactment of this 

Act, the enterprises shall each pay into the Federal Housing Enterprises Oversight Fund established under subsection (f) an initial 

assessment of $1,500,000 to cover the startup costs of the Office, 

including space and modifications thereof, capital equipment, supplies, recruitment, and activities of the Office during the period 

preceding the first annual assessment under subsection (a). Any 

amounts collected from an enterprise under this subsection shall be 

credited against the first annual assessment collected pursuant to 

subsection (a), and are hereby appropriated, and shall be available 

and used, without fiscal year limitation, as provided in this section. 

ø(f) FUND.—There is established in the Treasury of the United 

States a fund to be known as the Federal Housing Enterprises 

Oversight Fund. Any assessments collected pursuant to this section 

shall be deposited in the Fund. Amounts in the Fund shall be 

available, to the extent provided in appropriation Acts and subsection (e), for— 

ø(1) carrying out the responsibilities of the Director relating 

to the enterprises; and 

ø(2) necessary administrative and nonadministrative expenses of the Office to carry out the purposes of this title. 

ø(g) BUDGET AND FINANCIAL REPORTS.— 

138 

ø(1) FINANCIAL OPERATING PLANS AND FORECASTS.—Before 

the beginning of each fiscal year, the Director shall submit a 

copy of the financial operating plans and forecasts for the Office to the Secretary and the Director of the Office of Management and Budget. 

ø(2) REPORTS OF OPERATIONS.—As soon as practicable after 

the end of each fiscal year and each quarter thereof, the Director shall submit a copy of the report of the results of the operations of the Office during such period to the Secretary and the 

Director of the Office of Mana gement and Budget. 

ø(3) INCLUSION IN PRESIDENT’S BUDGET.—The annual plans, 

forecasts, and reports required under this subsection shall be 

included (A) in the Budget of the United States in the appropriate form, and (B) in the congressional justifications of the 

Department of Housing and Urban Development for each fiscal 

year in a form determined by the Secretary.¿ 

(e) WORKING CAPITAL FUND.—At the end of each year for which 

an assessment under this section is made, the Director shall remit 

to each regulated entity any amount of assessment collected from 

such regulated entity that is attributable to subsection (a)(3) and is 

in excess of the amount the Director deems necessary to maintain 

a working capital fund. 

(f) TREATMENT OF ASSESSMENTS.— (1) DEPOSIT.—Amounts received by the Director from assessments under this section may be deposited by the Director in the 

manner provided in section 5234 of the Revised Statutes (12 

U.S.C. 192) for monies deposited by the Comptroller of the Currency. 

(2) NOT GOVERNMENT FUNDS.—The amounts received by the 

Director from any assessment under this section shall not be 

construed to be Government or public funds or appropriated 

money. 

(3) NO APPORTIONMENT OF FUNDS.—Notwithstanding any 

other provision of law, the amounts received by the Director 

from any assessment under this section shall not be subject to 

apportionment for the purpose of chapter 15 of title 31, United 

States Code, or under any other authority. 

(4) USE OF FUNDS.—The Director may use any amounts received by the Director from assessments under this section for 

compensation of the Director and other employees of the Agency 

and for all other expenses of the Director and the Agency. 

(5) AVAILABILITY OF OVERSIGHT FUND AMOUNTS.—Notwithstanding any other provision of law, any amounts remaining in 

the Federal Housing Enterprises Oversight Fund established 

under this section (as in effect before the effective date under 

section 185 of the Federal Housing Finance Reform Act of 

2005), and any amounts remaining from assessments on the 

Federal Home Loan banks pursuant to section 18(b) of the Federal Home Loan Bank Act (12 U.S.C. 1438(b)), shall, upon such 

effective date, be treated for purposes of this subsection as 

amounts received from assessments under this section. 

(g) BUDGET AND FINANCIAL MANAGEMENT.— (1) FINANCIAL OPERATING PLANS AND FORECASTS.—The Director shall provide to the Director of the Office of Management 

and Budget copies of the Director’s financial operating plans 

139 

and forecasts as prepared by the Director in the ordinary course 

of the Agency’s operations, and copies of the quarterly reports 

of the Agency’s financial condition and results of operations as 

prepared by the Director in the ordinary course of the Agency’s 

operations. 

(2) FINANCIAL STATEMENTS.—The Agency shall prepare annually a statement of assets and liabilities and surplus or deficit; 

a statement of income and expenses; and a statement of sources 

and application of funds. 

(3) FINANCIAL MANAGEMENT SYSTEMS.—The Agency shall implement and maintain financial management systems that comply substantially with Federal financial management systems 

requirements, applicable Federal accounting standards, and 

that uses a general ledger system that accounts for activity at 

the transaction level. 

(4) ASSERTION OF INTERNAL CONTROLS.—The Director shall 

provide to the Comptroller General an assertion as to the effectiveness of the internal controls that apply to financial reporting by the Agency, using the standards established in section 

3512 (c) of title 31, United States Code. 

(5) RULE OF CONSTRUCTION.—This subsection may not be 

construed as implying any obligation on the part of the Director 

to consult with or obtain the consent or approval of the Director 

of the Office of Management and Budget with respect to any reports, plans, forecasts, or other information referred to in paragraph (1) or any jurisdiction or oversight over the affairs or operations of the Agency. 

(h) AUDIT OF AGENCY.— (1) IN GENERAL.—The Comptroller General shall annually 

audit the financial transactions of the Agency in accordance 

with the U.S. generally accepted government auditing standards as may be prescribed by the Comptroller General of the 

United States. The audit shall be conducted at the place or 

places where accounts of the Agency are normally kept. The representatives of the Government Accountability Office shall have 

access to the personnel and to all books, accounts, documents, 

papers, records (including electronic records), reports, files, and 

all other papers, automated data, things, or property belonging 

to or under the control of or used or employed by the Agency 

pertaining to its financial transactions and necessary to facilitate the audit, and such representatives shall be afforded full 

facilities for verifying transactions with the balances or securities held by depositaries, fiscal agents, and custodians. All such 

books, accounts, documents, records, reports, files, papers, and 

property of the Agency shall remain in possession and custody 

of the Agency. The Comptroller General may obtain and duplicate any such books, accounts, documents, records, working papers, automated data and files, or other information relevant to 

such audit without cost to the Comptroller General and the 

Comptroller General’s right of access to such information shall 

be enforceable pursuant to section 716(c) of title 31, United 

States Code. 

(2) REPORT.—The Comptroller General shall submit to the 

Congress a report of each annual audit conducted under this 

subsection. The report to the Congress shall set forth the scope 

140 

of the audit and shall include the statement of assets and liabilities and surplus or deficit, the statement of income and expenses, the statement of sources and application of funds, and 

such comments and information as may be deemed necessary to 

inform Congress of the financial operations and condition of the 

Agency, together with such recommendations with respect thereto as the Comptroller General may deem advisable. A copy of 

each report shall be furnished to the President and to the Agency at the time submitted to the Congress. 

(3) ASSISTANCE AND COSTS.—For the purpose of conducting 

an audit under this subsection, the Comptroller General may, 

in the discretion of the Comptroller General, employ by contract, without regard to section 5 of title 41, United States Code, 

professional services of firms and organizations of certified public accountants for temporary periods or for special purposes. 

Upon the request of the Comptroller General, the Director of the 

Agency shall transfer to the Government Accountability Office 

from funds available, the amount requested by the Comptroller 

General to cover the full costs of any audit and report conducted by the Comptroller General. The Comptroller General 

shall credit funds transferred to the account established for salaries and expenses of the Government Accountability Office, and 

such amount shall be available upon receipt and without fiscal 

year limitation to cover the full costs of the audit and report. 

SEC. 1317. EXAMINATIONS. 

(a) ANNUAL EXAMINATION.—The Director shall annually conduct 

an on-site examination under this section of øeach enterprise¿ each 

regulated entity to determine the condition of øthe enterprise¿ the 

regulated entity for the purpose of ensuring its financial safety and 

soundness. Each examination under this subsection of a regulated 

entity shall include a review of the procedures required to be established and maintained by the regulated entity pursuant to section 

1314(c) (relating to fraudulent financial transactions) and the report regarding each such examination shall describe any problems 

with such procedures maintained by the regulated entity. 

(b) OTHER EXAMINATIONS.—In addition to annual examinations 

under subsection (a), the Director may conduct an examination 

under this section of a regulated entity whenever the Director determines that an examination is necessary øto determine the condition of an enterprise for the purpose of ensuring its financial safety 

and soundness¿ or appropriate. 

(c) EXAMINERS.—The Director shall appoint examiners to conduct 

examinations under this section. The Director may contract with 

the Comptroller of the Currency, the Board of Governors of the 

Federal Reserve System, the Federal Deposit Insurance Corporation, or the Director of the Office of Thrift Supervision for the services of examiners to conduct examinations under this section. The 

Director shall reimburse such agencies for any costs of providing 

examiners øfrom amounts available in the Federal Housing Enterprises Oversight Fund¿. 

* * * * * * * 

(e) TECHNICAL EXPERTS.—The Director may obtain the services of 

any technical experts the Director considers appropriate to provide 

temporary technical assistance relating to examinations to the DiVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00140 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
141 

rector, officers, and employees of the øOffice¿ Agency. The Director 

shall describe, in the record of each examination, the nature and 

extent of any such temporary technical assistance. 

(f) OATHS, EVIDENCE, AND SUBPOENA POWERS.—In connection 

with examinations under this section, the Director shall have the 

authority provided under øsection 1379B¿ section 1379D. 

(g) APPOINTMENT OF ACCOUNTANTS, ECONOMISTS, SPECIALISTS, 

AND EXAMINERS.— 

(1) APPLICABILITY.—This section applies with respect to any 

position of examiner, accountant, specialist in financial markets, specialist in technology, and economist at the Agency, with 

respect to supervision and regulation of the regulated entities, 

that is in the competitive service. 

(2) APPOINTMENT AUTHORITY.—The Director may appoint 

candidates to any position described in paragraph (1)— 

(A) in accordance with the statutes, rules, and regulations governing appointments in the excepted service; and 

(B) notwithstanding any statutes, rules, and regulations 

governing appointments in the competitive service. 

SEC. 1318. PROHIBITION øOF EXCESSIVE¿ AND WITHHOLDING OF EXECUTIVE COMPENSATION. 

(a) IN GENERAL.—The Director shall prohibit øthe enterprises¿ 

the regulated entities from providing compensation to any executive 

officer of øthe enterprise¿ the regulated entity that is not reasonable and comparable with compensation for employment in other 

similar businesses (including other publicly held financial institutions or major financial services companies) involving similar duties and responsibilities. 

(b) FACTORS.—In making any determination under subsection (a), 

the Director may take into consideration any factors the Director 

considers relevant, including any wrongdoing on the part of the executive officer, and such wrongdoing shall include any fraudulent 

act or omission, breach of trust or fiduciary duty, violation of law, 

rule, regulation, order, or written agreement, and insider abuse 

with respect to the regulated entity. The approval of an agreement 

or contract pursuant to section 309(d)(3)(B) of the Federal National 

Mortgage Association Charter Act (12 U.S.C. 1723a(d)(3)(B)) or section 303(h)(2) of the Federal Home Loan Mortgage Corporation Act 

(12 U.S.C. 1452(h)(2)) shall not preclude the Director from making 

any subsequent determination under subsection (a). 

(c) WITHHOLDING OF COMPENSATION.—In carrying out subsection 

(a), the Director may require a regulated entity to withhold any payment, transfer, or disbursement of compensation to an executive officer, or to place such compensation in an escrow account, during the 

review of the reasonableness and comparability of compensation. 

ø(b)¿ (d) PROHIBITION OF SETTING COMPENSATION.—In carrying 

out subsection (a), the Director may not prescribe or set a specific 

level or range of compensation. 

øSEC. 1319. AUTHORITY TO PROVIDE FOR REVIEW OF ENTERPRISES 

BY RATING ORGANIZATION.¿ 

SEC. 1319. REVIEWS OF REGULATED ENTITIES. 

The Director may, on such terms and conditions as the Director 

deems appropriate, contract with any entity that the Director considers appropriate, including an entity effectively recognized by the 

142 

Division of Market Regulation of the Securities and Exchange Commission as a nationally recognized statistical rating organization 

for the purposes of the capital rules for broker-dealers, to conduct 

a review of øthe enterprises¿ the regulated entities. 

SEC. 1319A. EQUAL OPPORTUNITY IN SOLICITATION OF CONTRACTS. 

ø(a) IN GENERAL.—Each enterprise¿ Each regulated entity shall 

establish a minority outreach program to ensure the inclusion (to 

the maximum extent possible) in contracts entered into by the enterprises of minorities and women and businesses owned by minorities and women, including financial institutions, investment banking firms, underwriters, accountants, brokers, and providers of 

legal services. 

ø(b) REPORT.—Not later than the expiration of the 180-day period beginning on the date of the enactment of this Act, each enterprise shall submit to the Committee on Banking, Finance and 

Urban Affairs of the House of Representatives and the Committee 

on Banking, Housing, and Urban Affairs of the Senate a report describing the actions taken by the enterprise pursuant to subsection 

(a).¿ 

SEC. 1319B. ANNUAL REPORTS BY DIRECTOR. 

(a) GENERAL REPORT.—The Director shall submit to the øCommittee on Banking, Finance and Urban Affairs¿ Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, not 

later than June 15 of each year, a written report, which shall include— 

(1) a description of the actions taken, and being undertaken, 

by the Director to carry out this title; 

(2) a description of the financial safety and soundness of 

øeach enterprise¿ each regulated entity, including the results 

and conclusions of the annual examinations of øthe enterprises¿ the regulated entities conducted under section 1317(a); 

(3) any recommendations for legislation to enhance the financial safety and soundness of øthe enterprises¿ the regulated 

entities; øand¿ 

ø(4) a description of— 

ø(A) whether the procedures established by each enterprise pursuant to section 102(b)(3) of the Flood Disaster 

Protection Act of 1973 are adequate and being complied 

with, and 

ø(B) the results and conclusions of any examination, as 

determined necessary by the Director, to determine the 

compliance of the enterprises with the requirements of section 102(b)(3) of such Act, which shall include a description 

of the methods used to determine compliance and the 

types and sources of deficiencies (if any), and identify any 

corrective measures that have been taken to remedy any 

such deficiencies, 

except that the information described in this paragraph shall 

be included only in each of the first, third, and fifth annual reports under this subsection required to be submitted after the 

expiration of the 1-year period beginning on the date of enactment of the Riegle Community Development and Regulatory 

Improvement Act of 1994.¿ 

143 

(4) an assessment of the Board with respect to— 

(A) the safety and soundness of the regulated entities; 

(B) any material deficiencies in the conduct of the operations of the regulated entities; 

(C) the overall operational status of the regulated entities; 

(D) an evaluation of the performance of the regulated entities in carrying out their missions, including compliance 

of the enterprises with the housing goals under subpart B 

of part 2 of this subtitle and compliance of the Federal 

home loan banks with the community investment and affordable housing programs under subsections (i) and (j) of 

section 10 of the Federal Home Loan Bank Act; 

(E) an evaluation of the performance of the Agency in fulfilling its duties and responsibilities under law; and 

(F) such other matters relating to the Board and the fulfillment of its duties as the Board considers appropriate; 

(5) operations, resources, and performance of the Agency; and 

(6) such other matters relating to the Agency and its fulfillment of its mission. 

(b) REPORT ON ENFORCEMENT ACTIONS.—Not later than March 

15 of each year, the Director shall submit to the øCommittee on 

Banking, Finance and Urban Affairs¿ Committee on Financial 

Services of the House of Representatives and the Committee on 

Banking, Housing, and Urban Affairs of the Senate a written report describing, for the preceding calendar year, the requests by 

the Director to the Attorney General for enforcement actions under 

subtitle C and describing the disposition of each request, which 

shall include statements of— 

(1) * * * 

* * * * * * * 

SEC. 1319C. PUBLIC DISCLOSURE OF FINAL ORDERS AND AGREEMENTS. 

(a) IN GENERAL.—The Director shall make available to the public— 

(1) any written agreement or other written statement for 

which a violation may be redressed by the Director or any 

modification to or termination thereof, unless the Director, in 

the Director’s discretion, determines that public disclosure 

would be contrary to the public interest or determines under 

subsection (c) that public disclosure would seriously threaten 

the financial health or security of øthe enterprise¿ the regulated entity; 

* * * * * * * 

(c) DELAY OF PUBLIC DISCLOSURE UNDER EXCEPTIONAL CIRCUMSTANCES.—If the Director makes a determination in writing 

that the public disclosure of any final order pursuant to subsection 

(a) would seriously threaten the financial health or security of øthe 

enterprise¿ the regulated entity, the Director may delay the public 

disclosure of such order for a reasonable time. 

* * * * * * * 

SEC. 1319D. LIMITATION ON SUBSEQUENT EMPLOYMENT. 

Neither the Director nor any former officer or employee of the 

øOffice¿ Agency who, while employed by the øOffice¿ Agency, was 

144 

compensated at a rate in excess of the lowest rate for a position 

classified higher than GS–15 of the General Schedule under section 

5107 of title 5, United States Code, may accept compensation from 

øan enterprise¿ a regulated entity during the 2-year period beginning on the date of separation from employment by the øOffice¿ 

Agency. 

SEC. 1319E. AUDITS BY GAO. 

The Comptroller General shall audit the operations of the øOffice¿ Agency in accordance with generally accepted Government auditing standards. All books, records, accounts, reports, files, and 

property belonging to, or used by, the øOffice¿ Agency shall be 

made available to the Comptroller General. Audits under this section shall be conducted annually for the first 2 fiscal years following the date of the enactment of this Act and as appropriate 

thereafter. 

SEC. 1319F. INFORMATION, RECORDS, AND MEETINGS. 

For purposes of subchapter II of chapter 5 of title 5, United 

States Codeø— 

ø(1) the Office, and 

ø(2) the Department of Housing and Urban Development, 

with respect to activities under this title, 

shall be considered agencies responsible for the regulation or supervision of financial institutions.¿, the Agency shall be considered an 

agency responsible for the regulation or supervision of financial institutions. 

SEC. 1319G. REGULATIONS AND ORDERS. 

ø(a) AUTHORITY.—The Director shall issue any regulations and 

orders necessary to carry out the duties of the Director and to carry 

out this title before the expiration of the 18-month period beginning on the appointment of the Director under section 1312. Such 

regulations and orders shall be subject to the approval of the Secretary only to the extent provided in subsections (b) and (c) of section 1313.¿ 

(a) AUTHORITY.—The Director shall issue any regulations, guidelines, and orders necessary to carry out the duties of the Director 

under this title and each of the authorizing statutes to ensure that 

the purposes of this title and such Acts are accomplished. 

(b) NOTICE AND COMMENT.—Any regulations issued by the Director under this section, this title, or any of the authorizing statutes 

shall be issued after notice and opportunity for public comment 

pursuant to the provisions of section 553 of title 5, United States 

Code. 

ø(c) CONGRESSIONAL REVIEW.—The Director may not publish any 

regulation for comment under subsection (b) unless, not less than 

15 days before it is published for comment, the Director has submitted a copy of the regulation, in the form it is intended to be proposed, to the Committee on Banking, Finance and Urban Affairs of 

the House of Representatives and the Committee on Banking, 

Housing, and Urban Affairs of the Senate.¿ 

145 

øPART 2—AUTHORITY OF SECRETARY¿ 

PART 2—PROGRAM AND ACTIVITIES APPROVAL 

BY DIRECTOR, CORPORATE GOVERNANCE, 

AND ESTABLISHMENT OF HOUSING GOALS 

Subpart A—General Authority 

øSEC. 1321. REGULATORY AUTHORITY. 

øExcept for the authority of the Director of the Office of Federal 

Housing Enterprise Oversight described in section 1313(b) and all 

other matters relating to the safety and soundness of the enterprises, the Secretary of Housing and Urban Development shall 

have general regulatory power over each enterprise and shall make 

such rules and regulations as shall be necessary and proper to ensure that this part and the purposes of the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act are accomplished. 

øSEC. 1322. PRIOR APPROVAL AUTHORITY FOR NEW PROGRAMS. 

ø(a) AUTHORITY.—The Secretary shall require each enterprise to 

obtain the approval of the Secretary for any new program of the 

enterprise before implementing the program. 

ø(b) STANDARD FOR APPROVAL.— ø(1) PERMANENT STANDARD.—Except as provided in paragraph (2), the Secretary shall approve any new program of an 

enterprise for purposes of subsection (a) unless— 

ø(A) for a new program of the Federal National Mortgage Association, the Secretary determines that the program is not authorized under paragraph (2), (3), (4), or (5) 

of section 302(b) of the Federal National Mortgage Association Charter Act, or under section 304 of such Act; 

ø(B) for a new program of the Federal Home Loan Mortgage Corporation, the Secretary determines that the program is not authorized under section 305(a) (1), (4), or (5) 

of the Federal Home Loan Mortgage Corporation Act; or 

ø(C) the Secretary determines that the new program is 

not in the public interest. 

ø(2) TRANSITION STANDARD.—Before the date occurring 12 

months after the date of the effectiveness of the regulations 

under section 1361(e) establishing the risk-based capital test, 

the Secretary shall approve any new program of an enterprise 

for purposes of subsection (a) unless— 

ø(A) The Secretary makes a determination as described 

in paragraph (1) (A), (B), or (C); or 

ø(B) the Director determines that the new program 

would risk significant deterioration of the financial condition of the enterprise. 

ø(c) PROCEDURE FOR APPROVAL.— ø(1) SUBMISSION OF REQUEST.—To obtain the approval of the 

Secretary for purposes of subsection (a), an enterprise shall 

submit to the Secretary a written request for approval of the 

new program that describes the program. 

ø(2) RESPONSE.—The Secretary shall, not later than the expiration of the 45-day period beginning upon the submission of 

146 

a request for approval, approve the request or submit to the 

Committee on Banking, Finance and Urban Affairs of the 

House of Representatives and the Committee on Banking, 

Housing, and Urban Affairs of the Senate a report explaining 

the reasons for not approving the request. The Secretary may 

extend such period for a single additional 15-day period only 

if the Secretary requests additional information from the 

enterprise. 

ø(3) FAILURE TO RESPOND.—If the Secretary fails to approve 

the request or fails to submit a report under paragraph (2) 

during the period under such paragraph, the request shall be 

considered to have been approved. 

ø(4) REVIEW OF DISAPPROVAL.— 

ø(A) UNAUTHORIZED NEW PROGRAMS.—If the Secretary 

submits a report under paragraph (2) of this subsection 

disapproving a request for approval on the grounds under 

subparagraph (A) or (B) of subsection (b)(1), the Secretary 

shall provide the enterprise submitting the request with a 

timely opportunity to review and supplement the administrative record. 

ø(B) NEW PROGRAMS NOT IN PUBLIC INTEREST.—If the 

Secretary submits a report under paragraph (2) of this 

subsection disapproving a request for approval on the 

grounds under subsection (b)(1)(C) or (b)(2)(B), the Secretary shall provide the enterprise submitting the request 

notice of, and opportunity for, a hearing on the record regarding such disapproval.¿ 

SEC. 1321. REVIEW AND APPROVAL BY DIRECTOR OF NEW PROGRAMS 

AND BUSINESS ACTIVITIES OF ENTERPRISES. 

(a) LIMITATION ON AUTHORITY TO UNDERTAKE PROGRAMS AND

ACTIVITIES.—An enterprise may not undertake any new program, 

including a pilot program, or any new business activity except in accordance with the procedures set forth in this section and orders 

and regulations issued under this section. 

(b) NEW PROGRAMS.— 

(1) PRIOR APPROVAL REQUIREMENT.—An enterprise may not 

commence any new program before it has obtained the approval 

of the Director, pursuant to this subsection, for the new program. 

(2) APPLICATION.—The Director shall, by order or regulation, 

require that an enterprise shall, to obtain a determination by 

the Director regarding approval of a new program by the enterprise, submit to the Director a written application for the new 

program in a format as prescribed by the Director. 

(3) NOTICE.—Immediately upon receipt of a complete application for a new program, the Director shall cause to be published 

in the Federal Register notice of the receipt of such application 

and of the period for public comment pursuant to paragraph (4) 

regarding such new program, and a description of the new program proposed by the application. 

(4) PUBLIC COMMENT PERIOD.—During the 30-day period beginning upon publication pursuant to paragraph (3) of a notice 

regarding such an application, the Director shall receive public 

comments regarding the new program. 

147 

(5) DETERMINATION.—Not less than 15 days after the conclusion of the public comment period pursuant to paragraph (4) regarding an application but not more than 30 days after the conclusion of such comment period, the Director shall approve, conditionally approve, or reject such program, in writing. 

(6) STANDARD FOR APPROVAL.—The Director may approve, or 

conditionally approve, a new program of an enterprise only if 

the Director determines, taking into consideration any relevant 

information and comments received during the public comment 

period, that such new program— 

(A) does not contravene and is not inconsistent with the 

purposes of this title, the Federal National Mortgage Association Charter Act, or the Federal Home Loan Mortgage 

Corporation Act, as such purposes are determined taking 

into consideration the definitions of the terms ‘‘mortgage 

loan origination’’ and ‘‘secondary mortgage market’’ pursuant to section 1303; 

(B) is not otherwise inconsistent with the safety and 

soundness of the enterprise; and 

(C) is in the public interest. 

(7) LIMITATION.—The Director, in implementing this subsection, may not prevent an enterprise from continuing to offer 

the automated loan underwriting system in existence on the 

date of the enactment of the Federal Housing Finance Reform 

Act of 2005 or continuing to engage in counseling and education activities. 

(c) NEW BUSINESS ACTIVITIES.— 

(1) AUTHORITY OF DIRECTOR TO PROHIBIT NEW BUSINESS ACTIVITIES.—The Director shall have authority to prohibit any 

new business activity by an enterprise if the Director determines, in writing, that such activity— 

(A) contravenes or is inconsistent with the purposes of 

this title, the Federal National Mortgage Association Charter Act, or the Federal Home Loan Mortgage Corporation 

Act; 

(B) is otherwise inconsistent with the safety and soundness of the enterprise; or 

(C) is not in the public interest. 

(2) NOTIFICATION OF NEW BUSINESS ACTIVITIES.—An enterprise that undertakes any new business activity shall provide 

written notice of the activity to the Director and may commence 

the new business activity only in accordance with paragraph 

(4). 

(3) DIRECTOR DETERMINATION OF APPLICABLE PROCEDURE.— 

(A) TIMING.—Immediately upon receipt of any notice 

under paragraph (2) regarding a new business activity, the 

Director shall undertake a determination under subparagraph (B) of this paragraph regarding the new business activity. 

(B) DETERMINATION AND TREATMENT AS NEW PROGRAM.— 

If the Director determines that any new business activity 

consists of, relates to, or involves any new program— 

(i) the Director shall notify the enterprise of the determination; 

148 

(ii) the new business activity described in the notice 

shall be considered a new program for purposes of this 

section; and 

(iii) the Director shall prohibit the enterprise from 

carrying out the activity except to the extent that approval for the activity is obtained pursuant to subsection (b). 

(4) COMMENCEMENT.—An enterprise may commence a new 

business activity— 

(A) if the Director issues a written approval regarding 

such new business activity, immediately upon such 

issuance or at such other time as provided by the Director 

in such letter; or 

(B) if, during the 30-day period beginning upon receipt 

by the Director of notice pursuant to paragraph (2) regarding a new business activity, the Director has not issued to 

the enterprise a written approval or denial of the new business activity, upon the expiration of such 30-day period. 

(d) APPROVAL AND CONDITIONAL APPROVAL.—The Director may at 

any time conditionally approve the undertaking of a particular new 

program or new business activity by an enterprise and set forth the 

terms and conditions that apply to the program or activity with 

which the enterprise shall comply if it undertakes the new program 

or activity. Such approval may, in the discretion of the Director, be 

in the form of a written agreement between the enterprise and the 

Director and shall be subject to such terms and conditions therein. 

Such a written agreement or conditional approval shall be enforceable under subtitle C. 

(e) DETERMINATION AND TREATMENT OF ACTIVITY AS NEW BUSINESS ACTIVITY.—If the Director determines that any activity of an 

enterprise consists of, relates to, or involves any new business activity— 

(1) the Director shall notify the enterprise of the determination; 

(2) such activity shall be considered a new business activity 

for purposes of this section; and 

(3) the Director shall prohibit the enterprise from carrying out 

the activity except to the extent that approval for the activity is 

obtained pursuant to subsection (c). 

(f) EFFECT ON OTHER AUTHORITIES.— 

(1) EXAMINATIONS.—Nothing in this section may be construed 

to limit, in any manner, any other authority or right the Director may have under other provisions of law to conduct an examination of an enterprise. 

(2) REQUESTS FOR INFORMATION.—Nothing in this section 

may be construed to limit the right of the Director at any time 

to request additional information from an enterprise concerning 

any business activity. 

(3) NO IMPLIED RIGHT OF ACTION.—This section shall not create any private right of action against an enterprise or any director or executive officer of an enterprise, or impair any private 

right of action under other applicable law. 

(4) NO LIMITATION.—Nothing in this section may be construed 

to restrict the general supervisory and regulatory authority of 

149 

the Director over all programs, products, activities, or business 

operations of any kind. 

(g) REPORT ON PROGRAMS AND BUSINESS ACTIVITIES.—Not later 

than the expiration of the 180-day period beginning on the effective 

date under section 185 of the Federal Housing Finance Reform Act 

of 2005, each enterprise shall submit to the Director a report identifying and describing each program and business activity of the enterprise engaged in or existing as of the submission of the report. 

(h) REGULATIONS.—The Director shall by order or regulation issue 

rules and procedures to implement this section, including in the discretion of the Director, such definitions, interpretations, forms, and 

other guidances as the Director considers appropriate. 

SEC. 1322. HOUSING PRICE INDEX. 

(a) IN GENERAL.—The Director shall establish and maintain a 

method of assessing the national average 1-family house price for 

use for adjusting the conforming loan limitations of the enterprises. 

In establishing such method, the Director shall take into consideration the monthly survey of all major lenders conducted by the Federal Housing Finance Agency to determine the national average 1- 

family house price, the House Price Index maintained by the Office 

of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development before the effective date under section 

185 of the Federal Housing Finance Reform Act of 2005, any appropriate house price indexes of the Bureau of the Census of the Department of Commerce, and any other indexes or measures that the 

Director considers appropriate. 

(b) GAO AUDIT.— 

(1) IN GENERAL.—At such times as are required under paragraph (2), the Comptroller General of the United States shall 

conduct an audit of the methodology established by the Director 

under subsection (a) to determine whether the methodology established is an accurate and appropriate means of measuring 

changes to the national average 1-family house price. 

(2) TIMING.—An audit referred to in paragraph (1) shall be 

conducted and completed not later than the expiration of the 

180-day period that begins upon each of the following dates: 

(A) ESTABLISHMENT.—The date upon which such methodology is initially established under subsection (a) in final 

form by the Director. 

(B) MODIFICATION OR AMENDMENT.—Each date upon 

which any modification or amendment to such methodology 

is adopted in final form by the Director. 

(3) REPORT.—Within 30 days of the completion of any audit 

conducted under this subsection, the Comptroller General shall 

submit a report detailing the results and conclusions of the 

audit to the Director, the Committee on Financial Services of 

the House of Representatives, and the Committee on Banking, 

Housing, and Urban Affairs of the Senate. 

SEC. 1322A. CORPORATE GOVERNANCE OF ENTERPRISES. 

(a) BOARD OF DIRECTORS.— 

(1) INDEPENDENCE.—A majority of seated members of the 

board of directors of each enterprise shall be independent board 

members, as defined under rules set forth by the New York 

150 

Stock Exchange, as such rules may be amended from time to 

time. 

(2) FREQUENCY OF MEETINGS.—To carry out its obligations 

and duties under applicable laws, rules, regulations, and guidelines, the board of directors of an enterprise shall meet at least 

eight times a year and not less than once a calendar quarter. 

(3) NON-MANAGEMENT BOARD MEMBER MEETINGS.—The nonmanagement directors of an enterprise shall meet at regularly 

scheduled executive sessions without management participation. 

(4) QUORUM; PROHIBITION ON PROXIES.—For the transaction 

of business, a quorum of the board of directors of an enterprise 

shall be at least a majority of the seated board of directors and 

a board member may not vote by proxy. 

(5) INFORMATION.—The management of an enterprise shall 

provide a board member of the enterprise with such adequate 

and appropriate information that a reasonable board member 

would find important to the fulfillment of his or her fiduciary 

duties and obligations. 

(6) ANNUAL REVIEW.—At least annually, the board of directors of each enterprise shall review, with appropriate professional assistance, the requirements of laws, rules, regulations, 

and guidelines that are applicable to its activities and duties. 

(b) COMMITTEES OF BOARDS OF DIRECTORS.— 

(1) FREQUENCY OF MEETINGS.—Any committee of the board of 

directors of an enterprise shall meet with sufficient frequency to 

carry out its obligations and duties under applicable laws, 

rules, regulations, and guidelines. 

(2) REQUIRED COMMITTEES.—Each enterprise shall provide 

for the establishment, however styled, of the following committees of the board of directors: 

(A) Audit committee. 

(B) Compensation committee. 

(C) Nominating/corporate governance committee. 

Such committees shall be in compliance with the charter, independence, composition, expertise, duties, responsibilities, and 

other requirements set forth under section 10A(m) of the Securities Exchange Act of 1934 (15 U.S.C. 78j-1(m)), with respect to 

the audit committee, and under rules issued by the New York 

Stock Exchange, as such rules may be amended from time to 

time. 

(c) COMPENSATION.— 

(1) IN GENERAL.—The compensation of board members, executive officers, and employees of an enterprise— 

(A) shall not be in excess of that which is reasonable and 

appropriate; 

(B) shall be commensurate with the duties and responsibilities of such persons, 

(C) shall be consistent with the long-term goals of the enterprise; 

(D) shall not focus solely on earnings performance, but 

shall take into account risk management, operational stability and legal and regulatory compliance as well; and 

(E) shall be undertaken in a manner that complies with 

applicable laws, rules, and regulations. 

151 

(2) REIMBURSEMENT.—If an enterprise is required to prepare 

an accounting restatement due to the material noncompliance of 

the enterprise, as a result of misconduct, with any financial reporting requirement under the securities laws, the chief executive officer and chief financial officer of the enterprise shall reimburse the enterprise as provided under section 304 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7243). This provision does 

not otherwise limit the authority of the Agency to employ remedies available to it under its enforcement authorities. 

(d) CODE OF CONDUCT AND ETHICS.— (1) IN GENERAL.—An enterprise shall establish and administer a written code of conduct and ethics that is reasonably designed to assure the ability of board members, executive officers, 

and employees of the enterprise to discharge their duties and responsibilities, on behalf of the enterprise, in an objective and 

impartial manner, and that includes standards required under 

section 406 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7264) 

and other applicable laws, rules, and regulations. 

(2) REVIEW.—Not less than once every three years, an enterprise shall review the adequacy of its code of conduct and ethics 

for consistency with practices appropriate to the enterprise and 

make any appropriate revisions to such code. 

(e) CONDUCT AND RESPONSIBILITIES OF BOARD OF DIRECTORS.— The board of directors of an enterprise shall be responsible for directing the conduct and affairs of the enterprise in furtherance of 

the safe and sound operation of the enterprise and shall remain reasonably informed of the condition, activities, and operations of the 

enterprise. The responsibilities of the board of directors shall include having in place adequate policies and procedures to assure its 

oversight of, among other matters, the following: 

(1) Corporate strategy, major plans of action, risk policy, programs for legal and regulatory compliance and corporate performance, including prudent plans for growth and allocation of 

adequate resources to manage operations risk. 

(2) Hiring and retention of qualified executive officers and 

succession planning for such executive officers. 

(3) Compensation programs of the enterprise. 

(4) Integrity of accounting and financial reporting systems of 

the enterprise, including independent audits and systems of internal control. 

(5) Process and adequacy of reporting, disclosures, and communications to shareholders, investors, and potential investors. 

(6) Extensions of credit to board members and executive officers. 

(7) Responsiveness of executive officers in providing accurate 

and timely reports to Federal regulators and in addressing the 

supervisory concerns of Federal regulators in a timely and appropriate manner. 

(f) PROHIBITION OF EXTENSIONS OF CREDIT.—An enterprise may 

not directly or indirectly, including through any subsidiary, extend 

or maintain credit, arrange for the extension of credit, or renew an 

extension of credit, in the form of a personal loan to or for any 

board member or executive officer of the enterprise, as provided by 

section 13(k) of the Securities Exchange Act of 1934 (15 U.S.C. 

78m(k)). 

152 

(g) CERTIFICATION OF DISCLOSURES.—The chief executive officer 

and the chief financial officer of an enterprise shall review each 

quarterly report and annual report issued by the enterprise and 

such reports shall include certifications by such officers as required 

by section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241). 

(h) CHANGE OF AUDIT PARTNER.—An enterprise may not accept 

audit services from an external auditing firm if the lead or coordinating audit partner who has primary responsibility for the external 

audit of the enterprise, or the external audit partner who has responsibility for reviewing the external audit has performed audit 

services for the enterprise in each of the five previous fiscal years. 

(i) COMPLIANCE PROGRAM.— (1) REQUIREMENT.—Each enterprise shall establish and 

maintain a compliance program that is reasonably designed to 

assure that the enterprise complies with applicable laws, rules, 

regulations, and internal controls. 

(2) COMPLIANCE OFFICER.—The compliance program of an enterprise shall be headed by a compliance officer, however styled, 

who reports directly to the chief executive officer of the enterprise. The compliance officer shall report regularly to the board 

of directors or an appropriate committee of the board of directors on compliance with and the adequacy of current compliance policies and procedures of the enterprise, and shall recommend any adjustments to such policies and procedures that 

the compliance officer considers necessary and appropriate. 

(j) RISK MANAGEMENT PROGRAM.— (1) REQUIREMENT.—Each enterprise shall establish and 

maintain a risk management program that is reasonably designed to manage the risks of the operations of the enterprise. 

(2) RISK MANAGEMENT OFFICER.—The risk management program of an enterprise shall be headed by a risk management 

officer, however styled, who reports directly to the chief executive officer of the enterprise. The risk management officer shall 

report regularly to the board of directors or an appropriate committee of the board of directors on compliance with and the adequacy of current risk management policies and procedures of 

the enterprise, and shall recommend any adjustments to such 

policies and procedures that the risk management officer considers necessary and appropriate. 

(k) COMPLIANCE WITH OTHER LAWS.— 

(1) DEREGISTERED OR UNREGISTERED COMMON STOCK.—If an 

enterprise deregisters or has not registered its common stock 

with the Securities and Exchange Commission under the Securities Exchange Act of 1934, the enterprise shall comply or continue to comply with sections 10A(m) and 13(k) of the Securities 

Exchange Act of 1934 (15 U.S.C. 78j-1(m), 78m(k)) and sections 

302, 304, and 406 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 

7241, 7243, 7264), subject to such requirements as provided by 

subsection (l) of this section. 

(2) REGISTERED COMMON STOCK.—An enterprise that has its 

common stock registered with the Securities and Exchange 

Commission shall maintain such registered status, unless it 

provides 60 days prior written notice to the Director stating its 

intent to deregister and its understanding that it will remain 

subject to the requirements of the sections of the Securities ExVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00152 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
153 

change Act of 1934 and the Sarbanes-Oxley Act of 2002, subject 

to such requirements as provided by subsection (l) of this section. 

(l) OTHER MATTERS.—The Director may from time to time establish standards, by regulation, order, or guideline, regarding such 

other corporate governance matters of the enterprises as the Director 

considers appropriate. 

(m) MODIFICATION OF STANDARDS.—In connection with standards 

of Federal or State law (including the Revised Model Corporation 

Act) or New York Stock Exchange rules that are made applicable to 

an enterprise by section 1710.10 of the Director’s rules (12 C.F.R. 

1710.10) and by subsections (a), (b), (g), (i), (j), and (k) of this section, the Director, in the Director’s sole discretion, may modify the 

standards contained in this section or in part 1710 of the Director’s 

rules (12 U.S.C. Part 1710) in accordance with section 553 of title 

5, United States Code, and upon written notice to the enterprise. 

SEC. 1322B. REQUIRED REGISTRATION UNDER SECURITIES EXCHANGE 

ACT OF 1934. 

(a) IN GENERAL.—Each regulated entity shall register at least one 

class of the capital stock of such regulated entity, and maintain 

such registration with the Securities and Exchange Commission, 

under the Securities Exchange Act of 1934. 

(b) ENTERPRISES.—Each enterprise shall comply with sections 14 

and 16 of the Securities Exchange Act of 1934. 

SEC. 1323. PUBLIC ACCESS TO MORTGAGE INFORMATION OF ENTERPRISES. 

(a) IN GENERAL.—The øSecretary¿ Director shall make available 

to the public, in forms useful to the public (including forms accessible by computers), the data submitted by the enterprises in the 

reports required under section 309(m) of the Federal National 

Mortgage Association Charter Act or section 307(e) of the Federal 

Home Loan Mortgage Corporation Act. 

(b) ACCESS.— 

(1) PROPRIETARY DATA.—Except as provided in paragraph (2), 

the øSecretary¿ Director may not make available to the public 

data that the øSecretary¿ Director determines pursuant to section 1326 are proprietary information. 

(2) EXCEPTION.—The øSecretary¿ Director shall not restrict 

access to the data provided in accordance with section 

309(m)(1)(A) of the Federal National Mortgage Association 

Charter Act or section 307(e)(1)(A) of the Federal Home Loan 

Mortgage Corporation Act. 

(c) FEES.—The øSecretary¿ Director may charge reasonable fees 

to cover the cost of making data available under this section to the 

public. 

øSEC. 1324. ANNUAL HOUSING REPORT. 

ø(a) IN GENERAL.—After reviewing and analyzing the reports 

submitted under section 309(n) of the Federal National Mortgage 

Association Charter Act and section 307(f) of the Federal Home 

Loan Mortgage Corporation Act, the Secretary shall submit a report, as part of the annual report under section 1328(a) of this title, 

on the extent to which each enterprise is achieving the annual 

housing goals established under subpart B of this part and the purposes of the enterprise established by law. 

154 

ø(b) CONTENTS.—The report shall— 

ø(1) aggregate and analyze census tract data to assess the 

compliance of each enterprise with the central cities, rural 

areas, and other underserved areas housing goal and to determine levels of business in central cities, rural areas, underserved areas, low- and moderate-income census tracts, minority 

census tracts, and other geographical areas deemed appropriate by the Secretary; 

ø(2) aggregate and analyze data on income to assess the 

compliance of each enterprise with the low- and moderate-income and special affordable housing goals; 

ø(3) aggregate and analyze data on income, race, and gender 

by census tract and compare such data with larger demographic, housing, and economic trends; 

ø(4) examine actions that each enterprise has undertaken or 

could undertake to promote and expand the annual goals established under sections 1332, 1333, and 1334, and the purposes of the enterprise established by law; 

ø(5) examine the primary and secondary multifamily housing 

mortgage markets and describe— 

ø(A) the availability and liquidity of mortgage credit; 

ø(B) the status of efforts to provide standard credit 

terms and underwriting guidelines for multifamily housing 

and to securitize such mortgage products; and 

ø(C) any factors inhibiting such standardization and 

securitization; 

ø(6) examine actions each enterprise has undertaken and 

could undertake to promote and expand opportunities for firsttime homebuyers; and 

ø(7) describe any actions taken under section 1325(5) with 

respect to originators found to violate fair lending procedures.¿ 

SEC. 1324. ANNUAL HOUSING REPORT REGARDING REGULATED ENTITIES. 

(a) IN GENERAL.—After reviewing and analyzing the reports submitted under section 309(n) of the Federal National Mortgage Association Charter Act, section 307(f) of the Federal Home Loan Mortgage Corporation Act, and section 10(j)(11) of the Federal Home 

Loan Bank Act (12 U.S.C. 1430(j)(11)), the Director shall submit a 

report, not later than October 30 of each year, to the Committee on 

Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate, on 

the activities of each regulated entity. 

(b) CONTENTS.—The report shall— 

(1) discuss the extent to which— 

(A) each enterprise is achieving the annual housing goals 

established under subpart B of this part; 

(B) each enterprise is complying with section 1337; 

(C) each Federal home loan bank is complying with section 10(j) of the Federal Home Loan Bank Act; and 

(D) each regulated entity is achieving the purposes of the 

regulated entity established by law; 

(2) aggregate and analyze relevant data on income to assess 

the compliance by each enterprise with the housing goals established under subpart B; 

155 

(3) aggregate and analyze data on income, race, and gender 

by census tract and other relevant classifications, and compare 

such data with larger demographic, housing, and economic 

trends; 

(4) examine actions that— 

(A) each enterprise has undertaken or could undertake to 

promote and expand the annual goals established under 

subpart B and the purposes of the enterprise established by 

law; and 

(B) each Federal home loan bank has taken or could undertake to promote and expand the community investment 

program and affordable housing program of the bank established under section subsections (i) and (j) of section 10 

of the Federal Home Loan Bank Act; 

(5) examine the primary and secondary multifamily housing 

mortgage markets and describe— 

(A) the availability and liquidity of mortgage credit; 

(B) the status of efforts to provide standard credit terms 

and underwriting guidelines for multifamily housing and 

to securitize such mortgage products; and 

(C) any factors inhibiting such standardization and 

securitization; 

(6) examine actions each regulated entity has undertaken and 

could undertake to promote and expand opportunities for firsttime homebuyers; 

(7) describe any actions taken under section 1325(5) with respect to originators found to violate fair lending procedures; 

(8) discuss and analyze existing conditions and trends, including conditions and trends relating to pricing, in the housing markets and mortgage markets; and 

(9) identify the extent to which each enterprise is involved in 

mortgage purchases and secondary market activities involving 

subprime loans (as identified in accordance with the regulations issued pursuant to section 124(b) of the Federal Housing 

Finance Reform Act of 2005) and compare the characteristics of 

subprime loans purchased and securitized by the enterprises to 

other loans purchased and securitized by the enterprises 

(c) DATA COLLECTION AND REPORTING.— (1) IN GENERAL.—To assist the Director in analyzing the matters described in subsection (b) and establishing the methodology described in section 1322, the Director shall conduct, on 

a monthly basis, a survey of mortgage markets in accordance 

with this subsection. 

(2) DATA POINTS.—Each monthly survey conducted by the Director under paragraph (1) shall collect data on— 

(A) the characteristics of individual mortgages that are 

eligible for purchase by the enterprises and the characteristics of individual mortgages that are not eligible for purchase by the enterprises including, in both cases, information concerning— 

(i) the price of the house that secures the mortgage; 

(ii) the loan-to-value ratio of the mortgage, which 

shall reflect any secondary liens on the relevant property; 

(iii) the terms of the mortgage; 

156 

(iv) the creditworthiness of the borrower or borrowers; and 

(v) whether the mortgage, in the case of a conforming 

mortgage, was purchased by an enterprise; and 

(B) such other matters as the Director determines to be 

appropriate. 

(3) PUBLIC AVAILABILITY.—The Director shall make any data 

collected by the Director in connection with the conduct of a 

monthly survey available to the public in a timely manner, provided that the Director may modify the data released to the 

public to ensure that the data is not released in an identifiable 

form. 

(4) DEFINITION.—For purposes of this subsection, the term 

‘‘identifiable form’’ means any representation of information 

that permits the identity of a borrower to which the information 

relates to be reasonably inferred by either direct or indirect 

means. 

SEC. 1325. FAIR HOUSING. 

The øSecretary¿ Director shall— 

(1) * * * 

(2) by regulation, require each enterprise to submit data to 

the øSecretary¿ Director to assist the øSecretary¿ Director in 

investigating whether a mortgage lender with which the enterprise does business has failed to comply with the Fair Housing 

Act; 

(3) by regulation, require each enterprise to submit data to 

the øSecretary¿ Director to assist in investigating whether a 

mortgage lender with which the enterprise does business has 

failed to comply with the Equal Credit Opportunity Act, and 

shall submit any such information received to the appropriate 

Federal agencies, as provided in section 704 of the Equal Credit Opportunity Act, for appropriate action; 

* * * * * * * 

SEC. 1326. PROHIBITION OF PUBLIC DISCLOSURE OF PROPRIETARY 

INFORMATION. 

(a) IN GENERAL.—The øSecretary¿ Director may, by regulation or 

order, provide that certain information shall be treated as proprietary information and not subject to disclosure under section 1323 

of this title, section 309(n)(3) of the Federal National Mortgage Association Charter Act, or section 307(f)(3) of the Federal Home 

Loan Mortgage Corporation Act. 

(b) PROTECTION OF INFORMATION ON HOUSING ACTIVITIES.—The 

øSecretary¿ Director shall not provide public access to, or disclose 

to the public, any information required to be submitted by an enterprise under section 309(n) of the Federal National Mortgage Association Charter Act or section 307(f) of the Federal Home Loan 

Mortgage Corporation Act that the øSecretary¿ Director determines 

is proprietary. 

* * * * * * * 

øSEC. 1327. AUTHORITY TO REQUIRE REPORTS BY ENTERPRISES. 

øThe Secretary shall require each enterprise to submit reports on 

its activities to the Secretary as the Secretary considers 

appropriate. 

157 

øSEC. 1328. REPORTS BY SECRETARY. 

ø(a) ANNUAL REPORT.—The Secretary shall, not later than June 

30 of each year, submit a report to the Committee on Banking, Finance and Urban Affairs of the House of Representatives and the 

Committee on Banking, Housing, and Urban Affairs of the Senate 

on the activities of each enterprise. 

ø(b) VIEWS ON BUDGET AND FINANCIAL PLANS OF ENTERPRISES.— 

On an annual basis, the Secretary shall provide the Committees referred to in subsection (a) with comments on the plans, forecasts, 

and reports required under section 1316(g).¿ 

Subpart B—Housing Goals 

øSEC. 1331. ESTABLISHMENT. 

ø(a) IN GENERAL.—The Secretary shall establish, by regulation, 

housing goals under this subpart for each enterprise. The housing 

goals shall include a low- and moderate-income housing goal pursuant to section 1332, a special affordable housing goal pursuant to 

section 1333, and a central cities, rural areas, and other underserved areas housing goal pursuant to section 1334. The Secretary 

shall implement this subpart in a manner consistent with section 

301(3) of the Federal National Mortgage Association Charter Act 

and section 301(b)(3) of the Federal Home Loan Mortgage Corporation Act. 

ø(b) CONSIDERATION OF UNITS IN MULTIFAMILY HOUSING.—In establishing any goal under this subpart, the Secretary may take into 

consideration the number of housing units financed by any mortgage on multifamily housing purchased by an enterprise. 

ø(c) ADJUSTMENT OF HOUSING GOALS.—Except as otherwise provided in this title, from year to year the Secretary may, by regulation, adjust any housing goal established under this subpart. 

øSEC. 1332. LOW- AND MODERATE-INCOME HOUSING GOAL. 

ø(a) IN GENERAL.—The Secretary shall establish an annual goal 

for the purchase by each enterprise of mortgages on housing for 

low- and moderate-income families. The Secretary may establish 

separate specific subgoals within the goal under this section and 

such subgoals shall not be enforceable under the provisions of section 1336, any other provision of this title, or any provision of the 

Federal National Mortgage Association Charter Act or the Federal 

Home Loan Mortgage Corporation Act. 

ø(b) FACTORS TO BE APPLIED.—In establishing the goal under 

this section, the Secretary shall consider— 

ø(1) national housing needs; 

ø(2) economic, housing, and demographic conditions; 

ø(3) the performance and effort of the enterprises toward 

achieving the low- and moderate-income housing goal in previous years; 

ø(4) the size of the conventional mortgage market serving 

low- and moderate-income families relative to the size of the 

overall conventional mortgage market; 

ø(5) the ability of the enterprises to lead the industry in 

making mortgage credit available for low- and moderate-income families; and 

158 

ø(6) the need to maintain the sound financial condition of the 

enterprises. 

ø(c) USE OF BORROWER AND TENANT INCOME.— ø(1) IN GENERAL.—The Secretary shall monitor the performance of each enterprise in carrying out this section and shall 

evaluate such performance (for purposes of section 1336) based 

on— 

ø(A) in the case of an owner-occupied dwelling, the mortgagor’s income at the time of origination of the mortgage; 

or 

ø(B) in the case of a rental dwelling— 

ø(i) the income of the prospective or actual tenants 

of the property, where such data are available; or 

ø(ii) the rent levels affordable to low- and moderateincome families, where the data referred to in clause 

(i) are not available. 

ø(2) AFFORDABILITY.—For the purpose of paragraph (1)(B)(ii), 

a rent level shall be considered affordable if it does not exceed 

30 percent of the maximum income level of the income categories referred to in this section, with appropriate adjustments for unit size as measured by the number of bedrooms. 

ø(d) TRANSITION.— ø(1) INTERIM TARGET.—Notwithstanding any other provision 

of this section, during the 2-year period beginning on January 1, 1993, the annual target under this section for low- and 

moderate-income mortgage purchases for each enterprise shall 

be 30 percent of the total number of dwelling units financed by 

mortgage purchases of the enterprise. 

ø(2) INTERIM GOAL.—During such 2-year period, the Secretary shall establish a separate annual goal for each enterprise, the achievement of which shall require— 

ø(A) an enterprise that is not meeting the target under 

paragraph (1) upon January 1, 1993, to improve its performance relative to such target annually and, to the maximum extent feasible, to meet such target at the conclusion 

of such 2-year period; and 

ø(B) an enterprise that is meeting the target under paragraph (1) upon January 1, 1993, to improve its performance relative to the target. 

ø(3) IMPLEMENTATION.—The Secretary shall establish any requirements necessary to implement the transition provisions 

under this subsection by notice, after providing the enterprises 

with an opportunity to review and comment not less than 30 

days before the issuance of such notice. Such notice shall be 

issued not later than the expiration of the 90-day period beginning upon the date of the enactment of this Act and shall be 

effective upon issuance. 

øSEC. 1333. SPECIAL AFFORDABLE HOUSING GOAL. 

ø(a) ESTABLISHMENT.— 

ø(1) IN GENERAL.—The Secretary shall establish a special annual goal designed to adjust the purchase by each enterprise 

of mortgages on rental and owner-occupied housing to meet the 

then-existing unaddressed needs of, and affordable to, low-income families in low-income areas and very low-income families. The special affordable housing goal established under this 

159 

section for an enterprise shall not be less than 1 percent of the 

dollar amount of the mortgage purchases by the enterprise for 

the previous year. 

ø(2) STANDARDS.—In establishing the special affordable 

housing goal for an enterprise, the Secretary shall consider— 

ø(A) data submitted to the Secretary in connection with 

the special affordable housing goal for previous years; 

ø(B) the performance and efforts of the enterprise toward achieving the special affordable housing goal in previous years; 

ø(C) national housing needs within the categories set 

forth in this section; 

ø(D) the ability of the enterprise to lead the industry in 

making mortgage credit available for low-income and very 

low-income families; and 

ø(E) the need to maintain the sound financial condition 

of the enterprise. 

ø(b) FULL CREDIT ACTIVITIES.— ø(1) IN GENERAL.—The Secretary shall give full credit toward 

achievement of the special affordable housing goal under this 

section (for purposes of section 1336) to the following activities: 

ø(A) FEDERALLY RELATED MORTGAGES.—The purchase or 

securitization of federally insured or guaranteed mortgages, if— 

ø(i) such mortgages cannot be readily securitized 

through the Government National Mortgage Association or any other Federal agency; 

ø(ii) participation of the enterprise substantially enhances the affordability of the housing subject to such 

mortgages; and 

ø(iii) the mortgages involved are on housing that 

otherwise qualifies under such goal to be considered 

for purposes of such goal. 

ø(B) PORTFOLIOS.—The purchase or refinancing of existing, seasoned portfolios of loans, if— 

ø(i) the seller is engaged in a specific program to use 

the proceeds of such sales to originate additional loans 

that meet such goal; and 

ø(ii) such purchases or refinancings support additional lending for housing that otherwise qualifies 

under such goal to be considered for purposes of such 

goal. 

ø(C) RTC AND FDIC LOANS.—The purchase of direct loans 

made by the Resolution Trust Corporation or the Federal 

Deposit Insurance Corporation, if such loans— 

ø(i) are not guaranteed by such agencies themselves 

or other Federal agencies; 

ø(ii) are made with recourse provisions similar to 

those offered through private mortgage insurance or 

other conventional sellers; and 

ø(iii) are made for the purchase of housing that otherwise qualifies under such goal to be considered for 

purposes of such goal. 

ø(2) EXCLUSION.—No credit toward the achievement of the 

special affordable housing goal may be given to the purchase 

160 

or securitization of mortgages associated with the refinancing 

of the existing enterprise portfolios. 

ø(c) USE OF BORROWER AND TENANT INCOME.— ø(1) IN GENERAL.—The Secretary shall monitor the performance of each enterprise in carrying out this section and shall 

evaluate such performance (for purposes of section 1336) based 

on— 

ø(A) in the case of an owner-occupied dwelling, the mortgagor’s income at the time of origination of the mortgage; 

or 

ø(B) in the case of a rental dwelling— 

ø(i) the income of the prospective or actual tenants 

of the property, where such data are available; or 

ø(ii) the rent levels affordable to low-income and 

very low-income families, where the data referred to in 

clause (i) are not available. 

ø(2) AFFORDABILITY.—For the purpose of paragraph (1)(B)(ii), 

a rent level shall be considered affordable if it does not exceed 

30 percent of the maximum income level of the income categories referred to in this section, with appropriate adjustments for unit size as measured by the number of bedrooms. 

ø(d) TRANSITION.— ø(1) FNMA MORTGAGE PURCHASES.—Notwithstanding any 

other provision of this section, during the 2-year period beginning on January 1, 1993, the special affordable housing goal 

for the Federal National Mortgage Association shall include 

mortgage purchases of not less than $2,000,000,000 (for such 

2-year period), with one-half of such purchases consisting of 

mortgages on single family housing and one-half consisting of 

mortgages on multifamily housing. 

ø(2) FHLMC MORTGAGE PURCHASES.—Notwithstanding any 

other provision of this section, during the 2-year period beginning on January 1, 1993, the special affordable housing goal 

for the Federal Home Loan Mortgage Corporation shall include 

mortgage purchases of not less than $1,500,000,000 (for such 

2-year period), with one-half of such purchases consisting of 

mortgages on single family housing and one-half consisting of 

mortgages on multifamily housing. 

ø(3) INCOME CHARACTERISTICS FOR MORTGAGE PURCHASES.— ø(A) MULTIFAMILY MORTGAGES.—The special affordable 

housing goals established under paragraphs (1) and (2) 

shall provide that, of mortgages on multifamily housing 

that are purchased and contribute to the achievement of 

such goals— 

ø(i) 45 percent shall be mortgages on multifamily 

housing affordable to low-income families; and 

ø(ii) 55 percent shall be mortgages on multifamily 

housing in which— 

ø(I) at least 20 percent of the units are affordable to families whose incomes do not exceed 50 

percent of the median income for the area; or 

ø(II) at least 40 percent of the units are affordable to very low-income families. 

ø(B) SINGLE FAMILY MORTGAGES.—The special affordable 

housing goals established under paragraphs (1) and (2) 

161 

shall provide that, of mortgages on single family housing 

that are purchased and contribute to the achievement of 

such goals— 

ø(i) 45 percent shall be mortgages of low-income 

families who live in census tracts in which the median 

income does not exceed 80 percent of the area median 

income; and 

ø(ii) 55 percent shall be mortgages of very low-income families. 

ø(C) COMPLIANCE WITH SPECIAL AFFORDABLE HOUSING

GOALS.—Only the portion of mortgages on multifamily 

housing purchased by an enterprise that are attributable 

to units affordable to low-income families shall contribute 

to the achievement of the special affordable housing goals 

under subparagraph (A)(ii). 

ø(4) IMPLEMENTATION.—The Secretary shall establish any requirements necessary to implement the transition provisions 

under this subsection by notice, after providing the enterprises 

with an opportunity to review and comment not less than 30 

days before the issuance of such notice. Such notice shall be 

issued not later than the expiration of the 90-day period beginning upon the date of the enactment of this Act and shall be 

effective upon issuance. 

øSEC. 1334. CENTRAL CITIES, RURAL AREAS, AND OTHER UNDERSERVED AREAS HOUSING GOAL. 

ø(a) IN GENERAL.—The Secretary shall establish an annual goal 

for the purchase by each enterprise of mortgages on housing located in central cities, rural areas, and other underserved areas. 

The Secretary may establish separate subgoals within the goal 

under this section and such subgoals shall not be enforceable under 

the provisions of section 1336, any other provision of this title, or 

any provision of the Federal National Mortgage Association Charter Act or the Federal Home Loan Mortgage Corporation Act. 

ø(b) FACTORS TO BE APPLIED.—In establishing the housing goal 

under this section, the Secretary shall consider— 

ø(1) urban and rural housing needs and the housing needs 

of underserved areas; 

ø(2) economic, housing, and demographic conditions; 

ø(3) the performance and efforts of the enterprises toward 

achieving the central cities, rural areas, and other underserved 

areas housing goal in previous years; 

ø(4) the size of the conventional mortgage market for central 

cities, rural areas, and other underserved areas relative to the 

size of the overall conventional mortgage market; 

ø(5) the ability of the enterprises to lead the industry in 

making mortgage credit available throughout the United 

States, including central cities, rural areas, and other underserved areas; and 

ø(6) the need to maintain the sound financial condition of the 

enterprises. 

ø(c) LOCATION OF PROPERTIES.—The Secretary shall monitor the 

performance of each enterprise in carrying out this section and 

shall evaluate such performance (for purposes of section 1336) 

based on the location of the properties subject to mortgages purchased by each enterprise. 

162 

ø(d) TRANSITION.— ø(1) INTERIM TARGET.—Notwithstanding any other provision 

of this section, during the 2-year period beginning on January 

1, 1993, the annual target under this section for purchases by 

each enterprise of mortgages on housing located in central cities shall be 30 percent of the total number of dwelling units 

financed by mortgage purchases of the enterprise. 

ø(2) INTERIM GOAL.—During such 2-year period, the Secretary shall establish a separate annual goal for each enterprise, the achievement of which shall require— 

ø(A) an enterprise that is not meeting the target under 

paragraph (1) upon January 1, 1993, to improve its performance relative to such target annually and, to the maximum extent feasible, to meet such target at the conclusion 

of such 2-year period; and 

ø(B) an enterprise that is meeting the target under paragraph (1) upon January 1, 1993, to improve its performance relative to the target. 

ø(3) DEFINITION OF CENTRAL CITY.—For purposes of this subsection, the term ‘‘central city’’ means any political subdivision 

designated as a central city by the Office of Management and 

Budget. 

ø(4) IMPLEMENTATION.—The Secretary shall establish any requirements necessary to implement the transition provisions 

under this subsection by notice, after providing the enterprises 

with an opportunity to review and comment not less than 30 

days before the issuance of such notice. Such notice shall be 

issued not later than the expiration of the 90-day period beginning upon the date of the enactment of this Act and shall be 

effective upon issuance.¿ 

SEC. 1331. ESTABLISHMENT OF HOUSING GOALS. 

(a) IN GENERAL.—The Director shall establish, effective for the 

first year that begins after the effective date under section 185 of the 

Federal Housing Finance Reform Act of 2005 and each year thereafter, annual housing goals, with respect to the mortgage purchases 

by the enterprises, as follows: 

(1) SINGLE FAMILY HOUSING GOALS.—Three single-family 

housing goals under section 1332. 

(2) MULTIFAMILY SPECIAL AFFORDABLE HOUSING GOALS.—A 

multifamily special affordable housing goal under section 1333. 

(b) ELIMINATING INTEREST RATE DISPARITIES.— 

(1) IN GENERAL.—In establishing and implementing the housing goals under this subpart, the Director shall require the enterprises to disclose appropriate information to allow the Director to assess if there are any disparities in interest rates 

charged on mortgages to borrowers who are minorities as compared with borrowers of similar creditworthiness who are not 

minorities, as evidenced in reports pursuant to the Home Mortgage Disclosure Act of 1975. 

(2) REPORT AND REMEDY.—Upon a finding by the Director, 

pursuant to the information provided by an enterprise in paragraph (1), that a pattern of disparities in interest rates exists, 

the Director shall— 

(A) submit to the Committee on Financial Services of the 

House of Representatives and the Committee on Banking, 

163 

Housing, and Urban Affairs of the Senate a report detailing the disparities; and 

(B) require the enterprise to take such action as the Director deems appropriate pursuant to this Act to remedy the 

interest rate disparities identified. 

(3) PROTECTION OF IDENTITY.—In carrying out this subsection, the Director shall ensure that no information is made 

public that would reasonably allow identification, directly or 

indirectly, of an individual borrower. 

(c) TIMING.—The Director shall establish an annual deadline by 

which the Director shall establish the annual housing goals under 

this subpart for each year, taking into consideration the need for the 

enterprises to reasonably and sufficiently plan their operations and 

activities in advance, including operations and activities necessary 

to meet such annual goals. 

SEC. 1332. SINGLE-FAMILY HOUSING GOALS. 

(a) IN GENERAL.—The Director shall establish an annual goal for 

the purchase by each enterprise of conventional, conforming, singlefamily, owner-occupied, purchase money mortgages financing housing for each of the following categories of families: 

(1) Low-income families. 

(2) Families that reside in low-income areas. 

(3) Very low-income families. 

(b) DETERMINATION OF COMPLIANCE.—The Director shall determine, for each year that the housing goal under this section is in 

effect pursuant to section 1331(a), whether each enterprise has complied with the single-family housing goal established under this section for such year. An enterprise shall be considered to be in compliance with such a goal for a year only if— 

(1) for each of the types of families described in subsection (a), 

the percentage of the number of conventional, conforming, single-family, owner-occupied, purchase money mortgages purchased by each enterprise in such year that serve such families, 

meets or exceeds 

(2) the target for the year for such type of family that is established under subsection (c). 

(c) ANNUAL TARGETS.— (1) IN GENERAL.—Except as provided in paragraph (2), for 

each of the types of families described in subsection (a), the target under this subsection for a year shall be the average percentage, for the three years that most recently precede such year 

and for which information under the Home Mortgage Disclosure Act of 1975 is publicly available, of the number of conventional, conforming, single-family, owner-occupied, purchase 

money mortgages originated in such year that serves such type 

of family, as determined by the Director using the information 

obtained and determined pursuant to paragraphs (3) and (4). 

(2) AUTHORITY TO INCREASE TARGETS.— 

(A) IN GENERAL.—The Director may, for any year, establish by regulation, for any or all of the types of families described in subsection (a), percentage targets that are higher 

than the percentages for such year determined pursuant to 

paragraph (1), to reflect expected changes in market performance related to such information under the Home 

Mortgage Disclosure Act of 1975. 

164 

(B) FACTORS.—In establishing any targets pursuant to 

subparagraph (A), the Director shall consider the following 

factors: 

(i) National housing needs. 

(ii) Economic, housing, and demographic conditions. 

(iii) The performance and effort of the enterprises toward achieving the housing goals under this section in 

previous years. 

(iv) The size of the conventional mortgage market 

serving each of the types of families described in subsection (a) relative to the size of the overall conventional mortgage market. 

(v) The need to maintain the sound financial condition of the enterprises. 

(3) HMDA INFORMATION.—The Director shall annually obtain 

information submitted in compliance with the Home Mortgage 

Disclosure Act of 1975 regarding conventional, conforming, single-family, owner-occupied, purchase money mortgages originated and purchased for the previous year. 

(4) CONFORMING MORTGAGES.—In determining whether a 

mortgage is a conforming mortgage for purposes of this paragraph, the Director shall consider the original principal balance 

of the mortgage loan to be the principal balance as reported in 

the information referred to in paragraph (3), as rounded to the 

nearest thousand dollars. 

(d) NOTICE OF DETERMINATION AND ENTERPRISE COMMENT.— (1) NOTICE.—Within 30 days of making a determination 

under subsection (b) regarding a compliance of an enterprise for 

a year with the housing goal established under this section and 

before any public disclosure thereof, the Director shall provide 

notice of the determination to the enterprise, which shall include an analysis and comparison, by the Director, of the performance of the enterprise for the year and the targets for the 

year under subsection (c). 

(2) COMMENT PERIOD.—The Director shall provide each enterprise an opportunity to comment on the determination during 

the 30-day period beginning upon receipt by the enterprise of 

the notice. 

(e) USE OF BORROWER INCOME.—In monitoring the performance 

of each enterprise pursuant to the housing goals under this section 

and evaluating such performance (for purposes of section 1336), the 

Director shall consider a mortgagor’s income to be such income at 

the time of origination of the mortgage. 

SEC. 1333. MULTIFAMILY SPECIAL AFFORDABLE GOAL. 

(a) ESTABLISHMENT.— 

(1) IN GENERAL.—The Director shall establish, by regulation, 

an annual goal for the purchase by each enterprise of each of 

the following types of mortgages on multifamily housing: 

(A) Mortgages that finance dwelling units for very low-income families. 

(B) Mortgages that finance dwelling units assisted by the 

low-income housing tax credit under section 42 of the Internal Revenue Code of 1986. 

(2) ADDITIONAL REQUIREMENTS FOR SMALLER PROJECTS.—The 

Director shall establish, within the goal under this section, adVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00164 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
165 

ditional requirements for the purchase by each enterprise of 

mortgages described in paragraph (1) for multifamily housing 

projects of a smaller or limited size, which may be based on the 

number of dwelling units in the project or the amount of the 

mortgage, or both, and shall include multifamily housing 

projects of such smaller sizes as are typical among such projects 

that serve rural areas. 

(3) FACTORS.—In establishing the goal under this section relating to mortgages on multifamily housing for an enterprise, 

the Director shall consider— 

(A) national multifamily mortgage credit needs; 

(B) the performance and effort of the enterprise in making mortgage credit available for multifamily housing in 

previous years; 

(C) the size of the multifamily mortgage market; 

(D) the ability of the enterprise to lead the industry in 

making mortgage credit available, especially for underserved markets, such as for small multifamily projects of 5 

to 50 units, multifamily properties in need of rehabilitation, 

and multifamily properties located in rural areas; and 

(E) the need to maintain the sound financial condition of 

the enterprise. 

(b) UNITS FINANCED BY HOUSING FINANCE AGENCY BONDS.—The 

Director shall give full credit toward the achievement of the multifamily special affordable housing goal under this section (for purposes of section 1336) to dwelling units in multifamily housing that 

otherwise qualifies under such goal and that is financed by tax-exempt or taxable bonds issued by a State or local housing finance 

agency, but only if— 

(1) such bonds are secured by a guarantee of the enterprise; 

or 

(2) are not investment grade and are purchased by the enterprise. 

(c) USE OF TENANT INCOME OR RENT.—The Director shall monitor the performance of each enterprise in meeting the goals established under this section and shall evaluate such performance (for 

purposes of section 1336) based on— 

(1) the income of the prospective or actual tenants of the property, where such data are available; or 

(2) where the data referred to in paragraph (1) are not available, rent levels affordable to low-income and very low-income 

families. 

A rent level shall be considered to be affordable for purposes of this 

subsection for an income category referred to in this subsection if it 

does not exceed 30 percent of the maximum income level of such income category, with appropriate adjustments for unit size as measured by the number of bedrooms. 

(d) DETERMINATION OF COMPLIANCE.—The Director shall, for each 

year that the housing goal under this section is in effect pursuant 

to section 1331(a), determine whether each enterprise has complied 

with such goal and the additional requirements under subsection 

(a)(2). 

166 

SEC. 1334. DISCRETIONARY ADJUSTMENT OF HOUSING GOALS. 

(a) AUTHORITY.—An enterprise may petition the Director in writing at any time during a year to reduce the level of any goal for 

such year established pursuant to this subpart. 

(b) STANDARD FOR REDUCTION.—The Director may reduce the 

level for a goal pursuant to such a petition only if— 

(1) market and economic conditions or the financial condition 

of the enterprise require such action; or 

(2) efforts to meet the goal would result in the constraint of 

liquidity, over-investment in certain market segments, or other 

consequences contrary to the intent of this subpart, or section 

301(3) of the Federal National Mortgage Association Charter 

Act (12 U.S.C. 1716(3)) or section 301(3) of the Federal Home 

Loan Mortgage Corporation Act (12 U.S.C. 1451 note), as applicable. 

(c) DETERMINATION.—The Director shall make a determination regarding any proposed reduction within 30 days of receipt of the petition regarding the reduction. The Director may extend such period 

for a single additional 15-day period, but only if the Director requests additional information from the enterprise. A denial by the 

Director to reduce the level of any goal under this section may be 

appealed to the United States District Court for the District of Columbia or the United States district court in the jurisdiction in 

which the headquarters of an enterprise is located. 

SEC. 1335. DUTY TO SERVE UNDERSERVED MARKETS AND OTHER REQUIREMENTS. 

(a) DUTY TO SERVE UNDERSERVED MARKETS.— (1) DUTY.—In accordance with the purpose of the enterprises 

under section 301(3) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1716) and section 301(b)(3) of the 

Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451 

note) to undertake activities relating to mortgages on housing 

for very low-, low-, and moderate-income families involving a 

reasonable economic return that may be less than the return 

earned on other activities, each enterprise shall have the duty 

to increase the liquidity of mortgage investments and improve 

the distribution of investment capital available for mortgage financing for underserved markets. 

(2) UNDERSERVED MARKETS.—To meet its duty under paragraph (1), each enterprise shall comply with the following requirements with respect to the following underserved markets: 

(A) MANUFACTURED HOUSING.—The enterprise shall lead 

the industry in developing loan products and flexible underwriting guidelines to facilitate a secondary market for 

mortgages on manufactured homes for very low-, low-, and 

moderate-income families. 

(B) AFFORDABLE HOUSING PRESERVATION.—The enterprise shall lead the industry in developing loan products 

and flexible underwriting guidelines to facilitate a secondary market to preserve housing affordable to very low-, 

low-, and moderate-income families, including housing 

projects subsidized under— 

(i) the project-based and tenant-based rental assistance programs under section 8 of the United States 

Housing Act of 1937; 

167 

(ii) the program under section 236 of the National 

Housing Act; 

(iii) the below-market interest rate mortgage program 

under section 221(d)(4) of the National Housing Act; 

(iv) the supportive housing for the elderly program 

under section 202 of the Housing Act of 1959; 

(v) the supportive housing program for persons with 

disabilities under section 811 of the Cranston-Gonzalez 

National Affordable Housing Act; and 

(vi) the rural rental housing program under section 

515 of the Housing Act of 1949. 

(C) RURAL AND OTHER UNDERSERVED MARKETS.—The enterprise shall lead the industry in developing loan products 

and flexible underwriting guidelines to facilitate a secondary market for mortgages on housing for very low-, low- 

, and moderate-income families in rural areas, and for 

mortgages for housing for any other underserved market for 

very low-, low-, and moderate-income families that the Secretary identifies as lacking adequate credit through conventional lending sources. Such underserved markets may be 

identified by borrower type, market segment, or geographic 

area. 

ø(a)¿ (b) IN GENERAL.—To meet the ølow- and moderate-income 

housing goal under section 1332, the special affordable housing 

goal under section 1333, and the central cities, rural areas, and 

other underserved areas housing goal under section 1334¿ housing 

goals established under this subpart and to carry out the duty 

under subsection (a) of this section, each enterprise shall— 

(1) * * * 

* * * * * * * 

(3) take affirmative steps to— 

(A) * * * 

* * * * * * * 

which shall include developing appropriate and prudent underwriting standards, business practices, repurchase requirements, pricing, fees, and procedures; and 

(4) develop the institutional capacity to help finance low- and 

moderate-income housing, including housing for first-time 

homebuyersø; and¿. 

ø(5) assist in maintaining the affordability of assisted units 

in eligible multifamily housing projects with expiring contracts, 

as defined under the Multifamily Assisted Housing Reform and 

Affordability Act of 1997.¿ 

ø(b) AFFORDABLE HOUSING GOALS.—Actions taken under subsection (a)(5) shall constitute part of the contribution of each entity 

in meeting its affordable housing goals under sections 1332, 1333, 

and 1334 for any fiscal year, as determined by the Secretary.¿ 

(c) EVALUATION AND REPORTING OF COMPLIANCE.— 

(1) IN GENERAL.—Not later than 6 months after the effective 

date under section 185 of the Federal Housing Finance Reform 

Act of 2005, the Director shall establish a manner for evaluating whether, and the extent to which, the enterprises have 

complied with the duty under subsection (a) to serve underserved markets and for rating the extent of such compliance. 

168 

Using such method, the Director shall, for each year, evaluate 

such compliance and rate the performance of each enterprise as 

to extent of compliance. The Director shall include such evaluation and rating for each enterprise for a year in the report for 

that year submitted pursuant to section 1319B(a). 

(2) SEPARATE EVALUATIONS.—In determining whether an enterprise has complied with the duty referred to in paragraph 

(1), the Director shall separately evaluate whether the enterprise 

has complied with such duty with respect to each of the underserved markets identified in subsection (a), taking into consideration— 

(A) the development of loan products and more flexible 

underwriting guidelines; 

(B) the extent of outreach to qualified loan sellers in each 

of such underserved markets; and 

(C) the volume of loans purchased in each of such underserved markets. 

SEC. 1336. MONITORING AND ENFORCING COMPLIANCE WITH HOUSING GOALS. 

(a) IN GENERAL.— 

(1) AUTHORITY.—The øSecretary¿ Director shall monitor and 

enforce compliance with the housing goals established under 

øsections 1332, 1333, and 1334,¿ this subpart and with the 

duty under section 1335A of each enterprise with respect to underserved markets, as provided in this section. 

(2) GUIDELINES.—The øSecretary¿ Director shall establish 

guidelines to measure the extent of compliance with the housing goals, which may assign full credit, partial credit, or no 

credit toward achievement of the housing goals to different categories of mortgage purchase activities of the enterprises, 

based on such criteria as the øSecretary¿ Director deems appropriate. 

(3) EXTENT OF COMPLIANCE.—In determining compliance 

with the housing goals established under this subpart, the 

øSecretary¿ Director— 

(A) * * * 

* * * * * * * 

(4) ENFORCEMENT OF DUTY TO PROVIDE MORTGAGE CREDIT TO

UNDERSERVED MARKETS.—The duty under section 1335(a) of 

each enterprise to serve underserved markets (as determined in 

accordance with section 1335(c)) shall be enforceable under this 

section to the same extent and under the same provisions that 

the housing goals established under sections 1332, 1333, and 

1334 are enforceable. Such duty shall not be enforceable under 

any other provision of this title (including subpart C of this 

part) other than this section or under any provision of the Federal National Mortgage Association Charter Act or the Federal 

Home Loan Mortgage Corporation Act. 

(b) NOTICE AND PRELIMINARY DETERMINATION OF FAILURE TO

MEET GOALS.— 

ø(1) NOTICE.—If the Secretary determines that an enterprise 

has failed, or that there is a substantial probability that an enterprise will fail, to meet any housing goal established under 

section 1332, 1333, or 1334, the Secretary shall provide written 

169 

notice to the enterprise of such a determination, the reasons 

for such determination, the requirement to submit a housing 

plan under subsection (c) of this section, and the information 

on which the Secretary based the determination or imposed 

such requirement.¿ 

(1) NOTICE.—If the Director preliminarily determines that an 

enterprise has failed, or that there is a substantial probability 

that an enterprise will fail, to meet any housing goal established under this subpart, the Director shall provide written notice to the enterprise of such a preliminary determination, the 

reasons for such determination, and the information on which 

the Director based the determination. 

(2) RESPONSE PERIOD.— (A) IN GENERAL.—During the 30-day period beginning on 

the date that an enterprise is provided notice under paragraph (1), the enterprise may submit to the øSecretary¿ 

Director any written information that the enterprise considers appropriate for consideration by the øSecretary¿ Director in finally determining whether such failure has occurred or whether the achievement of such goal was or is 

feasible. 

ø(B) EXTENDED PERIOD.—The Secretary may extend the 

period under subparagraph (A) for good cause for not more 

than 30 additional days. 

ø(C) SHORTENED PERIOD.—The Secretary may shorten 

the period under subparagraph (A) for good cause.¿ 

(B) EXTENSION OR SHORTENING OF PERIOD.—The Director 

may— 

(i) extend the period under subparagraph (A) for 

good cause for not more than 30 additional days; and 

(ii) shorten the period under subparagraph (A) for 

good cause. 

ø(D)¿ (C) FAILURE TO RESPOND.—The failure of an enterprise to provide information during the 30-day period 

under this paragraph (as extended or shortened) shall 

waive any right of the enterprise to comment on the proposed determination or action of the øSecretary¿ Director. 

(3) CONSIDERATION OF INFORMATION AND DETERMINATION.— (A) IN GENERAL.—After the expiration of the response 

period under paragraph (2) or upon receipt of information 

provided during such period by the enterprise, whichever 

occurs earlier, the øSecretary¿ Director shall ødetermine¿ 

issue a final determination of (i) whether the enterprise 

has failed, or there is a substantial probability that the enterprise will fail, to meet the housing goal, and (ii) whether (taking into consideration market and economic conditions and the financial condition of the enterprise) the 

achievement of the housing goal was or is feasible. 

(B) CONSIDERATIONS.—In making such final determinations, the øSecretary¿ Director shall take into consideration any relevant information submitted by the enterprise 

during the response period. 

(C) NOTICE.—The øSecretary¿ Director shall provide 

written notice to the enterprise, the øCommittee on Banking, Finance and Urban Affairs¿ Committee on Financial 

170 

Services of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs of the Senate, of— 

(i) each final determination that an enterprise has 

failed, or that there is a substantial probability that 

the enterprise will fail, to meet a housing goal; 

(ii) each final determination that the achievement of 

a housing goal was or is feasible; and 

(iii) the reasons for each such final determination. 

Such notice shall respond to any information submitted 

during the response period. 

ø(c) HOUSING PLANS.— ø(1) REQUIREMENT.—If the Secretary finds pursuant to subsection (b), that an enterprise has failed, or that there is a substantial probability that an enterprise will fail, to meet any 

housing goal established under section 1332, 1333, or 1334, 

and that the achievement of the housing goal was or is feasible, the Secretary shall require the enterprise to submit a 

housing plan under this subsection for approval by the Secretary.¿ 

(c) CEASE AND DESIST ORDERS, CIVIL MONEY PENALTIES, AND

REMEDIES INCLUDING HOUSING PLANS.— (1) REQUIREMENT.—If the Director finds, pursuant to subsection (b), that there is a substantial probability that an enterprise will fail, or has actually failed, to meet any housing goal 

under this subpart and that the achievement of the housing 

goal was or is feasible, the Director may require that the enterprise submit a housing plan under this subsection. If the Director makes such a finding and the enterprise refuses to submit 

such a plan, submits an unacceptable plan, fails to comply with 

the plan or the Director finds that the enterprise has failed to 

meet any housing goal under this subpart, in addition to requiring an enterprise to submit a housing plan, the Director 

may issue a cease and desist order in accordance with section 

1341, impose civil money penalties in accordance with section 

1345, or order other remedies as set forth in paragraph (7) of 

this subsection. 

(2) øCONTENTS.—Each housing plan¿ HOUSING PLAN.—If the 

Director requires a housing plan under this section, such a plan 

shall be a feasible plan describing the specific actions the enterprise will take— 

(A) to achieve the goal for the next calendar year; or 

(B) if the øSecretary¿ Director determines that there is 

a substantial probability that the enterprise will fail to 

meet a goal in the current year, to make such improvements and changes in its operations as are reasonable in 

the remainder of such year. 

The plan shall be sufficiently specific to enable the øSecretary¿ 

Director to monitor compliance periodically. 

(3) DEADLINE FOR SUBMISSION.—The øSecretary¿ Director 

shall, by regulation, establish a deadline for an enterprise to 

comply with any remedial action or submit a housing plan to 

the øSecretary¿ Director, which may not be more than 45 days 

after the enterprise is provided notice øunder subsection (b)(3) 

that a housing plan is required¿. The regulations shall provide 

171 

that the øSecretary¿ Director may extend the deadline to the 

extent that the øSecretary¿ Director determines necessary. 

Any extension of the deadline shall be in writing and for a 

time certain. 

(4) APPROVAL.—øThe Secretary shall review each housing 

plan submitted under this subsection and, not later than 30 

days after submission of the plan, approve or disapprove the 

plan. The Secretary may extend the period for approval or disapproval for a single additional 30-day period if the Secretary 

determines it necessary.¿ The Director shall review each submission by an enterprise, including a housing plan submitted 

under this subsection, and not later than 30 days after submission, approve or disapprove the plan or other action. The Director may extend the period for approval or disapproval for a single additional 30-day period if the Director determines such extension necessary. The øSecretary¿ Director shall approve any 

plan that the øSecretary¿ Director determines is likely to succeed, and conforms with the Federal National Mortgage Association Charter Act or the Federal Home Loan Mortgage Corporation Act (as applicable), this title, and any other applicable 

laws and regulations. 

(5) NOTICE OF APPROVAL AND DISAPPROVAL.—The øSecretary¿ 

Director shall provide written notice to any enterprise submitting a housing plan of the approval or disapproval of the plan 

(which shall include the reasons for any disapproval of the 

plan) and of any extension of the period for approval or disapproval. 

(6) RESUBMISSION.—If the initial housing plan submitted by 

an enterprise is disapproved, the enterprise shall submit an 

amended plan acceptable to the øSecretary¿ Director within 30 

days or such longer period that the øSecretary¿ Director determines is in the public interest. 

(7) ADDITIONAL REMEDIES FOR FAILURE TO MEET GOALS.—In 

addition to ordering a housing plan under this section, issuing 

cease and desist orders under section 1341, and ordering civil 

money penalties under section 1345, the Director may seek other 

actions when an enterprise fails to meet a goal, and exercise appropriate enforcement authority available to the Director under 

this Act to prohibit the enterprise from entering into new programs and new business activities and to order the enterprise 

to suspend programs and business activities pending its 

achievement of the goal. 

øSEC. 1337. REPORTS DURING TRANSITION. 

øEach enterprise shall submit to the Secretary, the Committee 

on Banking, Finance and Urban Affairs of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs 

of the Senate, a report for each transitional housing goal for the 

enterprise under section 1332(d), 1333(d), or 1334(d), describing the 

actions the enterprise plans to take to meet such goal. Each such 

report shall be submitted within 45 days after the establishment 

of the goal for which the report is submitted. 

øSEC. 1338. EFFECTIVE DATE OF TRANSITION GOALS. 

øThe housing goals established under sections 1332(d), 1333(d), 

and 1334(d) shall not become effective until January 1, 1993.¿ 

172 

SEC. 1337. AFFORDABLE HOUSING FUND. 

(a) ESTABLISHMENT AND PURPOSE.—Each enterprise shall establish and manage an affordable housing fund in accordance with 

this section. The purpose of the affordable housing fund shall be— 

(1) to increase homeownership for extremely low-and very 

low-income families; 

(2) to increase investment in housing in low-income areas, 

and areas designated as qualified census tracts or an area of 

chronic economic distress pursuant to section 143(j) of the Internal Revenue Code of 1986 (26 U.S.C. 143(j)); 

(3) to increase and preserve the supply of rental and owneroccupied housing for extremely low- and very low-income families; and 

(4) to increase investment in economic and community development in economically underserved areas. 

(b) ALLOCATION OF AMOUNTS BY ENTERPRISES.— 

(1) IN GENERAL.—In accordance with regulations issued by 

the Director under subsection (l) and subject to paragraph (2) 

of this subsection, each enterprise shall allocate to the affordable housing fund established under subsection (a) by the enterprise, in each year beginning after the effective date under section 185 of the Federal Housing Finance Reform Act of 2005, 

5 percent of the after-tax income of the enterprise for the preceding year. 

(2) LIMITATION.—An enterprise shall not be required to make 

an allocation for a year to the affordable housing fund of the 

enterprise established under subsection (a) unless— 

(A) the enterprise is classified by the Director at the time 

of such allocation as adequately capitalized; and 

(B) the enterprise generated after-tax income for the preceding year. 

(3) DETERMINATION OF AFTER-TAX INCOME.—For purposes of 

this section, the term ‘‘after-tax income’’ means, with respect to 

an enterprise for a year, the amount reported by the enterprise 

for such year in the enterprise’s annual report for such year 

that is filed with the Securities and Exchange Commission, except that for any year in which no such filing is made by an 

enterprise or such filing is not timely made, such term means 

the amount determined by the Director based on the income tax 

return filings of the enterprise. 

(c) SELECTION OF ACTIVITIES FUNDED USING AFFORDABLE HOUSING FUND AMOUNTS.—Amounts from the affordable housing fund of 

the enterprise may be used, or committed for use, only for activities 

that— 

(1) are eligible under subsection (d) for such use; and 

(2) are selected for funding by the enterprise in accordance 

with the process and criteria for such selection established pursuant to subsection (l)(2)(C). 

(d) ELIGIBLE ACTIVITIES.—Amounts from the affordable housing 

fund of an enterprise shall be eligible for use, or for commitment for 

use, only for assistance for— 

(1) the production, preservation, and rehabilitation of rental 

housing, including housing under the programs identified in 

section 1335(a)(2)(B), except that amounts provided from the 

173 

Fund may be used for the benefit only of extremely low- and 

very low-income families; 

(2) the production, preservation, and rehabilitation of housing 

for homeownership, including such forms as downpayment assistance, closing cost assistance, and assistance for interest-rate 

buy-downs, that— 

(A) is available for purchase only for use as a principal 

residence by families that qualify both as— 

(i) extremely low- and very-low income families at 

the times described in subparagraphs (A) through (C) 

of section 215(b)(2) of the Cranston-Gonzalez National 

Affordable Housing Act (42 U.S.C. 12745(b)(2)); and 

(ii) first-time homebuyers, as such term is defined in 

section 104 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12704), except that any 

reference in such section to assistance under title II of 

such Act shall for purposes of this section be considered 

to refer to assistance from the affordable housing fund 

of the enterprise; 

(B) has an initial purchase price that meets the requirements of section 215(b)(1) of the Cranston-Gonzalez National Affordable Housing Act; and 

(C) is subject to the same resale restrictions established 

under section 215(b)(3) of the Cranston-Gonzalez National 

Affordable Housing Act and applicable to the participating 

jurisdiction that is the State in which such housing is located; and 

(3) leveraged grants under subsection (e). 

(e) LEVERAGED GRANTS.— 

(1) IN GENERAL.—Pursuant to regulations issued by the Director, each enterprise shall carry out a program under this subsection to make leveraged grants from amounts in the affordable housing fund of the enterprise, subject to the requirements 

under this subsection. 

(2) ELIGIBLE PURPOSES.—Amounts from the affordable housing fund of an enterprise may be used only for leveraged grants 

under paragraph (4) for— 

(A) the development, preservation, rehabilitation, or purchase of affordable housing that meets underserved needs 

for affordable housing; 

(B) community or economic development activities in economically underserved areas; or 

(C) a combination of the activities identified in subparagraphs (A) and (B). 

(3) ELIGIBLE SPONSORS.—A leveraged grant under this subsection may be made only on behalf of a sponsor that meets 

such requirements as the Director shall establish for experience 

and success in carrying out the types of activities proposed 

under the application of the sponsor, such as the following entities: 

(A) A low-income housing fund. 

(B) A housing finance agency of a State or unit of general 

local government. 

174 

(C) A non-profit organization having as one of its principal purposes the development or management of affordable housing. 

(D) A community development financial institution. 

(E) A national non-profit housing intermediary. 

(F) A community development corporation. 

(G) A community development entity. 

(4) ELIGIBLE USES.—Amounts from the affordable housing 

fund of an enterprise may be used under this subsection only 

for the following types of leveraged grants: 

(A) To provide loan loss reserves. 

(B) To capitalize a revolving loan fund. 

(C) To provide equity capitalization of an affordable 

housing fund. 

(D) To provide equity capitalization of a community development or economic development fund. 

(E) For risk sharing loans. 

(F) For the funding of a specific, detailed investment plan 

that identifies the specific types of uses and the expected 

timeframes with respect to such uses. 

(5) APPLICATIONS.—The Director shall provide, in the application process established pursuant to subsection (l)(2)(C), for 

eligible sponsors under paragraph (3) of this subsection to submit applications to an enterprise for leveraged grants pursuant 

to this subsection, which shall include a detailed description 

of— 

(A) the types of affordable housing or community or economic development activities for which the leveraged grant 

is made; 

(B) the type of eligible leveraged grants under paragraph 

(4) to be made in the project; 

(C) the types, sources, and amounts of other funding for 

the project; 

(D) and the expected time frame of the leveraged grant 

under this subsection. 

(6) LIMITATIONS.—The Director shall by regulation— 

(A) ensure that leveraged grants pursuant to this subsection are designed to alleviate need for affordable housing 

in underserved markets identified in section 1335(a) having 

the greatest need for such housing or to address community 

and economic development needs in economically underserved areas having the greatest need; and 

(B) any returns from leveraged grants under this subsection accrue to the affordable housing fund of the enterprise and are available for use only as provided under this 

section. 

(f) LIMITATIONS ON USE.— 

(1) AMOUNTS FOR HOMEOWNERSHIP.—Of any amounts allocated pursuant to subsection (b) in each year to the affordable 

housing fund of an enterprise, not less than 10 percent shall be 

used for activities under paragraph (2) of subsection (d). 

(2) AMOUNTS FOR LEVERAGED GRANTS.—Of any amounts allocated pursuant to subsection (b) in each year to the affordable 

housing fund of an enterprise, not more than 12.5 percent shall 

be used for leveraged grants under subsection (e). 

175 

(3) DEADLINE FOR COMMITMENT OR USE.—Any amounts allocated to the affordable housing fund of an enterprise shall be 

used or committed for use within two years of the date of such 

allocation. 

(4) USE OF RETURNS.—Any return on investment of any 

amounts allocated pursuant to subsection (b) to the affordable 

housing fund of an enterprise shall be available for use by the 

enterprise only for eligible activities under subsection (d). 

(5) ADMINISTRATIVE COSTS.—The Director shall, by regulation— 

(A) provide that, except as provided in subparagraph (B), 

amounts allocated to the affordable housing fund of an enterprise may not be used for administrative, outreach, or 

other costs of— 

(i) the enterprise; or 

(ii) any recipient of amounts from the affordable 

housing fund; and 

(B) limit the amount of any such contributions that may 

be used for administrative costs of the enterprise of maintaining the affordable housing fund and carrying out the 

program under this section. 

(6) PROHIBITION OF CONSIDERATION OF USE FOR MEETING

HOUSING GOALS.—In determining compliance with the housing 

goals under this subpart, the Director may not consider 

amounts used under this section for eligible activities under 

subsection (d). The Director shall give credit toward the 

achievement of such housing goals to purchases of mortgages 

for housing that receives funding under this section, but only to 

the extent that such purchases are funded other than under this 

section. 

(7) PROHIBITION OF CERTAIN SUBGRANTS.—The Director shall, 

by regulation, ensure that amounts from the affordable housing 

fund of an enterprise awarded under this section to a national 

non-profit housing intermediary are not used for the purpose of 

distributing subgrants to other non-profit entities. 

(g) CONSISTENCY OF USE WITH HOUSING NEEDS.— (1) QUARTERLY REPORTS.—The Director shall require each enterprise to submit a report, on a quarterly basis, to the Director 

and the affordable housing board established under subsection 

(j) describing the activities funded under this section during 

such quarter with amounts from the affordable housing fund of 

the enterprise established under this section. The Director shall 

make such reports publicly available. The affordable housing 

board shall review each report by an enterprise to determine the 

consistency of such activities funded with the criteria for selection of such activities established pursuant to subsection 

(l)(2)(C). 

(2) REPLENISHMENT.—If the affordable housing board determines that an activity funded by an enterprise with amounts 

from the affordable housing fund of the enterprise is not consistent with the criteria established pursuant to subsection 

(l)(2)(C), the board shall notify the Director and the Director 

shall require the enterprise to allocate to such affordable housing fund (in addition to amounts allocated in compliance with 

subsection (b)) an amount equal to the sum of the amounts from 

176 

the affordable housing fund used and further committed for use 

for such activity. 

(h) CAPITAL REQUIREMENTS.—The utilization or commitment of 

amounts from the affordable housing fund of an enterprise shall not 

be subject to the risk-based capital requirements established pursuant to section 1361(a). 

(i) REPORTING REQUIREMENT.—Each enterprise shall include, in 

the report required under section 309(m) of the Federal National 

Mortgage Association Charter Act or section 307(f) of the Federal 

Home Loan Mortgage Corporation Act, as applicable, a description 

of the actions taken by the enterprise to utilize or commit amounts 

allocated under this section to the affordable housing fund of the enterprise established under this section. 

(j) AFFORDABLE HOUSING BOARD.— (1) APPOINTMENT.—The Director shall appoint an affordable 

housing board of 7, 9, or 11 persons, who shall include— 

(A) the Director, or the Director’s designee; 

(B) the Secretary of Housing and Urban Development, or 

the Secretary’s designee; 

(C) the Secretary of Agriculture, or the Secretary’s designee; 

(D) 2 persons from for-profit organizations or businesses 

actively involved in providing or promoting affordable 

housing for extremely low- and very low-income households; 

and 

(E) 2 persons from nonprofit organizations actively involved in providing or promoting affordable housing for extremely low- and very low-income households. 

(2) TERMS.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), the term of each member of the affordable housing 

board appointed pursuant to paragraph (1) (but not including members appointed pursuant to subparagraphs (A), 

(B), and (C)) shall be 3 years. 

(B) INITIAL APPOINTEES.—The Director shall appoint the 

initial members of the affordable housing board not later 

than the expiration of the 60-day period beginning on the 

date of the enactment of this Act. As designated by the Director at the time of appointment, of the members of the affordable housing board first appointed pursuant to paragraph (1) (but not including members appointed pursuant 

to subparagraphs (A), (B), and (C))— 

(i) in the case of a board having 7 members— 

(I) one shall be appointed for a term of one year; 

and 

(II) one shall be appointed for a term of two 

years; 

(ii) in the case of a board having 9 members— 

(I) two shall be appointed for a term of one year; 

and 

(II) two shall be appointed for a term of two 

years; and 

(iii) in the case of a board having 11 members— 

(I) two shall be appointed for a term of one year; 

and 

177 

(II) three shall be appointed for a term of two 

years; 

(3) DUTIES.—The affordable housing board shall meet not 

less than quarterly— 

(A) to determine extremely low- and very low-income 

housing needs; 

(B) to advise the Director with respect to— 

(i) establishment of the selection criteria under subsection (l)(2)(C) that provide for appropriate use of 

amounts from the affordable housing funds of the enterprises to meet such needs; and 

(ii) operation of, and changes to, the program under 

this section appropriate to meet such needs; and 

(C) to review the reports submitted by the enterprises pursuant to subsection (g)(1) to determine whether the activities funded using amounts from the affordable housing 

funds of the enterprises comply with the regulations issued 

pursuant to subsection (l)(2)(C) and inform the Director of 

such determinations, for purposes of subsection (g)(2). 

(4) EXPENSES AND PER DIEM.—Members of the board shall receive travel expenses, including per diem in lieu of subsistence, 

in accordance with sections 5702 and 5703 of title 5, United 

States Code. 

(5) ADVISORY COMMITTEE.—The board shall be considered an 

advisory committee for purposes of the Federal Advisory Committee Act (5 U.S.C. App.). 

(6) DURATION.— The board shall have continued existence 

until terminated by law. 

(k) DEFINITION.—For purposes of this section, the term ‘‘economically underserved area’’ means an area that predominantly includes 

census tracts for which— 

(1) at least 20 percent of the population is below the poverty 

line (as such term is defined in section 673(2) of the Omnibus 

Budget Reconciliation Act of 1981 (42 U.S.C. 9902(2)), including any revision required by such section), applicable to a family of the size involved; or 

(2) median family income does not exceed the greater of— 

(A) 80 percent of the median family income for the metropolitan statistical area in which such census tracts are located; or 

(B) 80 percent of the median family income for the State 

in which such census tracts are located. 

(l) REGULATIONS.— 

(1) IN GENERAL.—The Director shall issue regulations to 

carry out this section. 

(2) REQUIRED CONTENTS.—The regulations issued under this 

subsection shall include— 

(A) authority for the Director to audit, provide for an 

audit, or otherwise verify an enterprise’s activities, to ensure compliance with this section; 

(B) a requirement that the Director ensure that the affordable housing fund of each enterprise is audited not less 

than annually to ensure compliance with this section; 

(C) requirements for a process for application to, and selection by, an enterprise for activities to be funded with 

178 

amounts from the affordable housing fund, which shall 

provide that— 

(i) selection shall based upon specific criteria, including a prioritization of funding based upon— 

(I) greatest impact; 

(II) geographic diversity; 

(III) ability to obligate amounts and undertake 

activities so funded in a timely manner; 

(IV) in the case of rental housing projects under 

subsection (d)(1), the extent to which rents for 

units in the project funded are affordable, especially for extremely low-income families; and 

(V) in the case of rental housing projects under 

subsection (d)(1), the extent of the duration for 

which such rents will remain affordable; and 

(ii) an enterprise may not require for such selection 

that an activity involve financing or underwriting of 

any kind by the enterprise (other than funding through 

the affordable housing fund of the enterprise) and may 

not give preference in such selection to activities that 

involve such financing; and 

(D) requirements to ensure that amounts from the affordable housing funds of the enterprises used for rental housing under subsection (d)(1) are used only for the benefit of 

extremely low- and very-low income families. 

(3) LIMITATION.—Any regulations issued by the Director pursuant to this section shall be no more restrictive on the enterprises’ activities in connection with the allocation of after-tax 

income under this section than the regulations issued to implement the affordable housing program of the Federal home loan 

banks pursuant to section 10(j) of the Federal Home Loan Bank 

Act (12 U.S.C. 1430(j)). 

SEC. 1338. CONSISTENCY WITH MISSION. 

This subpart may not be construed to authorize an enterprise to 

engage in any program or activity that contravenes or is inconsistent with the Federal National Mortgage Association Charter Act 

or the Federal Home Loan Mortgage Corporation Act. 

øSubpart C—Enforcement of Housing Goals¿ 

Subpart C—Enforcement 

SEC. 1341. CEASE-AND-DESIST PROCEEDINGS. 

ø(a) GROUNDS FOR ISSUANCE.—The Secretary may issue and 

serve a notice of charges under this section upon an enterprise if, 

in the determination of the Secretary— 

ø(1) the enterprise has failed to submit a housing plan that 

substantially complies with section 1336(c) within the applicable period; 

ø(2) the enterprise is engaging or has engaged, or the Secretary has reasonable cause to believe that the enterprise is 

about to engage, in any failure to make a good faith effort to 

comply with a housing plan for the enterprise submitted and 

approved under section 1336(c); or 

179 

ø(3) the enterprise has failed to submit the information required under subsection (m) or (n) of section 309 of the Federal 

National Mortgage Association Charter Act, subsection (e) or 

(f) of section 307 of the Federal Home Loan Mortgage Corporation Act, or section 1337 of this title.¿ 

(a) GROUNDS FOR ISSUANCE.—The Director may issue and serve 

a notice of charges under this section upon an enterprise if the Director determines— 

(1) the enterprise has failed to meet any housing goal established under subpart B, following a written notice and determination of such failure in accordance with section 1336; 

(2) the enterprise has failed to submit a report under section 

1314, following a notice of such failure, an opportunity for comment by the enterprise, and a final determination by the Director; 

(3) the enterprise has failed to submit the information required under subsection (m) or (n) of section 309 of the Federal 

National Mortgage Association Charter Act, or subsection (e) or 

(f) of section 307 of the Federal Home Loan Mortgage Corporation Act; 

(4) the enterprise has violated any provision of this part or 

any order, rule or regulation under this part; 

(5) the enterprise has failed to submit a housing plan that 

complies with section 1336(c) within the applicable period; or 

(6) the enterprise has failed to comply with a housing plan 

under section 1336(c). 

(b) PROCEDURE.— (1) NOTICE OF CHARGES.—Each notice of charges shall contain a statement of the facts constituting the alleged conduct 

and shall fix a time and place at which a hearing will be held 

to determine on the record whether an order to cease and desist from such conduct should issue. 

(2) ISSUANCE OF ORDER.—If the øSecretary¿ Director finds on 

the record made at such hearing that any conduct specified in 

the notice of charges has been established (or the enterprise 

consents pursuant to section 1342(a)(4)), the øSecretary¿ Director may issue and serve upon the enterprise an order ørequiring the enterprise to (A) submit a housing plan in compliance 

with section 1336(c), (B) comply with the housing plan, or (C) 

provide the information required under subsection (m) or (n) of 

section 309 of the Federal National Mortgage Association 

Charter Act, subsection (e) or (f) of section 307 of the Federal 

Home Loan Mortgage Corporation Act, or section 1337 of this 

title.¿ requiring the enterprise to— 

(A) comply with the goal or goals; 

(B) submit a report under section 1314; 

(C) comply with any provision this part or any order, 

rule or regulation under such part; 

(D) submit a housing plan in compliance with section 

1336(c); 

(E) comply with a housing plan submitted under section 

1336(c); or 

(F) provide the information required under subsection 

(m) or (n) of section 309 of the Federal National Mortgage 

Association Charter Act or subsection (e) or (f) of section 

180 

307 of the Federal Home Loan Mortgage Corporation Act, 

as applicable. 

(c) EFFECTIVE DATE.—An order under this section shall become 

effective upon the expiration of the 30-day period beginning on the 

date of the service of the order upon the enterprise (except in the 

case of an order issued upon consent, which shall become effective 

at the time specified therein), and shall remain effective and enforceable as provided in the order, except to the extent that the 

order is stayed, modified, terminated, or set aside by action of the 

øSecretary¿ Director or otherwise, as provided in this subpart. 

ø(d) TRANSITION PERIOD LIMITATION.—The Secretary may not impose any cease-and-desist order under this section for any failure 

by an enterprise, during the 2-year period beginning on the January 1, 1993, to comply with an approved housing plan, unless the 

Secretary determines that the enterprise has intentionally failed to 

make a good faith effort to comply with the approved plan.¿ 

SEC. 1342. HEARINGS. 

(a) * * * 

* * * * * * * 

(b) ISSUANCE OF ORDER.— 

(1) IN GENERAL.—After any such hearing, and within 90 days 

after the enterprise has been notified that the case has been 

submitted to the øSecretary¿ Director for final decision, the 

øSecretary¿ Director shall render the decision (which shall include findings of fact upon which the decision is predicated) 

and shall issue and serve upon the enterprise an order or orders consistent with the provisions of this subpart. 

(2) MODIFICATION.—Judicial review of any such order shall 

be exclusively as provided in section 1343. Unless such a petition for review is timely filed as provided in section 1343, and 

thereafter until the record in the proceeding has been filed as 

so provided, the øSecretary¿ Director may at any time, modify, 

terminate, or set aside any such order, upon such notice and 

in such manner as the øSecretary¿ Director considers proper. 

Upon such filing of the record, the øSecretary¿ Director may 

modify, terminate, or set aside any such order with permission 

of the court. 

SEC. 1343. JUDICIAL REVIEW. 

(a) COMMENCEMENT.—An enterprise that is a party to a proceeding under section 1341 or 1345 may obtain review of any final 

order issued under such section by filing in the United States 

Court of Appeals for the District of Columbia Circuit, within 30 

days after the date of service of such order, a written petition praying that the order of the øSecretary¿ Director be modified, terminated, or set aside. The clerk of the court shall transmit a copy of 

the petition to the øSecretary¿ Director. 

(b) FILING OF RECORD.—Upon receiving a copy of a petition, the 

øSecretary¿ Director shall file in the court the record in the proceeding, as provided in section 2112 of title 28, United States Code. 

(c) JURISDICTION.—Upon the filing of a petition, such court shall 

have jurisdiction, which upon the filing of the record by the øSecretary¿ Director shall (except as provided in the last sentence of 

181 

section 1342(b)(2)) be exclusive, to affirm, modify, terminate, or set 

aside, in whole or in part, the order of the øSecretary¿ Director. 

* * * * * * * 

(e) ORDER TO PAY PENALTY.—Such court shall have the authority 

in any such review to order payment of any penalty imposed by the 

øSecretary¿ Director under this subpart. 

(f) NO AUTOMATIC STAY.—The commencement of proceedings for 

judicial review under this section shall not, unless specifically ordered by the court, operate as a stay of any order issued by the 

øSecretary¿ Director. 

SEC. 1344. ENFORCEMENT AND JURISDICTION. 

ø(a) ENFORCEMENT.—The Secretary may request the Attorney 

General of the United States to bring an action in the United 

States District Court for the District of Columbia for the enforcement of any effective notice or order issued under section 1341 or 

1345. Such court shall have jurisdiction and power to order and require compliance herewith.¿ 

(a) ENFORCEMENT.—The Director may, in the discretion of the Director, apply to the United States District Court for the District of 

Columbia, or the United States district court within the jurisdiction 

of which the headquarters of the enterprise is located, for the enforcement of any effective and outstanding notice or order issued 

under section 1341 or 1345, or request that the Attorney General of 

the United States bring such an action. Such court shall have jurisdiction and power to order and require compliance with such notice 

or order. 

* * * * * * * 

SEC. 1345. CIVIL MONEY PENALTIES. 

ø(a) AUTHORITY.—The Secretary may impose a civil money penalty, in accordance with the provisions of this section, on any enterprise that has failed— 

ø(1) to submit a housing plan that substantially complies 

with section 1336(c) within the applicable period; 

ø(2) to make a good faith effort to comply with a housing 

plan for the enterprise submitted and approved under section 

1336(c); or 

ø(3) to submit the information required under subsection (m) 

or (n) of section 309 of the Federal National Mortgage Association Charter Act, subsection (e) or (f) of section 307 of the Federal Home Loan Mortgage Corporation Act, or section 1337 of 

this title. 

ø(b) AMOUNT OF PENALTY.—The amount of the penalty, as determined by the Secretary, may not exceed— 

ø(1) for any failure described in subsection (a)(1), $25,000 for 

each day that the failure occurs; and 

ø(2) for any failure described in subsection (a) (2) or (3), 

$10,000 for each day that the failure occurs.¿ 

(a) AUTHORITY.—The Director may impose a civil money penalty, 

in accordance with the provisions of this section, on any enterprise 

that has failed to— 

(1) meet any housing goal established under subpart B, following a written notice and determination of such failure in accordance with section 1336(b); 

182 

(2) submit a report under section 1314, following a notice of 

such failure, an opportunity for comment by the enterprise, and 

a final determination by the Director; 

(3) submit the information required under subsection (m) or 

(n) of section 309 of the Federal National Mortgage Association 

Charter Act, or subsection (e) or (f) of section 307 of the Federal 

Home Loan Mortgage Corporation Act; 

(4) comply with any provision of this part or any order, rule 

or regulation under this part; 

(5) submit a housing plan pursuant to section 1336(c) within 

the required period; or 

(6) comply with a housing plan for the enterprise under section 1336(c). 

(b) AMOUNT OF PENALTY.—The amount of the penalty, as determined by the Director, may not exceed— 

(1) for any failure described in paragraph (1), (5), or (6) of subsection (a), $50,000 for each day that the failure occurs; and 

(2) for any failure described in paragraph (2), (3), or (4) of subsection (a), $20,000 for each day that the failure occurs. 

(c) PROCEDURES.— (1) ESTABLISHMENT.—The øSecretary¿ Director shall establish standards and procedures governing the imposition of civil 

money penalties under this section. Such standards and procedures— 

(A) shall provide for the øSecretary¿ Director to notify 

the enterprise in writing of the øSecretary’s¿ Director’s determination to impose the penalty, which shall be made on 

the record; and 

(B) shall provide for the imposition of a penalty only 

after the enterprise has been given an opportunity for a 

hearing on the record pursuant to section 1342ø; and¿. ø(C) may provide for review by the Director for any determination or order, or interlocutory ruling, arising from 

a hearing.¿ 

(2) FACTORS IN DETERMINING AMOUNT OF PENALTY.—In determining the amount of a penalty under this section, the øSecretary¿ Director shall give consideration to such factors as the 

gravity of the offense, any history of prior offenses, ability to 

pay the penalty, injury to the public, benefits received, deterrence of future violations, and such other factors as the øSecretary¿ Director may determine, by regulation, to be appropriate. In determining the penalty under subsection (a)(1), the 

Director shall give consideration to the length of time the enterprise should reasonably take to achieve the goal. 

(d) ACTION TO COLLECT PENALTY.—If an enterprise fails to comply with an order by the øSecretary¿ Director imposing a civil 

money penalty under this section, after the order is no longer subject to review as provided by sections 1342 and 1343, the øSecretary¿ Director may ørequest the Attorney General of the United 

States to¿, in the discretion of the Director, bring an action in the 

United States District Court for the District of Columbia to obtain 

a monetary judgment against the enterprise and such other relief 

as may be available, or request that the Attorney General of the 

United States bring such an action. The monetary judgment may, 

in the court’s discretion, include the attorneys fees and other exVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00182 Fmt 6659 Sfmt 6602 E:\HR\OC\HR171P1.XXX HR171P1
183 

penses incurred by the United States in connection with the action. 

In an action under this subsection, the validity and appropriateness of the order imposing the penalty shall not be subject to review. 

(e) SETTLEMENT BY øSECRETARY¿ DIRECTOR.—The øSecretary¿ 

Director may compromise, modify, or remit any civil money penalty 

which may be, or has been, imposed under this section. 

ø(f) TRANSITION PERIOD LIMITATION.—The Secretary may not impose any civil money penalty under this section for any failure by

an enterprise, during the 2-year period beginning on January 1, 

1993, to comply with an approved housing plan, unless the Secretary determines that the enterprise has intentionally failed to 

make a good faith effort to comply with an approved plan.¿ 

ø(g)¿ (f) DEPOSIT OF PENALTIES.—The øSecretary¿ Director shall 

deposit any civil money penalties collected under this section into 

the general fund of the Treasury. 

SEC. 1346. PUBLIC DISCLOSURE OF FINAL ORDERS AND AGREEMENTS. 

(a) IN GENERAL.—The øSecretary¿ Director shall make available 

to the public— 

(1) any written agreement or other written statement for 

which a violation may be redressed by the øSecretary¿ Director 

or any modification to or termination thereof, unless the øSecretary¿ Director, in the Secretary’s discretion, determines that 

public disclosure would be contrary to the public interest or determines under subsection (c) that public disclosure would seriously threaten the financial health or security of the enterprise; 

(2) any order that is issued with respect to any administrative enforcement proceeding initiated by the øSecretary¿ Director under this subpart and that has become final in accordance 

with sections 1342 and 1343; and 

* * * * * * * 

(b) HEARINGS.—All hearings with respect to any notice of charges 

issued by the øSecretary¿ Director shall be open to the public, unless the øSecretary¿ Director, in the øSecretary’s¿ Director’s discretion, determines that holding an open hearing would be contrary 

to the public interest. 

(c) DELAY OF PUBLIC DISCLOSURE UNDER EXCEPTIONAL CIR- CUMSTANCES.—If the øSecretary¿ Director makes a determination 

in writing that the public disclosure of any final order pursuant to 

subsection (a) would seriously threaten the financial soundness of 

the enterprise, the øSecretary¿ Director may delay the public disclosure of such order for a reasonable time. 

(d) DOCUMENTS FILED UNDER SEAL IN PUBLIC ENFORCEMENT

HEARINGS.—The øSecretary¿ Director may file any document or 

part thereof under seal in any hearing under this subpart if the 

øSecretary¿ Director determines in writing that disclosure thereof 

would be contrary to the public interest. 

(e) RETENTION OF DOCUMENTS.—The øSecretary¿ Director shall 

keep and maintain a record, for not less than 6 years, of all documents described in subsection (a) and all enforcement agreements 

and other supervisory actions and supporting documents issued 

with respect to or in connection with any enforcement proceeding 

initiated by the øSecretary¿ Director under this subpart. 

184 

(f) DISCLOSURES TO CONGRESS.—This section may not be construed to authorize the withholding, or to prohibit the disclosure, 

of any information to the Congress or any committee or subcommittee thereof. 

SEC. 1347. NOTICE OF SERVICE. 

Any service required or authorized to be made by the øSecretary¿ Director under this subpart may be made by registered 

mail or in such other manner reasonably calculated to give actual 

notice, as the øSecretary¿ Director may by regulation or otherwise 

provide. 

SEC. 1348. SUBPOENA AUTHORITY. 

(a) IN GENERAL.—In the course of or in connection with any administrative proceeding under this subpart, the øSecretary¿ Director shall have the authority— 

(1) * * * 

* * * * * * * 

(4) to revoke, quash, or modify subpoenas and subpoenas 

duces tecum issued by the øSecretary¿ Director. 

* * * * * * * 

(c) ENFORCEMENT.—The øSecretary¿ Director may ørequest the 

Attorney General of the United States to¿, in the discretion of the 

Director, bring an action in the United States district court for the 

judicial district in which such proceeding is being conducted, or 

where the witness resides or conducts business, or the United 

States District Court for the District of Columbia, or request that 

the Attorney General of the United States bring such an action, for 

enforcement of any subpoena or subpoena duces tecum issued pursuant to this section. Such courts shall have jurisdiction and power 

to order and require compliance therewith. 

* * * * * * * 

øSEC. 1349. REGULATIONS. 

øThe Secretary shall issue any final regulations necessary to implement the provisions of this part (not including the provisions of 

sections 1332(d), 1333(d), and 1334(d), relating to transition housing goals) not later than the expiration of the 18-month period beginning on the date of the enactment of this Act. Such regulations 

shall be issued after notice and opportunity for public comment 

pursuant to the provisions of section 553 of title 5, United States 

Code.¿ 

* * * * * * * 

øSubtitle B—Required Capital Levels for 

Enterprises and Special Enforcement 

Powers 

øSEC. 1361. RISK-BASED CAPITAL LEVELS. 

ø(a) RISK-BASED CAPITAL TEST.—The Director shall, by regulation, establish a risk-based capital test under this section for the 

enterprises. When applied to an enterprise, the risk-based capital 

test shall determine the amount of total capital for the enterprise 

185 

that is sufficient for the enterprise to maintain positive capital during a 10-year period in which the following circumstances occur (in 

this section referred to as the ‘‘stress period’’): 

ø(1) CREDIT RISK.—With respect to mortgages owned or guaranteed by the enterprise and other obligations of the enterprise, losses occur throughout the United States at a rate of 

default and severity (based on any measurements of default 

reasonably related to prevailing practice for that industry in 

determining capital adequacy) reasonably related to the rate 

and severity that occurred in contiguous areas of the United 

States containing an aggregate of not less than 5 percent of the 

total population of the United States that, for a period of not 

less than 2 years, experienced the highest rates of default and 

severity of mortgage losses, in comparison with such rates of 

default and severity of mortgage losses in other such areas for 

any period of such duration. 

ø(2) INTEREST RATE RISK.— 

ø(A) IN GENERAL.—Interest rates decrease as described 

in subparagraph (B) or increase as described in subparagraph (C), whichever would require more capital for the 

enterprise. 

ø(B) DECREASES.—The 10-year constant maturity Treasury yield decreases during the first year of the stress period and will remain at the new level for the remainder of 

the stress period. The yield decreases to the lesser of— 

ø(i) 600 basis points below the average yield during 

the preceding 9 months, or 

ø(ii) 60 percent of the average yield during the preceding 3 years, 

but in no case to a yield less than 50 percent of the average yield during the preceding 9 months. 

ø(C) INCREASES.—The 10-year constant maturity Treasury yield increases during the first year of the stress period and will remain at the new level for the remainder of 

the stress period. The yield increases to the greater of— 

ø(i) 600 basis points above the average yield during 

the preceding 9 months, or 

ø(ii) 160 percent of the average yield during the preceding 3 years, 

but in no case to a yield greater than 175 percent of the 

average yield during the preceding 9 months. 

ø(D) DIFFERENT TERMS TO MATURITY.—Yields of Treasury instruments with other terms to maturity will change 

relative to the 10-year constant maturity Treasury yield in 

patterns and for durations that are reasonably related to 

historical experience and are judged reasonable by the Director. 

ø(E) LARGE INCREASES IN YIELDS.—If the 10-year constant maturity Treasury yield is assumed to increase by 

more than 50 percent over the average yield during the 

preceding 9 months, the Director shall adjust the losses in 

paragraphs (1) and (3) to reflect a correspondingly higher 

rate of general price inflation. 

ø(3) NEW BUSINESS.— 

186 

ø(A) IN GENERAL.—Any contractual commitments of the 

enterprise to purchase mortgages or issue securities will 

be fulfilled. The characteristics of resulting mortgage purchases, securities issued, and other financing will be consistent with the contractual terms of such commitments, 

recent experience, and the economic characteristics of the 

stress period. No other purchases of mortgages shall be assumed, except as provided in subparagraph (B). 

ø(B) ADDITIONAL NEW BUSINESS.—The Director may, 

after consideration of each of the studies required by subparagraph (C), assume that the enterprise conducts additional new business during the stress period consistent 

with the following— 

ø(i) AMOUNT AND PRODUCT TYPES.—The amount and 

types of mortgages purchased and their financing will 

be reasonably related to recent experience and the economic characteristics of the stress period. 

ø(ii) LOSSES.—Default and loss severity characteristics of mortgages purchased will be reasonably related 

to historical experience. 

ø(iii) PRICING.—Prices charged by the enterprise in 

purchasing new mortgages will be reasonably related 

to recent experience and the economic characteristics 

of the stress period. The Director may assume that a 

reasonable period of time would lapse before the enterprise would recognize and react to the characteristics 

of the stress period. 

ø(iv) INTEREST RATE RISK.—Interest rate risk on new 

mortgages purchased will occur to an extent reasonably related to historical experience. 

ø(v) RESERVES.—The enterprise must maintain reserves during and at the end of the stress period on 

new business conducted during the first 5 years of the 

stress period reasonably related to the expected future 

losses on such business, consistent with generally accepted accounting principles and industry accounting 

practice. 

ø(C) STUDIES.—Within 1 year after regulations are first 

issued under subsection (e), the Director of the Congressional Budget Office, and the Comptroller General of the 

United States shall each submit to the Committee on 

Banking, Housing, and Urban Affairs of the Senate and 

the Committee on Banking, Finance and Urban Affairs of 

the House of Representatives a study of the advisability 

and appropriate form of any new business assumptions 

under subparagraph (B). 

ø(D) EFFECTIVE DATE.—The provisions of subparagraph 

(B) shall become effective 4 years after regulations are 

first issued under subsection (e). 

ø(4) OTHER ACTIVITIES.—Losses or gains on other activities, 

including interest rate and foreign exchange hedging activities, 

shall be determined by the Director, on the basis of available 

information, to be consistent with the stress period. 

ø(b) CONSIDERATIONS.— 

187 

ø(1) IN GENERAL.—In establishing the risk-based capital test 

under subsection (a), the Director shall take into account appropriate distinctions among types of mortgage products, differences in seasoning of mortgages, and any other factors the 

Director considers appropriate. 

ø(2) CONSISTENCY.—Characteristics of the stress period other 

than those specifically set forth in subsection (a), such as prepayment experience and dividend policies, will be those determined by the Director, on the basis of available information, to 

be most consistent with the stress period. 

ø(c) RISK-BASED CAPITAL LEVEL.—For purposes of this subtitle, 

the risk-based capital level for an enterprise shall be equal to the 

sum of the following amounts: 

ø(1) CREDIT AND INTEREST RATE RISK.—The amount of total 

capital determined by applying the risk-based capital test 

under subsection (a) to the enterprise. 

ø(2) MANAGEMENT AND OPERATIONS RISK.—To provide for 

management and operations risk, 30 percent of the amount of 

total capital determined by applying the risk-based capital test 

under subsection (a) to the enterprise. 

ø(d) DEFINITIONS.—For purposes of this section: 

ø(1) SEASONING.—The term ‘‘seasoning’’ means the change 

over time in the ratio of the unpaid principal balance of a 

mortgage to the value of the property by which such mortgage 

loan is secured, determined on an annual basis by region, in 

accordance with the Constant Quality Home Price Index published by the Secretary of Commerce (or any index of similar 

quality, authority, and public availability that is regularly used 

by the Federal Government). 

ø(2) TYPE OF MORTGAGE PRODUCT.—The term ‘‘type of mortgage product’’ means a classification of one or more mortgage 

products, as established by the Director, which have similar 

characteristics from each set of characteristics under the following subparagraphs: 

ø(A) The property securing the mortgage is— 

ø(i) a residential property consisting of 1 to 4 dwelling units; or 

ø(ii) a residential property consisting of more than 4 

dwelling units. 

ø(B) The interest rate on the mortgage is— 

ø(i) fixed; or 

ø(ii) adjustable. 

ø(C) The priority of the lien securing the mortgage is— 

ø(i) first; or 

ø(ii) second or other. 

ø(D) The term of the mortgage is— 

ø(i) 1 to 15 years; 

ø(ii) 16 to 30 years; or 

ø(iii) more than 30 years. 

ø(E) The owner of the property is— 

ø(i) an owner-occupant; or 

ø(ii) an investor. 

ø(F) The unpaid principal balance of the mortgage— 

188 

ø(i) will amortize completely over the term of the 

mortgage and will not increase significantly at any 

time during the term of the mortgage; 

ø(ii) will not amortize completely over the term of 

the mortgage and will not increase significantly at any 

time during the term of the mortgage; or 

ø(iii) may increase significantly at some time during 

the term of the mortgage. 

ø(G) Any other characteristics of the mortgage, as the 

Director may determine. 

ø(e) REGULATIONS.— 

ø(1) ISSUANCE.—The Director shall issue final regulations establishing the risk-based capital test under this section not 

later than the expiration of the 18-month period beginning on 

the date of the appointment of the Director. Such regulations 

shall be issued after notice and opportunity for public comment 

pursuant to the provisions of section 553 of title 5, United 

States Code, and shall take effect upon issuance. 

ø(2) CONTENTS.—The regulations under this subsection shall 

contain specific requirements, definitions, methods, variables, 

and parameters used under the risk-based capital test and in 

implementing the test (such as loan loss severity, float income, 

loan-to-value ratios, taxes, yield curve slopes, default experience, and prepayment rates). The regulations shall be sufficiently specific to permit an individual other than the Director 

to apply the test in the same manner as the Director. 

ø(3) CONFIDENTIALITY OF INFORMATION.—Any person that receives any book, record, or information from the Director or an 

enterprise to enable the risk-based capital test to be applied 

shall— 

ø(A) maintain the confidentiality of the book, record, or 

information in a manner that is generally consistent with 

the level of confidentiality established for the material by 

the Director or the enterprise; and 

ø(B) be exempt from section 552 of title 5, United States 

Code, with respect to the book, record, or information. 

ø(f) AVAILABILITY OF MODEL.—The Director shall provide copies 

of the statistical model or models used to implement the risk-based 

capital test under this section to the Secretary, the Board of Governors of the Federal Reserve System, the Director of the Office of 

Management and Budget, the Comptroller General of the United 

States, and the Director of the Congressional Budget Office. The 

Director shall make copies of such model or models available for 

public acquisition and may charge a reasonable fee for such copies.¿ 

Subtitle B—Required Capital Levels for 

Regulated Entities, Special Enforcement 

Powers, and Reviews of Assets and Liabilities 

SEC. 1361. RISK-BASED CAPITAL LEVELS FOR REGULATED ENTITIES. 

(a) IN GENERAL.— 

189 

(1) ENTERPRISES.—The Director shall, by regulation, establish risk-based capital requirements for the enterprises to ensure that the enterprises operate in a safe and sound manner, 

maintaining sufficient capital and reserves to support the risks 

that arise in the operations and management of the enterprises. 

(2) FEDERAL HOME LOAN BANKS.—The Director shall establish 

risk-based capital standards under section 6 of the Federal 

Home Loan Bank Act for the Federal home loan banks. 

(b) CONFIDENTIALITY OF INFORMATION.—Any person that receives 

any book, record, or information from the Director or a regulated 

entity to enable the risk-based capital requirements established 

under this section to be applied shall— 

(1) maintain the confidentiality of the book, record, or information in a manner that is generally consistent with the level 

of confidentiality established for the material by the Director or 

the regulated entity; and 

(2) be exempt from section 552 of title 5, United States Code, 

with respect to the book, record, or information. 

(c) NO LIMITATION.—Nothing in this section shall limit the authority of the Director to require other reports or undertakings, or 

take other action, in furtherance of the responsibilities of the Director under this Act. 

SEC. 1362. MINIMUM CAPITAL LEVELS. 

(a) øIN GENERAL¿ ENTERPRISES.—For purposes of this subtitle, 

the minimum capital level for each enterprise shall be the sum of— 

(1) * * * 

* * * * * * * 

ø(b) TRANSITION.—Notwithstanding subsection (a), during the 18- 

month period beginning upon the date of the enactment of this Act, 

the minimum capital level for each enterprise shall be the sum of— 

ø(1) 2.25 percent of the aggregate on-balance sheet assets of 

the enterprise, as determined in accordance with generally accepted accounting principles; 

ø(2) 0.40 percent of the unpaid principal balance of outstanding mortgage-backed securities and substantially equivalent instruments issued or guaranteed by the enterprise that 

are not included in paragraph (1); and 

ø(3) 0.40 percent of other off-balance sheet obligations of the 

enterprise not included in paragraph (2) (excluding commitments in excess of 50 percent of the average dollar amount of 

the commitments outstanding each quarter over the preceding 

4 quarters), except that the Director shall adjust such percentage to reflect differences in the credit risk of such obligations 

in relation to the instruments included in paragraph (2).¿ 

(b) FEDERAL HOME LOAN BANKS.—For purposes of this subtitle, 

the minimum capital level for each Federal home loan bank shall 

be the minimum capital required to be maintained to comply with 

the leverage requirement for the bank established under section 

6(a)(2) of the Federal Home Loan Bank Act (12 U.S.C. 1426(a)(2)). 

(c) ESTABLISHMENT OF REVISED MINIMUM CAPITAL LEVELS.—Notwithstanding subsections (a) and (b) and notwithstanding the capital classifications of the regulated entities, the Director may, by regulations issued under section 1319G(b), establish a minimum capital level for the enterprises, for the Federal home loan banks, or for 

190 

both the enterprises and the banks, that is higher than the level 

specified in subsection (a) for the enterprises or the level specified 

in subsection (b) for the Federal home loan banks, to the extent 

needed to ensure that the regulated entities operate in a safe and 

sound manner. 

(d) AUTHORITY TO REQUIRE TEMPORARY INCREASE.—Notwithstanding subsections (a) and (b) and any minimum capital level established pursuant to subsection (c), the Director may, by order, increase the minimum capital level for a regulated entity for such period as the Director may provide if the Director— 

(1) makes any of the determinations specified in subparagraphs (A) through (C) of section 1364(c)(1); or 

(2) determines that the regulated entity has violated any of 

the prudential management and operations standards established pursuant to section 1313A and, as a result of such violation, is operating in an unsafe and unsound manner. 

(e) AUTHORITY TO ESTABLISH ADDITIONAL CAPITAL AND RESERVE

REQUIREMENTS FOR PARTICULAR PROGRAMS.—The Director may, at 

any time by order or regulation, establish such capital or reserve requirements with respect to any program or activity of a regulated 

entity as the Director considers appropriate to ensure that the regulated entity operates in a safe and sound manner, with sufficient 

capital and reserves to support the risks that arise in the operations 

and management of the regulated entity. 

(f) PERIODIC REVIEW.—The Director shall periodically review the 

amount of core capital maintained by the enterprises, the amount 

of capital retained by the Federal home loan banks, and the minimum capital levels established for such regulated entities pursuant 

to this section. The Director may, by regulations issued under section 1319G(b), adjust the minimum capital levels as necessary, 

based on the Director’s review. 

SEC. 1363. CRITICAL CAPITAL LEVELS. 

øFor¿ (a) ENTERPRISES.—For purposes of this subtitle, the critical capital level for each enterprise shall be the sum of— 

(1) * * * 

* * * * * * * 

(b) FEDERAL HOME LOAN BANKS.— (1) IN GENERAL.—For purposes of this subtitle, the critical 

capital level for each Federal home loan bank shall be such 

amount of capital as the Director shall, by regulation require. 

(2) CONSIDERATION OF OTHER CRITICAL CAPITAL LEVELS.—In 

establishing the critical capital level under paragraph (1) for 

the Federal home loan banks, the Director shall take due consideration of the critical capital level established under subsection (a) for the enterprises, with such modifications as the 

Director determines to be appropriate to reflect the difference in 

operations between the banks and the enterprises. 

SEC. 1364. CAPITAL CLASSIFICATIONS. 

(a) øIN GENERAL¿ ENTERPRISES.—For purposes of this subtitle, 

the Director shall classify the enterprises according to the following 

capital classifications: 

(1) * * * 

* * * * * * * 

191 

ø(b) DISCRETIONARY CLASSIFICATION.—If at any time the Director 

determines in writing that an enterprise is engaging in conduct not 

approved by the Director that could result in a rapid depletion of 

core capital or that the value of the property subject to mortgages 

held or securitized by the enterprise has decreased significantly, 

the Director may classify the enterprise— 

ø(1) as undercapitalized, if the enterprise is otherwise classified as adequately capitalized; 

ø(2) as significantly undercapitalized, if the enterprise is otherwise classified as undercapitalized; and 

ø(3) as critically undercapitalized, if the enterprise is otherwise classified as significantly undercapitalized.¿ 

(b) FEDERAL HOME LOAN BANKS.— (1) ESTABLISHMENT AND CRITERIA.—For purposes of this subtitle, the Director shall, by regulation— 

(A) establish the capital classifications specified under 

paragraph (2) for the Federal home loan banks; 

(B) establish criteria for each such capital classification 

based on the amount and types of capital held by a bank 

and the risk-based, minimum, and critical capital levels for 

the banks and taking due consideration of the capital classifications established under subsection (a) for the enterprises, with such modifications as the Director determines 

to be appropriate to reflect the difference in operations between the banks and the enterprises; and 

(C) shall classify the Federal home loan banks according 

to such capital classifications. 

(2) CLASSIFICATIONS.—The capital classifications specified 

under this paragraph are— 

(A) adequately capitalized; 

(B) undercapitalized; 

(C) significantly undercapitalized; and 

(D) critically undercapitalized. 

(c) DISCRETIONARY CLASSIFICATION.— 

(1) GROUNDS FOR RECLASSIFICATION.—The Director may reclassify a regulated entity under paragraph (2) if— 

(A) at any time, the Director determines in writing that 

the regulated entity is engaging in conduct that could result in a rapid depletion of core or total capital or, in the 

case of an enterprise, that the value of the property subject 

to mortgages held or securitized by the enterprise has decreased significantly; 

(B) after notice and an opportunity for hearing, the Director determines that the regulated entity is in an unsafe 

or unsound condition; or 

(C) pursuant to section 1371(b), the Director deems the 

regulated entity to be engaging in an unsafe or unsound 

practice. 

(2) RECLASSIFICATION.—In addition to any other action authorized under this title, including the reclassification of a regulated entity for any reason not specified in this subsection, if 

the Director takes any action described in paragraph (1) the Director may classify a regulated entity— 

(A) as undercapitalized, if the regulated entity is otherwise classified as adequately capitalized; 

192 

(B) as significantly undercapitalized, if the regulated entity is otherwise classified as undercapitalized; and 

(C) as critically undercapitalized, if the regulated entity 

is otherwise classified as significantly undercapitalized. 

ø(c)¿ (d) QUARTERLY DETERMINATION.—The Director shall determine the capital classification of the øenterprises¿ regulated entities for purposes of this subtitle on not less than a quarterly basis 

(and as appropriate under øsubsection (b)¿ subsection (c)). øThe 

first such determination shall be made during the 3-month period 

beginning on the appointment of the Director.¿ 

(e) RESTRICTION ON CAPITAL DISTRIBUTIONS.— (1) IN GENERAL.—A regulated entity shall make no capital 

distribution if, after making the distribution, the regulated entity would be undercapitalized. 

(2) EXCEPTION.—Notwithstanding paragraph (1), the Director 

may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire 

shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— 

(A) is made in connection with the issuance of additional 

shares or obligations of the regulated entity in at least an 

equivalent amount; and 

(B) will reduce the financial obligations of the regulated 

entity or otherwise improve the financial condition of the 

entity. 

ø(d)¿ (f) IMPLEMENTATION.—Notwithstanding any other provision 

of this section, during the period beginning on the date of the enactment of this Act and ending upon the effective date of section 

1365 (as provided in section 1365(c)), an enterprise shall be classified as adequately capitalized if the enterprise maintains an 

amount of core capital that is equal to or exceeds the minimum 

capital level for the enterprise under section 1362. 

SEC. 1365. SUPERVISORY ACTIONS APPLICABLE TO UNDERCAPITALIZED øENTERPRISES¿ REGULATED ENTITIES. 

(a) MANDATORY ACTIONS.— 

(1) REQUIRED MONITORING.—The Director shall— 

(A) closely monitor the condition of any regulated entity 

that is classified as undercapitalized; 

(B) closely monitor compliance with the capital restoration plan, restrictions, and requirements imposed under 

this section; and 

(C) periodically review the plan, restrictions, and requirements applicable to the undercapitalized regulated entity to 

determine whether the plan, restrictions, and requirements 

are achieving the purpose of this section. 

ø(1)¿ (2) CAPITAL RESTORATION PLAN.—øAn enterprise¿ A 

regulated entity that is classified as undercapitalized shall, 

within the time period provided in section 1369C (b) and (d), 

submit to the Director a capital restoration plan that complies 

with section 1369C and carry out the plan after approval. 

ø(2)¿ (3) RESTRICTION ON CAPITAL DISTRIBUTIONS.—øAn enterprise¿ A regulated entity that is classified as undercapitalized may not make any capital distribution that would result 

in øthe enterprise¿ the regulated entity being reclassified as 

significantly undercapitalized or critically undercapitalized. 

193 

(4) RESTRICTION OF ASSET GROWTH.—A regulated entity that 

is classified as undercapitalized shall not permit its average 

total assets (as such term is defined in section 1316(b) during 

any calendar quarter to exceed its average total assets during 

the preceding calendar quarter unless— 

(A) the Director has accepted the capital restoration plan 

of the regulated entity; 

(B) any increase in total assets is consistent with the 

plan; and 

(C) the ratio of total capital to assets for the regulated entity increases during the calendar quarter at a rate sufficient to enable the entity to become adequately capitalized 

within a reasonable time. 

(5) PRIOR APPROVAL OF ACQUISITIONS, NEW PROGRAMS, AND

NEW BUSINESS ACTIVITIES.—A regulated entity that is classified 

as undercapitalized shall not, directly or indirectly, acquire any 

interest in any entity or engage in any new program or new 

business activity unless— 

(A) the Director has accepted the capital restoration plan 

of the regulated entity, the entity is implementing the plan, 

and the Director determines that the proposed action is consistent with and will further the achievement of the plan; 

or 

(B) the Director determines that the proposed action will 

further the purpose of this section. 

(b) DISCRETIONARY RECLASSIFICATION øFROM UNDERCAPITALIZED

TO SIGNIFICANTLY UNDERCAPITALIZED¿.—The Director may reclassify as significantly undercapitalized øan enterprise¿ a regulated 

entity that is classified as undercapitalized (and øthe enterprise¿ 

the regulated entity shall be subject to the provisions of section 

1366) if— 

(1) øthe enterprise¿ the regulated entity does not submit a 

capital restoration plan that is substantially in compliance 

with section 1369C within the applicable period or the Director 

does not approve the capital restoration plan submitted by 

øthe enterprise¿ the regulated entity; or 

(2) the Director determines that øthe enterprise¿ the regulated entity has failed to make, in good faith, reasonable efforts 

necessary to comply with the capital restoration plan and fulfill the schedule for the plan approved by the Director. 

ø(c) EFFECTIVE DATE.—This section shall take effect upon the expiration of the 1-year period beginning on the date of the effectiveness of the regulations issued under section 1361(e) establishing 

the risk-based capital test.¿ 

(c) OTHER DISCRETIONARY SAFEGUARDS.—The Director may take, 

with respect to a regulated entity that is classified as undercapitalized, any of the actions authorized to be taken under section 1366 

with respect to a regulated entity that is classified as significantly 

undercapitalized, if the Director determines that such actions are 

necessary to carry out the purpose of this subtitle. 

SEC. 1366. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFICANTLY 

UNDERCAPITALIZED øENTERPRISES¿ ENTITIES. 

(a) * * * 

(2) RESTRICTIONS ON CAPITAL DISTRIBUTIONS.— 

194 

(A) PRIOR APPROVAL.—An enterprise that is classified as 

significantly undercapitalized may not make any capital 

distribution that would result in the enterprise being reclassified as critically undercapitalized. An enterprise that 

is classified as significantly undercapitalized øenterprise¿ 

may not make any other capital distribution unless the Director approves the distribution. 

* * * * * * * 

(b) øDISCRETIONARY SUPERVISORY ACTIONS¿ SPECIFIC ACTIONS.— In addition to any other actions taken by the Director (including 

actions under subsection (a)), the Director ømay, at any time, take 

any¿ shall carry out this section by taking, at any time, one or more 

of the following actions with respect to an enterprise that is classified as significantly undercapitalized: 

(1) * * * 

* * * * * * * 

(5) IMPROVEMENT OF MANAGEMENT.—Take one or more of the 

following actions: 

(A) NEW ELECTION OF BOARD.—Order a new election for 

the board of directors of the regulated entity. 

(B) DISMISSAL OF DIRECTORS OR EXECUTIVE OFFICERS.— Require the regulated entity to dismiss from office any director or executive officer who had held office for more than 

180 days immediately before the entity became undercapitalized. Dismissal under this subparagraph shall not 

be construed to be a removal pursuant to the Director’s enforcement powers provided in section 1377. 

(C) EMPLOY QUALIFIED EXECUTIVE OFFICERS.—Require 

the regulated entity to employ qualified executive officers 

(who, if the Director so specifies, shall be subject to approval by the Director). 

ø(5)¿ (6) RECLASSIFICATION FROM SIGNIFICANTLY TO CRITICALLY UNDERCAPITALIZED.—The Director may reclassify as 

critically undercapitalized an enterprise that is classified as 

significantly undercapitalized (and the enterprise shall be subject to the provisions of section 1367) if— 

(A) * * * 

* * * * * * * 

ø(6)¿ (7) CONSERVATORSHIP.—Appoint a conservator for the 

enterprise in accordance with the provisions of øsection 1369 

(excluding subsection (a) (1) and (2))¿ section 1367, but only if 

the Director determines— 

(A) * * * 

* * * * * * * 

(8) OTHER ACTION.—Require the regulated entity to take any 

other action that the Director determines will better carry out 

the purpose of this section than any of the actions specified in 

this paragraph. 

(c) RESTRICTION ON COMPENSATION OF EXECUTIVE OFFICERS.—A 

regulated entity that is classified as significantly undercapitalized 

may not, without prior written approval by the Director— 

(1) pay any bonus to any executive officer; or 

195 

(2) provide compensation to any executive officer at a rate exceeding that officer’s average rate of compensation (excluding 

bonuses, stock options, and profit sharing) during the 12 calendar months preceding the calendar month in which the regulated entity became undercapitalized. 

ø(c)¿ (d) EFFECTIVE DATE.—This section shall take effect upon 

the first classification of øthe enterprises¿ the regulated entities 

within capital classifications that occurs under section 1364. 

øSEC. 1367. APPOINTMENT OF CONSERVATORS FOR CRITICALLY 

UNDERCAPITALIZED ENTERPRISES. 

ø(a) APPOINTMENT.— ø(1) IN GENERAL.—Upon a determination and notice under 

section 1368(d) that an enterprise is critically undercapitalized 

and not later than 30 days after providing notice under section 

1369(a)(3), the Director shall appoint a conservator for the enterprise in accordance with the provisions of section 1369 (excluding subsections (a) (1) and (2)). 

ø(2) EXCEPTION.—Notwithstanding paragraph (1), the Director may determine not to appoint a conservator for an enterprise classified as critically undercapitalized, but only pursuant 

to a written finding by the Director, with the written concurrence of the Secretary of the Treasury, that— 

ø(A) the appointment of a conservator would have serious adverse effects on economic conditions of national financial markets or on the financial stability of the housing 

finance market; and 

ø(B) the public interest would be better served by taking 

some other enforcement action authorized under this title. 

ø(b) AUTHORITY.—The Director shall have the authority to take 

any actions under sections 1365 and 1366 with respect to an enterprise under conservatorship. 

ø(c) APPROVAL OF ACTIVITIES.— ø(1) CONSERVATOR.—The conservator of any enterprise classified as critically undercapitalized may undertake an activity 

subject to the approval of the Secretary under section 1322 of 

this title only with the additional approval of the Director. 

ø(2) NO CONSERVATOR.—If the Director determines under 

subsection (a)(2) not to appoint a conservator for an enterprise 

classified as critically undercapitalized, the provisions of section 1366 shall apply with respect to the enterprise. 

ø(d) EFFECTIVE DATE.—This section shall take effect upon the 

first classification of the enterprises within capital classifications 

that occurs under section 1364.¿ 

SEC. 1367. AUTHORITY OVER CRITICALLY UNDERCAPITALIZED REGULATED ENTITIES. 

(a) APPOINTMENT OF AGENCY AS CONSERVATOR OR RECEIVER.— 

(1) IN GENERAL.—Notwithstanding any other provision of 

Federal or State law, if any of the grounds under paragraph (3) 

exist, at the discretion of the Director, the Director may establish a conservatorship or receivership, as appropriate, for the 

purpose of reorganizing, rehabilitating, or winding up the affairs of a regulated entity. 

(2) APPOINTMENT.—In any conservatorship or receivership established under this section, the Director shall appoint the 

Agency as conservator or receiver. 

196 

(3) GROUNDS FOR APPOINTMENT.—The grounds for appointing 

a conservator or receiver for a regulated entity are as follows: 

(A) ASSETS INSUFFICIENT FOR OBLIGATIONS.—The assets 

of the regulated entity are less than the obligations of the 

regulated entity to its creditors and others. 

(B) SUBSTANTIAL DISSIPATION.—Substantial dissipation 

of assets or earnings due to— 

(i) any violation of any provision of Federal or State 

law; or 

(ii) any unsafe or unsound practice. 

(C) UNSAFE OR UNSOUND CONDITION.—An unsafe or unsound condition to transact business. 

(D) CEASE-AND-DESIST ORDERS.—Any willful violation of 

a cease-and-desist order that has become final. 

(E) CONCEALMENT.—Any concealment of the books, papers, records, or assets of the regulated entity, or any refusal to submit the books, papers, records, or affairs of the 

regulated entity, for inspection to any examiner or to any 

lawful agent of the Director. 

(F) INABILITY TO MEET OBLIGATIONS.—The regulated entity is likely to be unable to pay its obligations or meet the 

demands of its creditors in the normal course of business. 

(G) LOSSES.—The regulated entity has incurred or is likely to incur losses that will deplete all or substantially all 

of its capital, and there is no reasonable prospect for the 

regulated entity to become adequately capitalized (as defined in section 1364(a)(1)). 

(H) VIOLATIONS OF LAW.—Any violation of any law or 

regulation, or any unsafe or unsound practice or condition 

that is likely to— 

(i) cause insolvency or substantial dissipation of assets or earnings; or 

(ii) weaken the condition of the regulated entity. 

(I) CONSENT.—The regulated entity, by resolution of its 

board of directors or its shareholders or members, consents 

to the appointment. 

(J) UNDERCAPITALIZATION.—The regulated entity is 

undercapitalized or significantly undercapitalized (as defined in section 1364(a)(3) or in regulations issued pursuant to section 1364(b), as applicable), and— 

(i) has no reasonable prospect of becoming adequately capitalized; 

(ii) fails to become adequately capitalized, as required by— 

(I) section 1365(a)(1) with respect to an undercapitalized regulated entity; or 

(II) section 1366(a)(1) with respect to a significantly undercapitalized regulated entity; 

(iii) fails to submit a capital restoration plan acceptable to the Agency within the time prescribed under 

section 1369C; or 

(iv) materially fails to implement a capital restoration plan submitted and accepted under section 1369C. 

(K) CRITICAL UNDERCAPITALIZATION.—The regulated entity is critically undercapitalized, as defined in section 

197 

1364(a)(4) or in regulations issued pursuant to section 

1364(b), as applicable. 

(L) MONEY LAUNDERING.—The Attorney General notifies 

the Director in writing that the regulated entity has been 

found guilty of a criminal offense under section 1956 or 

1957 of title 18, United States Code, or section 5322 or 

5324 of title 31, United States Code. 

(4) JUDICIAL REVIEW.— (A) IN GENERAL.—If the Agency is appointed conservator 

or receiver under this section, the regulated entity may, 

within 30 days of such appointment, bring an action in the 

United States District Court for the judicial district in 

which the principal place of business of such regulated entity is located, or in the United States District Court for the 

District of Columbia, for an order requiring the Agency to 

remove itself as conservator or receiver. 

(B) REVIEW.—Upon the filing of an action under subparagraph (A), the court shall, upon the merits, dismiss 

such action or direct the Agency to remove itself as such 

conservator or receiver. 

(5) DIRECTORS NOT LIABLE FOR ACQUIESCING IN APPOINTMENT

OF CONSERVATOR OR RECEIVER.—The members of the board of 

directors of a regulated entity shall not be liable to the shareholders or creditors of the regulated entity for acquiescing in or 

consenting in good faith to the appointment of the Agency as 

conservator or receiver for that regulated entity. 

(6) AGENCY NOT SUBJECT TO ANY OTHER FEDERAL AGENCY.— When acting as conservator or receiver, the Agency shall not be 

subject to the direction or supervision of any other agency of the 

United States or any State in the exercise of the rights, powers, 

and privileges of the Agency. 

(b) POWERS AND DUTIES OF THE AGENCY AS CONSERVATOR OR RE- CEIVER.— 

(1) RULEMAKING AUTHORITY OF THE AGENCY.—The Agency 

may prescribe such regulations as the Agency determines to be 

appropriate regarding the conduct of conservatorships or receiverships. 

(2) GENERAL POWERS.— (A) SUCCESSOR TO REGULATED ENTITY.—The Agency 

shall, as conservator or receiver, and by operation of law, 

immediately succeed to— 

(i) all rights, titles, powers, and privileges of the regulated entity, and of any stockholder, officer, or director of such regulated entity with respect to the regulated entity and the assets of the regulated entity; and 

(ii) title to the books, records, and assets of any other 

legal custodian of such regulated entity. 

(B) OPERATE THE REGULATED ENTITY.—The Agency may, 

as conservator or receiver— 

(i) take over the assets of and operate the regulated 

entity with all the powers of the shareholders, the directors, and the officers of the regulated entity and conduct all business of the regulated entity; 

(ii) collect all obligations and money due the regulated entity; 

198 

(iii) perform all functions of the regulated entity in 

the name of the regulated entity which are consistent 

with the appointment as conservator or receiver; and 

(iv) preserve and conserve the assets and property of 

such regulated entity. 

(C) FUNCTIONS OF OFFICERS, DIRECTORS, AND SHARE- HOLDERS OF A REGULATED ENTITY.—The Agency may, by 

regulation or order, provide for the exercise of any function 

by any stockholder, director, or officer of any regulated entity for which the Agency has been named conservator or receiver. 

(D) POWERS AS CONSERVATOR.—The Agency may, as conservator, take such action as may be— 

(i) necessary to put the regulated entity in a sound 

and solvent condition; and 

(ii) appropriate to carry on the business of the regulated entity and preserve and conserve the assets and 

property of the regulated entity. 

(E) ADDITIONAL POWERS AS RECEIVER.—The Agency may, 

as receiver, place the regulated entity in liquidation and 

proceed to realize upon the assets of the regulated entity, 

having due regard to the conditions of the housing finance 

market. 

(F) ORGANIZATION OF NEW REGULATED ENTITIES.—The 

Agency may, as receiver, organize a successor regulated entity that will operate pursuant to subsection (i). 

(G) TRANSFER OF ASSETS AND LIABILITIES.—The Agency 

may, as conservator or receiver, transfer any asset or liability of the regulated entity in default without any approval, 

assignment, or consent with respect to such transfer. Any 

Federal home loan bank may, with the approval of the 

Agency, acquire the assets of any Bank in conservatorship 

or receivership, and assume the liabilities of such Bank 

(H) PAYMENT OF VALID OBLIGATIONS.—The Agency, as 

conservator or receiver, shall, to the extent of proceeds realized from the performance of contracts or sale of the assets 

of a regulated entity, pay all valid obligations of the regulated entity in accordance with the prescriptions and limitations of this section. 

(I) SUBPOENA AUTHORITY.— 

(i) IN GENERAL.— 

(I) IN GENERAL.—The Agency may, as conservator or receiver, and for purposes of carrying out 

any power, authority, or duty with respect to a regulated entity (including determining any claim 

against the regulated entity and determining and 

realizing upon any asset of any person in the 

course of collecting money due the regulated entity), exercise any power established under section 

1348. 

(II) APPLICABILITY OF LAW.—The provisions of 

section 1348 shall apply with respect to the exercise of any power exercised under this subparagraph in the same manner as such provisions 

apply under that section. 

199 

(ii) AUTHORITY OF DIRECTOR.—A subpoena or subpoena duces tecum may be issued under clause (i) only 

by, or with the written approval of, the Director, or the 

designee of the Director. 

(iii) RULE OF CONSTRUCTION.—This subsection shall 

not be construed to limit any rights that the Agency, in 

any capacity, might otherwise have under section 1317 

or 1379D. 

(J) CONTRACTING FOR SERVICES.—The Agency may, as 

conservator or receiver, provide by contract for the carrying 

out of any of its functions, activities, actions, or duties as 

conservator or receiver. 

(K) INCIDENTAL POWERS.—The Agency may, as conservator or receiver— 

(i) exercise all powers and authorities specifically 

granted to conservators or receivers, respectively, under 

this section, and such incidental powers as shall be 

necessary to carry out such powers; and 

(ii) take any action authorized by this section, which 

the Agency determines is in the best interests of the regulated entity or the Agency. 

(3) AUTHORITY OF RECEIVER TO DETERMINE CLAIMS.— 

(A) IN GENERAL.—The Agency may, as receiver, determine 

claims in accordance with the requirements of this subsection and any regulations prescribed under paragraph 

(4). 

(B) NOTICE REQUIREMENTS.—The receiver, in any case involving the liquidation or winding up of the affairs of a 

closed regulated entity, shall— 

(i) promptly publish a notice to the creditors of the 

regulated entity to present their claims, together with 

proof, to the receiver by a date specified in the notice 

which shall be not less than 90 days after the publication of such notice; and 

(ii) republish such notice approximately 1 month and 

2 months, respectively, after the publication under 

clause (i). 

(C) MAILING REQUIRED.—The receiver shall mail a notice 

similar to the notice published under subparagraph (B)(i) 

at the time of such publication to any creditor shown on the 

books of the regulated entity— 

(i) at the last address of the creditor appearing in 

such books; or 

(ii) upon discovery of the name and address of a 

claimant not appearing on the books of the regulated 

entity within 30 days after the discovery of such name 

and address. 

(4) RULEMAKING AUTHORITY RELATING TO DETERMINATION OF

CLAIMS.—Subject to subsection (c), the Director may prescribe 

regulations regarding the allowance or disallowance of claims 

by the receiver and providing for administrative determination 

of claims and review of such determination. 

(5) PROCEDURES FOR DETERMINATION OF CLAIMS.— 

(A) DETERMINATION PERIOD.— 

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(i) IN GENERAL.—Before the end of the 180-day period beginning on the date on which any claim against 

a regulated entity is filed with the Agency as receiver, 

the Agency shall determine whether to allow or disallow the claim and shall notify the claimant of any 

determination with respect to such claim. 

(ii) EXTENSION OF TIME.—The period described in 

clause (i) may be extended by a written agreement between the claimant and the Agency. 

(iii) MAILING OF NOTICE SUFFICIENT.—The notification requirements of clause (i) shall be deemed to be 

satisfied if the notice of any determination with respect 

to any claim is mailed to the last address of the claimant which appears— 

(I) on the books of the regulated entity; 

(II) in the claim filed by the claimant; or 

(III) in documents submitted in proof of the 

claim. 

(iv) CONTENTS OF NOTICE OF DISALLOWANCE.—If any 

claim filed under clause (i) is disallowed, the notice to 

the claimant shall contain— 

(I) a statement of each reason for the disallowance; and 

(II) the procedures available for obtaining agency review of the determination to disallow the 

claim or judicial determination of the claim. 

(B) ALLOWANCE OF PROVEN CLAIM.—The receiver shall 

allow any claim received on or before the date specified in 

the notice published under paragraph (3)(B)(i), or the date 

specified in the notice required under paragraph (3)(C), 

which is proved to the satisfaction of the receiver. 

(C) DISALLOWANCE OF CLAIMS FILED AFTER END OF FIL- ING PERIOD.—Claims filed after the date specified in the notice published under paragraph (3)(B)(i), or the date specified under paragraph (3)(C), shall be disallowed and such 

disallowance shall be final. 

(D) AUTHORITY TO DISALLOW CLAIMS.— (i) IN GENERAL.—The receiver may disallow any portion of any claim by a creditor or claim of security, 

preference, or priority which is not proved to the satisfaction of the receiver. 

(ii) PAYMENTS TO LESS THAN FULLY SECURED CREDITORS.—In the case of a claim of a creditor against a 

regulated entity which is secured by any property or 

other asset of such regulated entity, the receiver— 

(I) may treat the portion of such claim which exceeds an amount equal to the fair market value of 

such property or other asset as an unsecured claim 

against the regulated entity; and 

(II) may not make any payment with respect to 

such unsecured portion of the claim other than in 

connection with the disposition of all claims of unsecured creditors of the regulated entity. 

(iii) EXCEPTIONS.—No provision of this paragraph 

shall apply with respect to any extension of credit from 

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any Federal Reserve Bank, Federal home loan bank, or 

the Treasury of the United States. 

(E) NO JUDICIAL REVIEW OF DETERMINATION PURSUANT

TO SUBPARAGRAPH (D).—No court may review the determination of the Agency under subparagraph (D) to disallow 

a claim. This subparagraph shall not effect the authority of 

a claimant to obtain de novo judicial review of a claim pursuant to paragraph (6). 

(F) LEGAL EFFECT OF FILING.— (i) STATUTE OF LIMITATION TOLLED.—For purposes of 

any applicable statute of limitations, the filing of a 

claim with the receiver shall constitute a commencement of an action. 

(ii) NO PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (10), the filing of a claim with the receiver 

shall not prejudice any right of the claimant to continue any action which was filed before the date of the 

appointment of the receiver, subject to the determination of claims by the receiver. 

(6) PROVISION FOR JUDICIAL DETERMINATION OF CLAIMS.— (A) IN GENERAL.—The claimant may file suit on a claim 

(or continue an action commenced before the appointment 

of the receiver) in the district or territorial court of the 

United States for the district within which the principal 

place of business of the regulated entity is located or the 

United States District Court for the District of Columbia 

(and such court shall have jurisdiction to hear such claim), 

before the end of the 60-day period beginning on the earlier 

of— 

(i) the end of the period described in paragraph 

(5)(A)(i) with respect to any claim against a regulated 

entity for which the Agency is receiver; or 

(ii) the date of any notice of disallowance of such 

claim pursuant to paragraph (5)(A)(i). 

(B) STATUTE OF LIMITATIONS.—A claim shall be deemed 

to be disallowed (other than any portion of such claim 

which was allowed by the receiver), and such disallowance 

shall be final, and the claimant shall have no further 

rights or remedies with respect to such claim, if the claimant fails, before the end of the 60-day period described 

under subparagraph (A), to file suit on such claim (or continue an action commenced before the appointment of the 

receiver). 

(7) REVIEW OF CLAIMS.— 

(A) OTHER REVIEW PROCEDURES.— 

(i) IN GENERAL.—The Agency shall establish such alternative dispute resolution processes as may be appropriate for the resolution of claims filed under paragraph (5)(A)(i). 

(ii) CRITERIA.—In establishing alternative dispute 

resolution processes, the Agency shall strive for procedures which are expeditious, fair, independent, and 

low cost. 

(iii) VOLUNTARY BINDING OR NONBINDING PROCEDURES.—The Agency may establish both binding and 

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nonbinding processes, which may be conducted by any 

government or private party. All parties, including the 

claimant and the Agency, must agree to the use of the 

process in a particular case. 

(B) CONSIDERATION OF INCENTIVES.—The Agency shall 

seek to develop incentives for claimants to participate in the 

alternative dispute resolution process. 

(8) EXPEDITED DETERMINATION OF CLAIMS.— (A) ESTABLISHMENT REQUIRED.—The Agency shall establish a procedure for expedited relief outside of the routine 

claims process established under paragraph (5) for claimants who— 

(i) allege the existence of legally valid and enforceable or perfected security interests in assets of any regulated entity for which the Agency has been appointed 

receiver; and 

(ii) allege that irreparable injury will occur if the 

routine claims procedure is followed. 

(B) DETERMINATION PERIOD.—Before the end of the 90- 

day period beginning on the date any claim is filed in accordance with the procedures established under subparagraph (A), the Director shall— 

(i) determine— 

(I) whether to allow or disallow such claim; or 

(II) whether such claim should be determined 

pursuant to the procedures established under paragraph (5); and 

(ii) notify the claimant of the determination, and if 

the claim is disallowed, provide a statement of each 

reason for the disallowance and the procedure for obtaining agency review or judicial determination. 

(C) PERIOD FOR FILING OR RENEWING SUIT.—Any claimant who files a request for expedited relief shall be permitted to file a suit, or to continue a suit filed before the 

appointment of the receiver, seeking a determination of the 

rights of the claimant with respect to such security interest 

after the earlier of— 

(i) the end of the 90-day period beginning on the date 

of the filing of a request for expedited relief; or 

(ii) the date the Agency denies the claim. 

(D) STATUTE OF LIMITATIONS.—If an action described 

under subparagraph (C) is not filed, or the motion to renew 

a previously filed suit is not made, before the end of the 30- 

day period beginning on the date on which such action or 

motion may be filed under subparagraph (B), the claim 

shall be deemed to be disallowed as of the end of such period (other than any portion of such claim which was allowed by the receiver), such disallowance shall be final, 

and the claimant shall have no further rights or remedies 

with respect to such claim. 

(E) LEGAL EFFECT OF FILING.— 

(i) STATUTE OF LIMITATION TOLLED.—For purposes of 

any applicable statute of limitations, the filing of a 

claim with the receiver shall constitute a commencement of an action. 

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(ii) NO PREJUDICE TO OTHER ACTIONS.—Subject to 

paragraph (10), the filing of a claim with the receiver 

shall not prejudice any right of the claimant to continue any action that was filed before the appointment 

of the receiver, subject to the determination of claims 

by the receiver. 

(9) PAYMENT OF CLAIMS.— (A) IN GENERAL.—The receiver may, in the discretion of 

the receiver, and to the extent funds are available from the 

assets of the regulated entity, pay creditor claims, in such 

manner and amounts as are authorized under this section, 

which are— 

(i) allowed by the receiver; 

(ii) approved by the Agency pursuant to a final determination pursuant to paragraph (7) or (8); or 

(iii) determined by the final judgment of any court of 

competent jurisdiction. 

(B) AGREEMENTS AGAINST THE INTEREST OF THE AGEN- CY.—No agreement that tends to diminish or defeat the interest of the Agency in any asset acquired by the Agency as 

receiver under this section shall be valid against the Agency unless such agreement is in writing, and executed by an 

authorized official of the regulated entity, except that such 

requirements for qualified financial contracts shall be applied in a manner consistent with reasonable business trading practices in the financial contracts market. 

(C) PAYMENT OF DIVIDENDS ON CLAIMS.—The receiver 

may, in the sole discretion of the receiver, pay from the assets of the regulated entity dividends on proved claims at 

any time, and no liability shall attach to the Agency, by 

reason of any such payment, for failure to pay dividends to 

a claimant whose claim is not proved at the time of any 

such payment. 

(D) RULEMAKING AUTHORITY OF THE DIRECTOR.—The Director may prescribe such rules, including definitions of 

terms, as the Director deems appropriate to establish a single uniform interest rate for, or to make payments of postinsolvency interest to creditors holding proven claims 

against the receivership estates of regulated entities following satisfaction by the receiver of the principal amount 

of all creditor claims. 

(10) SUSPENSION OF LEGAL ACTIONS.— 

(A) IN GENERAL.—After the appointment of a conservator 

or receiver for a regulated entity, the conservator or receiver 

may, in any judicial action or proceeding to which such 

regulated entity is or becomes a party, request a stay for a 

period not to exceed— 

(i) 45 days, in the case of any conservator; and 

(ii) 90 days, in the case of any receiver. 

(B) GRANT OF STAY BY ALL COURTS REQUIRED.—Upon receipt of a request by any conservator or receiver under subparagraph (A) for a stay of any judicial action or proceeding in any court with jurisdiction of such action or proceeding, the court shall grant such stay as to all parties. 

(11) ADDITIONAL RIGHTS AND DUTIES.— 

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(A) PRIOR FINAL ADJUDICATION.—The Agency shall abide 

by any final unappealable judgment of any court of competent jurisdiction which was rendered before the appointment of the Agency as conservator or receiver. 

(B) RIGHTS AND REMEDIES OF CONSERVATOR OR RE- CEIVER.—In the event of any appealable judgment, the 

Agency as conservator or receiver shall— 

(i) have all the rights and remedies available to the 

regulated entity (before the appointment of such conservator or receiver) and the Agency, including removal to 

Federal court and all appellate rights; and 

(ii) not be required to post any bond in order to pursue such remedies. 

(C) NO ATTACHMENT OR EXECUTION.—No attachment or 

execution may issue by any court upon assets in the possession of the receiver. 

(D) LIMITATION ON JUDICIAL REVIEW.—Except as otherwise provided in this subsection, no court shall have jurisdiction over— 

(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, 

the assets of any regulated entity for which the Agency 

has been appointed receiver; or 

(ii) any claim relating to any act or omission of such 

regulated entity or the Agency as receiver. 

(E) DISPOSITION OF ASSETS.—In exercising any right, 

power, privilege, or authority as conservator or receiver in 

connection with any sale or disposition of assets of a regulated entity for which the Agency has been appointed conservator or receiver, the Agency shall conduct its operations 

in a manner which maintains stability in the housing finance markets and, to the extent consistent with that 

goal— 

(i) maximizes the net present value return from the 

sale or disposition of such assets; 

(ii) minimizes the amount of any loss realized in the 

resolution of cases; and 

(iii) ensures adequate competition and fair and consistent treatment of offerors. 

(12) STATUTE OF LIMITATIONS FOR ACTIONS BROUGHT BY CONSERVATOR OR RECEIVER.— 

(A) IN GENERAL.—Notwithstanding any provision of any 

contract, the applicable statute of limitations with regard to 

any action brought by the Agency as conservator or receiver 

shall be— 

(i) in the case of any contract claim, the longer of— 

(I) the 6-year period beginning on the date the 

claim accrues; or 

(II) the period applicable under State law; and 

(ii) in the case of any tort claim, the longer of— 

(I) the 3-year period beginning on the date the 

claim accrues; or 

(II) the period applicable under State law. 

(B) DETERMINATION OF THE DATE ON WHICH A CLAIM ACCRUES.—For purposes of subparagraph (A), the date on 

205 

which the statute of limitations begins to run on any claim 

described in such subparagraph shall be the later of— 

(i) the date of the appointment of the Agency as conservator or receiver; or 

(ii) the date on which the cause of action accrues. 

(13) REVIVAL OF EXPIRED STATE CAUSES OF ACTION.— 

(A) IN GENERAL.—In the case of any tort claim described 

under subparagraph (B) for which the statute of limitations 

applicable under State law with respect to such claim has 

expired not more than 5 years before the appointment of the 

Agency as conservator or receiver, the Agency may bring an 

action as conservator or receiver on such claim without regard to the expiration of the statute of limitation applicable 

under State law. 

(B) CLAIMS DESCRIBED.—A tort claim referred to under 

subparagraph (A) is a claim arising from fraud, intentional 

misconduct resulting in unjust enrichment, or intentional 

misconduct resulting in substantial loss to the regulated 

entity. 

(14) ACCOUNTING AND RECORDKEEPING REQUIREMENTS.— 

(A) IN GENERAL.—The Agency as conservator or receiver 

shall, consistent with the accounting and reporting practices and procedures established by the Agency, maintain a 

full accounting of each conservatorship and receivership or 

other disposition of a regulated entity in default. 

(B) ANNUAL ACCOUNTING OR REPORT.—With respect to 

each conservatorship or receivership, the Agency shall make 

an annual accounting or report available to the Board, the 

Comptroller General of the United States, the Committee on 

Banking, Housing, and Urban Affairs of the Senate, and 

the Committee on Financial Services of the House of Representatives. 

(C) AVAILABILITY OF REPORTS.—Any report prepared 

under subparagraph (B) shall be made available by the 

Agency upon request to any shareholder of a regulated entity or any member of the public. 

(D) RECORDKEEPING REQUIREMENT.—After the end of the 

6-year period beginning on the date that the conservatorship or receivership is terminated by the Director, the Agency may destroy any records of such regulated entity which 

the Agency, in the discretion of the Agency, determines to 

be unnecessary unless directed not to do so by a court of 

competent jurisdiction or governmental agency, or prohibited by law. 

(15) FRAUDULENT TRANSFERS.— 

(A) IN GENERAL.—The Agency, as conservator or receiver, 

may avoid a transfer of any interest of a regulated entityaffiliated party, or any person who the conservator or receiver determines is a debtor of the regulated entity, in 

property, or any obligation incurred by such party or person, that was made within 5 years of the date on which the 

Agency was appointed conservator or receiver, if such party 

or person voluntarily or involuntarily made such transfer 

or incurred such liability with the intent to hinder, delay, 

206 

or defraud the regulated entity, the Agency, the conservator, 

or receiver. 

(B) RIGHT OF RECOVERY.—To the extent a transfer is 

avoided under subparagraph (A), the conservator or receiver may recover, for the benefit of the regulated entity, 

the property transferred, or, if a court so orders, the value 

of such property (at the time of such transfer) from— 

(i) the initial transferee of such transfer or the regulated entity-affiliated party or person for whose benefit 

such transfer was made; or 

(ii) any immediate or mediate transferee of any such 

initial transferee. 

(C) RIGHTS OF TRANSFEREE OR OBLIGEE.—The conservator or receiver may not recover under subparagraph (B) 

from— 

(i) any transferee that takes for value, including satisfaction or securing of a present or antecedent debt, in 

good faith; or 

(ii) any immediate or mediate good faith transferee 

of such transferee. 

(D) RIGHTS UNDER THIS PARAGRAPH.—The rights under 

this paragraph of the conservator or receiver described 

under subparagraph (A) shall be superior to any rights of 

a trustee or any other party (other than any party which is 

a Federal agency) under title 11, United States Code. 

(16) ATTACHMENT OF ASSETS AND OTHER INJUNCTIVE RE- LIEF.—Subject to paragraph (17), any court of competent jurisdiction may, at the request of the conservator or receiver, issue 

an order in accordance with Rule 65 of the Federal Rules of 

Civil Procedure, including an order placing the assets of any 

person designated by the Agency or such conservator under the 

control of the court, and appointing a trustee to hold such assets. 

(17) STANDARDS OF PROOF.—Rule 65 of the Federal Rules of 

Civil Procedure shall apply with respect to any proceeding 

under paragraph (16) without regard to the requirement of such 

rule that the applicant show that the injury, loss, or damage is 

irreparable and immediate. 

(18) TREATMENT OF CLAIMS ARISING FROM BREACH OF CON- TRACTS EXECUTED BY THE RECEIVER OR CONSERVATOR.— 

(A) IN GENERAL.—Notwithstanding any other provision of 

this subsection, any final and unappealable judgment for 

monetary damages entered against a receiver or conservator 

for the breach of an agreement executed or approved in 

writing by such receiver or conservator after the date of its 

appointment, shall be paid as an administrative expense of 

the receiver or conservator. 

(B) NO LIMITATION OF POWER.—Nothing in this paragraph shall be construed to limit the power of a receiver or 

conservator to exercise any rights under contract or law, including to terminate, breach, cancel, or otherwise discontinue such agreement. 

(19) GENERAL EXCEPTIONS.— 

(A) LIMITATIONS.—The rights of a conservator or receiver 

appointed under this section shall be subject to the limitaVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00206 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
207 

tions on the powers of a receiver under sections 402 through 

407 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4402 through 4407). 

(B) MORTGAGES HELD IN TRUST.— 

(i) IN GENERAL.—Any mortgage, pool of mortgages, 

or interest in a pool of mortgages, held in trust, custodial, or agency capacity by a regulated entity for the 

benefit of persons other than the regulated entity shall 

not be available to satisfy the claims of creditors generally. 

(ii) HOLDING OF MORTGAGES.—Any mortgage, pool of 

mortgages, or interest in a pool of mortgages, described 

under clause (i) shall be held by the conservator or receiver appointed under this section for the beneficial 

owners of such mortgage, pool of mortgages, or interest 

in a pool of mortgages in accordance with the terms of 

the agreement creating such trust, custodial, or other 

agency arrangement. 

(iii) LIABILITY OF RECEIVER.—The liability of a receiver appointed under this section for damages shall, 

in the case of any contingent or unliquidated claim relating to the mortgages held in trust, be estimated in 

accordance set forth in the regulations of the Director. 

(c) PRIORITY OF EXPENSES AND UNSECURED CLAIMS.— 

(1) IN GENERAL.—Unsecured claims against a regulated entity, or a receiver, that are proven to the satisfaction of the receiver shall have priority in the following order: 

(A) Administrative expenses of the receiver. 

(B) Any other general or senior liability of the regulated 

entity and claims of other Federal home loan banks arising 

from their payment obligations (including joint and several 

payment obligations). 

(C) Any obligation subordinated to general creditors. 

(D) Any obligation to shareholders or members arising as 

a result of their status as shareholder or members. 

(2) CREDITORS SIMILARLY SITUATED.—All creditors that are 

similarly situated under paragraph (1) shall be treated in a 

similar manner, except that the Agency may make such other 

payments to creditors necessary to maximize the present value 

return from the sale or disposition or such regulated entity’s assets or to minimize the amount of any loss realized in the resolution of cases so long as all creditors similarly situated receive 

not less than the amount provided under subsection (e)(2). 

(3) DEFINITION.—The term ‘‘administrative expenses of the receiver’’ shall include the actual, necessary costs and expenses incurred by the receiver in preserving the assets of the regulated 

entity or liquidating or otherwise resolving the affairs of the 

regulated entity. Such expenses shall include obligations that 

are incurred by the receiver after appointment as receiver that 

the Director determines are necessary and appropriate to facilitate the smooth and orderly liquidation or other resolution of 

the regulated entity. 

(d) PROVISIONS RELATING TO CONTRACTS ENTERED INTO BEFORE

APPOINTMENT OF CONSERVATOR OR RECEIVER.— 

208 

(1) AUTHORITY TO REPUDIATE CONTRACTS.—In addition to 

any other rights a conservator or receiver may have, the conservator or receiver for any regulated entity may disaffirm or repudiate any contract or lease— 

(A) to which such regulated entity is a party; 

(B) the performance of which the conservator or receiver, 

in its sole discretion, determines to be burdensome; and 

(C) the disaffirmance or repudiation of which the conservator or receiver determines, in its sole discretion, will promote the orderly administration of the affairs of the regulated entity. 

(2) TIMING OF REPUDIATION.—The conservator or receiver 

shall determine whether or not to exercise the rights of repudiation under this subsection within a reasonable period following such appointment. 

(3) CLAIMS FOR DAMAGES FOR REPUDIATION.— (A) IN GENERAL.—Except as otherwise provided under 

subparagraph (C) and paragraphs (4), (5), and (6), the liability of the conservator or receiver for the disaffirmance 

or repudiation of any contract pursuant to paragraph (1) 

shall be— 

(i) limited to actual direct compensatory damages; 

and 

(ii) determined as of— 

(I) the date of the appointment of the conservator 

or receiver; or 

(II) in the case of any contract or agreement referred to in paragraph (8), the date of the 

disaffirmance or repudiation of such contract or 

agreement. 

(B) NO LIABILITY FOR OTHER DAMAGES.—For purposes of 

subparagraph (A), the term ‘‘actual direct compensatory 

damages’’ shall not include— 

(i) punitive or exemplary damages; 

(ii) damages for lost profits or opportunity; or 

(iii) damages for pain and suffering. 

(C) MEASURE OF DAMAGES FOR REPUDIATION OF FINAN- CIAL CONTRACTS.—In the case of any qualified financial 

contract or agreement to which paragraph (8) applies, compensatory damages shall be— 

(i) deemed to include normal and reasonable costs of 

cover or other reasonable measures of damages utilized 

in the industries for such contract and agreement 

claims; and 

(ii) paid in accordance with this subsection and subsection (e), except as otherwise specifically provided in 

this section. 

(4) LEASES UNDER WHICH THE REGULATED ENTITY IS THE LESSEE.— (A) IN GENERAL.—If the conservator or receiver disaffirms 

or repudiates a lease under which the regulated entity was 

the lessee, the conservator or receiver shall not be liable for 

any damages (other than damages determined under subparagraph (B)) for the disaffirmance or repudiation of such 

lease. 

209 

(B) PAYMENTS OF RENT.—Notwithstanding subparagraph 

(A), the lessor under a lease to which that subparagraph 

applies shall— 

(i) be entitled to the contractual rent accruing before 

the later of the date— 

(I) the notice of disaffirmance or repudiation is 

mailed; or 

(II) the disaffirmance or repudiation becomes effective, unless the lessor is in default or breach of 

the terms of the lease; 

(ii) have no claim for damages under any acceleration clause or other penalty provision in the lease; and 

(iii) have a claim for any unpaid rent, subject to all 

appropriate offsets and defenses, due as of the date of 

the appointment, which shall be paid in accordance 

with this subsection and subsection (e). 

(5) LEASES UNDER WHICH THE REGULATED ENTITY IS THE LES- SOR.— (A) IN GENERAL.—If the conservator or receiver repudiates an unexpired written lease of real property of the regulated entity under which the regulated entity is the lessor 

and the lessee is not, as of the date of such repudiation, in 

default, the lessee under such lease may either— 

(i) treat the lease as terminated by such repudiation; 

or 

(ii) remain in possession of the leasehold interest for 

the balance of the term of the lease, unless the lessee 

defaults under the terms of the lease after the date of 

such repudiation. 

(B) PROVISIONS APPLICABLE TO LESSEE REMAINING IN

POSSESSION.—If any lessee under a lease described under 

subparagraph (A) remains in possession of a leasehold interest under clause (ii) of such subparagraph— 

(i) the lessee— 

(I) shall continue to pay the contractual rent 

pursuant to the terms of the lease after the date of 

the repudiation of such lease; and 

(II) may offset against any rent payment which 

accrues after the date of the repudiation of the 

lease, and any damages which accrue after such 

date due to the nonperformance of any obligation 

of the regulated entity under the lease after such 

date; and 

(ii) the conservator or receiver shall not be liable to 

the lessee for any damages arising after such date as 

a result of the repudiation other than the amount of 

any offset allowed under clause (i)(II). 

(6) CONTRACTS FOR THE SALE OF REAL PROPERTY.— 

(A) IN GENERAL.—If the conservator or receiver repudiates any contract for the sale of real property and the purchaser of such real property under such contract is in possession, and is not, as of the date of such repudiation, in 

default, such purchaser may either— 

(i) treat the contract as terminated by such repudiation; or 

210 

(ii) remain in possession of such real property. 

(B) PROVISIONS APPLICABLE TO PURCHASER REMAINING IN

POSSESSION.—If any purchaser of real property under any 

contract described under subparagraph (A) remains in possession of such property under clause (ii) of such subparagraph— 

(i) the purchaser— 

(I) shall continue to make all payments due 

under the contract after the date of the repudiation 

of the contract; and 

(II) may offset against any such payments any 

damages which accrue after such date due to the 

nonperformance (after such date) of any obligation 

of the regulated entity under the contract; and 

(ii) the conservator or receiver shall— 

(I) not be liable to the purchaser for any damages arising after such date as a result of the repudiation other than the amount of any offset allowed under clause (i)(II); 

(II) deliver title to the purchaser in accordance 

with the provisions of the contract; and 

(III) have no obligation under the contract other 

than the performance required under subclause 

(II). 

(C) ASSIGNMENT AND SALE ALLOWED.— 

(i) IN GENERAL.—No provision of this paragraph 

shall be construed as limiting the right of the conservator or receiver to assign the contract described under 

subparagraph (A), and sell the property subject to the 

contract and the provisions of this paragraph. 

(ii) NO LIABILITY AFTER ASSIGNMENT AND SALE.—If 

an assignment and sale described under clause (i) is 

consummated, the conservator or receiver shall have no 

further liability under the contract described under 

subparagraph (A), or with respect to the real property 

which was the subject of such contract. 

(7) PROVISIONS APPLICABLE TO SERVICE CONTRACTS.— 

(A) SERVICES PERFORMED BEFORE APPOINTMENT.—In the 

case of any contract for services between any person and 

any regulated entity for which the Agency has been appointed conservator or receiver, any claim of such person 

for services performed before the appointment of the conservator or the receiver shall be— 

(i) a claim to be paid in accordance with subsections 

(b) and (e); and 

(ii) deemed to have arisen as of the date the conservator or receiver was appointed. 

(B) SERVICES PERFORMED AFTER APPOINTMENT AND

PRIOR TO REPUDIATION.—If, in the case of any contract for 

services described under subparagraph (A), the conservator 

or receiver accepts performance by the other person before 

the conservator or receiver makes any determination to exercise the right of repudiation of such contract under this 

section— 

211 

(i) the other party shall be paid under the terms of 

the contract for the services performed; and 

(ii) the amount of such payment shall be treated as 

an administrative expense of the conservatorship or receivership. 

(C) ACCEPTANCE OF PERFORMANCE NO BAR TO SUBSEQUENT REPUDIATION.—The acceptance by any conservator 

or receiver of services referred to under subparagraph (B) 

in connection with a contract described in such subparagraph shall not affect the right of the conservator or receiver to repudiate such contract under this section at any 

time after such performance. 

(8) CERTAIN QUALIFIED FINANCIAL CONTRACTS.— 

(A) RIGHTS OF PARTIES TO CONTRACTS.—Subject to paragraphs (9) and (10) and notwithstanding any other provision of this Act, any other Federal law, or the law of any 

State, no person shall be stayed or prohibited from exercising— 

(i) any right such person has to cause the termination, liquidation, or acceleration of any qualified financial contract with a regulated entity that arises 

upon the appointment of the Agency as receiver for 

such regulated entity at any time after such appointment; 

(ii) any right under any security agreement or arrangement or other credit enhancement relating to one 

or more qualified financial contracts described in 

clause (i); or 

(iii) any right to offset or net out any termination 

value, payment amount, or other transfer obligation 

arising under or in connection with 1 or more contracts 

and agreements described in clause (i), including any 

master agreement for such contracts or agreements. 

(B) APPLICABILITY OF OTHER PROVISIONS.—Paragraph 

(10) of subsection (b) shall apply in the case of any judicial 

action or proceeding brought against any receiver referred 

to under subparagraph (A), or the regulated entity for 

which such receiver was appointed, by any party to a contract or agreement described under subparagraph (A)(i) 

with such regulated entity. 

(C) CERTAIN TRANSFERS NOT AVOIDABLE.— 

(i) IN GENERAL.—Notwithstanding paragraph (11) or 

any other Federal or State laws relating to the avoidance of preferential or fraudulent transfers, the Agency, 

whether acting as such or as conservator or receiver of 

a regulated entity, may not avoid any transfer of 

money or other property in connection with any qualified financial contract with a regulated entity. 

(ii) EXCEPTION FOR CERTAIN TRANSFERS.—Clause (i) 

shall not apply to any transfer of money or other property in connection with any qualified financial contract 

with a regulated entity if the Agency determines that 

the transferee had actual intent to hinder, delay, or defraud such regulated entity, the creditors of such reguVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00211 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
212 

lated entity, or any conservator or receiver appointed 

for such regulated entity. 

(D) CERTAIN CONTRACTS AND AGREEMENTS DEFINED.—In 

this subsection: 

(i) QUALIFIED FINANCIAL CONTRACT.—The term 

‘‘qualified financial contract’’ means any securities contract, commodity contract, forward contract, repurchase agreement, swap agreement, and any similar 

agreement that the Agency determines by regulation, 

resolution, or order to be a qualified financial contract 

for purposes of this paragraph. 

(ii) SECURITIES CONTRACT.—The term ‘‘securities contract’’— 

(I) means a contract for the purchase, sale, or 

loan of a security, a certificate of deposit, a mortgage loan, or any interest in a mortgage loan, a 

group or index of securities, certificates of deposit, 

or mortgage loans or interests therein (including 

any interest therein or based on the value thereof) 

or any option on any of the foregoing, including 

any option to purchase or sell any such security, 

certificate of deposit, mortgage loan, interest, group 

or index, or option, and including any repurchase 

or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option; 

(II) does not include any purchase, sale, or repurchase obligation under a participation in a 

commercial mortgage loan unless the Agency determines by regulation, resolution, or order to include 

any such agreement within the meaning of such 

term; 

(III) means any option entered into on a national 

securities exchange relating to foreign currencies; 

(IV) means the guarantee by or to any securities 

clearing agency of any settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, certificates of deposit, or mortgage loans or interests 

therein (including any interest therein or based on 

the value thereof) or option on any of the foregoing, 

including any option to purchase or sell any such 

security, certificate of deposit, mortgage loan, interest, group or index, or option; 

(V) means any margin loan; 

(VI) means any other agreement or transaction 

that is similar to any agreement or transaction referred to in this clause; 

(VII) means any combination of the agreements 

or transactions referred to in this clause; 

(VIII) means any option to enter into any agreement or transaction referred to in this clause; 

(IX) means a master agreement that provides for 

an agreement or transaction referred to in subclause (I), (III), (IV), (V), (VI), (VII), or (VIII), toVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00212 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
213 

gether with all supplements to any such master 

agreement, without regard to whether the master 

agreement provides for an agreement or transaction that is not a securities contract under this 

clause, except that the master agreement shall be 

considered to be a securities contract under this 

clause only with respect to each agreement or 

transaction under the master agreement that is referred to in subclause (I), (III), (IV), (V), (VI), (VII), 

or (VIII); and 

(X) means any security agreement or arrangement or other credit enhancement related to any 

agreement or transaction referred to in this clause, 

including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in this clause. 

(iii) COMMODITY CONTRACT.—The term ‘‘commodity 

contract’’ means— 

(I) with respect to a futures commission merchant, a contract for the purchase or sale of a commodity for future delivery on, or subject to the 

rules of, a contract market or board of trade; 

(II) with respect to a foreign futures commission 

merchant, a foreign future; 

(III) with respect to a leverage transaction merchant, a leverage transaction; 

(IV) with respect to a clearing organization, a 

contract for the purchase or sale of a commodity 

for future delivery on, or subject to the rules of, a 

contract market or board of trade that is cleared 

by such clearing organization, or commodity option traded on, or subject to the rules of, a contract 

market or board of trade that is cleared by such 

clearing organization; 

(V) with respect to a commodity options dealer, 

a commodity option; 

(VI) any other agreement or transaction that is 

similar to any agreement or transaction referred to 

in this clause; 

(VII) any combination of the agreements or 

transactions referred to in this clause; 

(VIII) any option to enter into any agreement or 

transaction referred to in this clause; 

(IX) a master agreement that provides for an 

agreement or transaction referred to in subclause 

(I), (II), (III), (IV), (V), (VI), (VII), or (VIII), together with all supplements to any such master 

agreement, without regard to whether the master 

agreement provides for an agreement or transaction that is not a commodity contract under this 

clause, except that the master agreement shall be 

considered to be a commodity contract under this 

clause only with respect to each agreement or 

transaction under the master agreement that is reVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00213 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
214 

ferred to in subclause (I), (II), (III), (IV), (V), (VI), 

(VII), or (VIII); or 

(X) any security agreement or arrangement or 

other credit enhancement related to any agreement 

or transaction referred to in this clause, including 

any guarantee or reimbursement obligation in connection with any agreement or transaction referred 

to in this clause. 

(iv) FORWARD CONTRACT.—The term ‘‘forward contract’’ means— 

(I) a contract (other than a commodity contract) 

for the purchase, sale, or transfer of a commodity 

or any similar good, article, service, right, or interest which is presently or in the future becomes the 

subject of dealing in the forward contract trade, or 

product or byproduct thereof, with a maturity date 

more than 2 days after the date the contract is entered into, including, a repurchase transaction, reverse repurchase transaction, consignment, lease, 

swap, hedge transaction, deposit, loan, option, allocated transaction, unallocated transaction, or 

any other similar agreement; 

(II) any combination of agreements or transactions referred to in subclauses (I) and (III); 

(III) any option to enter into any agreement or 

transaction referred to in subclause (I) or (II); 

(IV) a master agreement that provides for an 

agreement or transaction referred to in subclauses 

(I), (II), or (III), together with all supplements to 

any such master agreement, without regard to 

whether the master agreement provides for an 

agreement or transaction that is not a forward 

contract under this clause, except that the master 

agreement shall be considered to be a forward contract under this clause only with respect to each 

agreement or transaction under the master agreement that is referred to in subclause (I), (II), or 

(III); or 

(V) any security agreement or arrangement or 

other credit enhancement related to any agreement 

or transaction referred to in subclause (I), (II), 

(III), or (IV), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause. 

(v) REPURCHASE AGREEMENT.—The term ‘‘repurchase 

agreement’’ (which definition also applies to a reverse 

repurchase agreement)— 

(I) means an agreement, including related terms, 

which provides for the transfer of one or more certificates of deposit, mortgage-related securities (as 

such term is defined in the Securities Exchange 

Act of 1934), mortgage loans, interests in mortgage-related securities or mortgage loans, eligible 

bankers’ acceptances, qualified foreign government 

215 

securities or securities that are direct obligations 

of, or that are fully guaranteed by, the United 

States or any agency of the United States against 

the transfer of funds by the transferee of such certificates of deposit, eligible bankers’ acceptances, 

securities, mortgage loans, or interests with a simultaneous agreement by such transferee to transfer to the transferor thereof certificates of deposit, 

eligible bankers’ acceptances, securities, mortgage 

loans, or interests as described above, at a date 

certain not later than 1 year after such transfers or 

on demand, against the transfer of funds, or any 

other similar agreement; 

(II) does not include any repurchase obligation 

under a participation in a commercial mortgage 

loan unless the Agency determines by regulation, 

resolution, or order to include any such participation within the meaning of such term; 

(III) means any combination of agreements or 

transactions referred to in subclauses (I) and (IV); 

(IV) means any option to enter into any agreement or transaction referred to in subclause (I) or 

(III); 

(V) means a master agreement that provides for 

an agreement or transaction referred to in subclause (I), (III), or (IV), together with all supplements to any such master agreement, without regard to whether the master agreement provides for 

an agreement or transaction that is not a repurchase agreement under this clause, except that the 

master agreement shall be considered to be a repurchase agreement under this subclause only 

with respect to each agreement or transaction 

under the master agreement that is referred to in 

subclause (I), (III), or (IV); and 

(VI) means any security agreement or arrangement or other credit enhancement related to any 

agreement or transaction referred to in subclause 

(I), (III), (IV), or (V), including any guarantee or 

reimbursement obligation in connection with any 

agreement or transaction referred to in any such 

subclause. 

For purposes of this clause, the term ‘‘qualified foreign 

government security’’ means a security that is a direct 

obligation of, or that is fully guaranteed by, the central 

government of a member of the Organization for Economic Cooperation and Development (as determined by 

regulation or order adopted by the appropriate Federal 

banking authority). 

(vi) SWAP AGREEMENT.—The term ‘‘swap agreement’’ 

means— 

(I) any agreement, including the terms and conditions incorporated by reference in any such 

agreement, which is an interest rate swap, option, 

future, or forward agreement, including a rate 

216 

floor, rate cap, rate collar, cross-currency rate 

swap, and basis swap; a spot, same day-tomorrow, 

tomorrow-next, forward, or other foreign exchange 

or precious metals agreement; a currency swap, option, future, or forward agreement; an equity index 

or equity swap, option, future, or forward agreement; a debt index or debt swap, option, future, or 

forward agreement; a total return, credit spread or 

credit swap, option, future, or forward agreement; 

a commodity index or commodity swap, option, future, or forward agreement; or a weather swap, 

weather derivative, or weather option; 

(II) any agreement or transaction that is similar 

to any other agreement or transaction referred to 

in this clause and that is of a type that has been, 

is presently, or in the future becomes, the subject 

of recurrent dealings in the swap markets (including terms and conditions incorporated by reference 

in such agreement) and that is a forward, swap, 

future, or option on one or more rates, currencies, 

commodities, equity securities or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an 

occurrence, extent of an occurrence, or contingency 

associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or 

value; 

(III) any combination of agreements or transactions referred to in this clause; 

(IV) any option to enter into any agreement or 

transaction referred to in this clause; 

(V) a master agreement that provides for an 

agreement or transaction referred to in subclause 

(I), (II), (III), or (IV), together with all supplements 

to any such master agreement, without regard to 

whether the master agreement contains an agreement or transaction that is not a swap agreement 

under this clause, except that the master agreement shall be considered to be a swap agreement 

under this clause only with respect to each agreement or transaction under the master agreement 

that is referred to in subclause (I), (II), (III), or 

(IV); and 

(VI) any security agreement or arrangement or 

other credit enhancement related to any agreements or transactions referred to in subclause (I), 

(II), (III), (IV), or (V), including any guarantee or 

reimbursement obligation in connection with any 

agreement or transaction referred to in any such 

subclause. 

Such term is applicable for purposes of this subsection 

only and shall not be construed or applied so as to 

challenge or affect the characterization, definition, or 

treatment of any swap agreement under any other statVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00216 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
217 

ute, regulation, or rule, including the Securities Act of 

1933, the Securities Exchange Act of 1934, the Public 

Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, 

the Investment Advisers Act of 1940, the Securities Investor Protection Act of 1970, the Commodity Exchange 

Act, the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank Products Act of 2000. 

(vii) TREATMENT OF MASTER AGREEMENT AS ONE

AGREEMENT.—Any master agreement for any contract 

or agreement described in any preceding clause of this 

subparagraph (or any master agreement for such master agreement or agreements), together with all supplements to such master agreement, shall be treated as a 

single agreement and a single qualified financial contract. If a master agreement contains provisions relating to agreements or transactions that are not themselves qualified financial contracts, the master agreement shall be deemed to be a qualified financial contract only with respect to those transactions that are 

themselves qualified financial contracts. 

(viii) TRANSFER.—The term ‘‘transfer’’ means every 

mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with 

property or with an interest in property, including retention of title as a security interest and foreclosure of 

the regulated entity’s equity of redemption. 

(E) CERTAIN PROTECTIONS IN EVENT OF APPOINTMENT OF

CONSERVATOR.—Notwithstanding any other provision of 

this Act (other than paragraph (13) of this subsection), any 

other Federal law, or the law of any State, no person shall 

be stayed or prohibited from exercising— 

(i) any right such person has to cause the termination, liquidation, or acceleration of any qualified financial contract with a regulated entity in a conservatorship based upon a default under such financial 

contract which is enforceable under applicable noninsolvency law; 

(ii) any right under any security agreement or arrangement or other credit enhancement relating to one 

or more such qualified financial contracts; or 

(iii) any right to offset or net out any termination 

values, payment amounts, or other transfer obligations 

arising under or in connection with such qualified financial contracts. 

(F) CLARIFICATION.—No provision of law shall be construed as limiting the right or power of the Agency, or authorizing any court or agency to limit or delay, in any manner, the right or power of the Agency to transfer any qualified financial contract in accordance with paragraphs (9) 

and (10) of this subsection or to disaffirm or repudiate any 

such contract in accordance with subsection (d)(1) of this 

section. 

(G) WALKAWAY CLAUSES NOT EFFECTIVE.— 

218 

(i) IN GENERAL.—Notwithstanding the provisions of 

subparagraphs (A) and (E), and sections 403 and 404 

of the Federal Deposit Insurance Corporation Improvement Act of 1991, no walkaway clause shall be enforceable in a qualified financial contract of a regulated entity in default. 

(ii) WALKAWAY CLAUSE DEFINED.—For purposes of 

this subparagraph, the term ‘‘walkaway clause’’ means 

a provision in a qualified financial contract that, after 

calculation of a value of a party’s position or an 

amount due to or from 1 of the parties in accordance 

with its terms upon termination, liquidation, or acceleration of the qualified financial contract, either does 

not create a payment obligation of a party or extinguishes a payment obligation of a party in whole or in 

part solely because of such party’s status as a nondefaulting party. 

(9) TRANSFER OF QUALIFIED FINANCIAL CONTRACTS.—In making any transfer of assets or liabilities of a regulated entity in 

default which includes any qualified financial contract, the conservator or receiver for such regulated entity shall either— 

(A) transfer to 1 person— 

(i) all qualified financial contracts between any person (or any affiliate of such person) and the regulated 

entity in default; 

(ii) all claims of such person (or any affiliate of such 

person) against such regulated entity under any such 

contract (other than any claim which, under the terms 

of any such contract, is subordinated to the claims of 

general unsecured creditors of such regulated entity); 

(iii) all claims of such regulated entity against such 

person (or any affiliate of such person) under any such 

contract; and 

(iv) all property securing or any other credit enhancement for any contract described in clause (i) or any 

claim described in clause (ii) or (iii) under any such 

contract; or 

(B) transfer none of the financial contracts, claims, or 

property referred to under subparagraph (A) (with respect 

to such person and any affiliate of such person). 

(10) NOTIFICATION OF TRANSFER.— 

(A) IN GENERAL.—If— 

(i) the conservator or receiver for a regulated entity 

in default makes any transfer of the assets and liabilities of such regulated entity, and 

(ii) the transfer includes any qualified financial contract, 

the conservator or receiver shall notify any person who is 

a party to any such contract of such transfer by 5:00 p.m. 

(eastern time) on the business day following the date of the 

appointment of the receiver in the case of a receivership, or 

the business day following such transfer in the case of a 

conservatorship. 

(B) CERTAIN RIGHTS NOT ENFORCEABLE.— 

219 

(i) RECEIVERSHIP.—A person who is a party to a 

qualified financial contract with a regulated entity 

may not exercise any right that such person has to terminate, liquidate, or net such contract under paragraph (8)(A) of this subsection or section 403 or 404 of 

the Federal Deposit Insurance Corporation Improvement Act of 1991, solely by reason of or incidental to 

the appointment of a receiver for the regulated entity 

(or the insolvency or financial condition of the regulated entity for which the receiver has been appointed)— 

(I) until 5:00 p.m. (eastern time) on the business 

day following the date of the appointment of the 

receiver; or 

(II) after the person has received notice that the 

contract has been transferred pursuant to paragraph (9)(A). 

(ii) CONSERVATORSHIP.—A person who is a party to 

a qualified financial contract with a regulated entity 

may not exercise any right that such person has to terminate, liquidate, or net such contract under paragraph (8)(E) of this subsection or section 403 or 404 of 

the Federal Deposit Insurance Corporation Improvement Act of 1991, solely by reason of or incidental to 

the appointment of a conservator for the regulated entity (or the insolvency or financial condition of the regulated entity for which the conservator has been appointed). 

(iii) NOTICE.—For purposes of this paragraph, the 

Agency as receiver or conservator of a regulated entity 

shall be deemed to have notified a person who is a 

party to a qualified financial contract with such regulated entity if the Agency has taken steps reasonably 

calculated to provide notice to such person by the time 

specified in subparagraph (A). 

(C) BUSINESS DAY DEFINED.—For purposes of this paragraph, the term ‘‘business day’’ means any day other than 

any Saturday, Sunday, or any day on which either the New 

York Stock Exchange or the Federal Reserve Bank of New 

York is closed. 

(11) DISAFFIRMANCE OR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS.—In exercising the rights of disaffirmance or 

repudiation of a conservator or receiver with respect to any 

qualified financial contract to which a regulated entity is a 

party, the conservator or receiver for such institution shall either— 

(A) disaffirm or repudiate all qualified financial contracts between— 

(i) any person or any affiliate of such person; and 

(ii) the regulated entity in default; or 

(B) disaffirm or repudiate none of the qualified financial 

contracts referred to in subparagraph (A) (with respect to 

such person or any affiliate of such person). 

(12) CERTAIN SECURITY INTERESTS NOT AVOIDABLE.—No provision of this subsection shall be construed as permitting the 

220 

avoidance of any legally enforceable or perfected security interest in any of the assets of any regulated entity, except where 

such an interest is taken in contemplation of the insolvency of 

the regulated entity, or with the intent to hinder, delay, or defraud the regulated entity or the creditors of such regulated entity. 

(13) AUTHORITY TO ENFORCE CONTRACTS.— 

(A) IN GENERAL.—Notwithstanding any provision of a 

contract providing for termination, default, acceleration, or 

exercise of rights upon, or solely by reason of, insolvency or 

the appointment of a conservator or receiver, the conservator or receiver may enforce any contract or regulated entity bond entered into by the regulated entity. 

(B) CERTAIN RIGHTS NOT AFFECTED.—No provision of this 

paragraph may be construed as impairing or affecting any 

right of the conservator or receiver to enforce or recover 

under a director’s or officer’s liability insurance contract or 

surety bond under other applicable law. 

(C) CONSENT REQUIREMENT.— 

(i) IN GENERAL.—Except as otherwise provided under 

this section, no person may exercise any right or power 

to terminate, accelerate, or declare a default under any 

contract to which a regulated entity is a party, or to obtain possession of or exercise control over any property 

of the regulated entity, or affect any contractual rights 

of the regulated entity, without the consent of the conservator or receiver, as appropriate, for a period of— 

(I) 45 days after the date of appointment of a 

conservator; or 

(II) 90 days after the date of appointment of a 

receiver. 

(ii) EXCEPTIONS.—This paragraph shall— 

(I) not apply to a director’s or officer’s liability 

insurance contract; 

(II) not apply to the rights of parties to any 

qualified financial contracts under subsection 

(d)(8); and 

(III) not be construed as permitting the conservator or receiver to fail to comply with otherwise 

enforceable provisions of such contracts. 

(14) SAVINGS CLAUSE.—The meanings of terms used in this 

subsection are applicable for purposes of this subsection only, 

and shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any similar 

terms under any other statute, regulation, or rule, including the 

Gramm-Leach-Bliley Act, the Legal Certainty for Bank Products Act of 2000, the securities laws (as that term is defined in 

section 3(a)(47) of the Securities Exchange Act of 1934), and the 

Commodity Exchange Act 

(15) EXCEPTION FOR FEDERAL RESERVE AND FEDERAL HOME

LOAN BANKS.—No provision of this subsection shall apply with 

respect to— 

(A) any extension of credit from any Federal home loan 

bank or Federal Reserve Bank to any regulated entity; or 

221 

(B) any security interest in the assets of the regulated entity securing any such extension of credit. 

(e) VALUATION OF CLAIMS IN DEFAULT.— (1) IN GENERAL.—Notwithstanding any other provision of 

Federal law or the law of any State, and regardless of the method which the Agency determines to utilize with respect to a regulated entity in default or in danger of default, including transactions authorized under subsection (i), this subsection shall 

govern the rights of the creditors of such regulated entity. 

(2) MAXIMUM LIABILITY.—The maximum liability of the Agency, acting as receiver or in any other capacity, to any person 

having a claim against the receiver or the regulated entity for 

which such receiver is appointed shall equal the lesser of— 

(A) the amount such claimant would have received if the 

Agency had liquidated the assets and liabilities of such regulated entity without exercising the authority of the Agency 

under subsection (i) of this section; or 

(B) the amount of proceeds realized from the performance 

of contracts or sale of the assets of the regulated entity. 

(f) LIMITATION ON COURT ACTION.—Except as provided in this 

section or at the request of the Director, no court may take any action to restrain or affect the exercise of powers or functions of the 

Agency as a conservator or a receiver. 

(g) LIABILITY OF DIRECTORS AND OFFICERS.— (1) IN GENERAL.—A director or officer of a regulated entity 

may be held personally liable for monetary damages in any 

civil action by, on behalf of, or at the request or direction of the 

Agency, which action is prosecuted wholly or partially for the 

benefit of the Agency— 

(A) acting as conservator or receiver of such regulated entity, or 

(B) acting based upon a suit, claim, or cause of action 

purchased from, assigned by, or otherwise conveyed by such 

receiver or conservator, 

for gross negligence, including any similar conduct or conduct 

that demonstrates a greater disregard of a duty of care (than 

gross negligence) including intentional tortious conduct, as such 

terms are defined and determined under applicable State law. 

(2) NO LIMITATION.—Nothing in this paragraph shall impair 

or affect any right of the Agency under other applicable law. 

(h) DAMAGES.—In any proceeding related to any claim against a 

director, officer, employee, agent, attorney, accountant, appraiser, or 

any other party employed by or providing services to a regulated entity, recoverable damages determined to result from the improvident 

or otherwise improper use or investment of any assets of the regulated entity shall include principal losses and appropriate interest. 

(i) LIMITED-LIFE REGULATED ENTITIES.— 

(1) ORGANIZATION.— 

(A) PURPOSE.—If a regulated entity is in default, or if the 

Agency anticipates that a regulated entity will default, the 

Agency may organize a limited-life regulated entity with 

those powers and attributes of the regulated entity in default or in danger of default that the Director determines 

necessary, subject to the provisions of this subsection. The 

Director shall grant a temporary charter to the limited-life 

222 

regulated entity, and the limited-life regulated entity shall 

operate subject to that charter. 

(B) AUTHORITIES.—Upon the creation of a limited-life 

regulated entity under subparagraph (A), the limited-life 

regulated entity may— 

(i) assume such liabilities of the regulated entity that 

is in default or in danger of default as the Agency may, 

in its discretion, determine to be appropriate, provided 

that the liabilities assumed shall not exceed the 

amount of assets of the limited-life regulated entity; 

(ii) purchase such assets of the regulated entity that 

is in default, or in danger of default, as the Agency 

may, in its discretion, determine to be appropriate; and 

(iii) perform any other temporary function which the 

Agency may, in its discretion, prescribe in accordance 

with this section. 

(2) CHARTER.— (A) CONDITIONS.—The Agency may grant a temporary 

charter if the Agency determines that the continued operation of the regulated entity in default or in danger of default is in the best interest of the national economy and the 

housing markets. 

(B) TREATMENT AS BEING IN DEFAULT FOR CERTAIN PUR- POSES.—A limited-life regulated entity shall be treated as a 

regulated entity in default at such times and for such purposes as the Agency may, in its discretion, determine. 

(C) MANAGEMENT.—A limited-life regulated entity, upon 

the granting of its charter, shall be under the management 

of a board of directors consisting of not fewer than 5 nor 

more than 10 members appointed by the Agency. 

(D) BYLAWS.—The board of directors of a limited-life regulated entity shall adopt such bylaws as may be approved 

by the Agency. 

(3) CAPITAL STOCK.—No capital stock need be paid into a limited-life regulated entity by the Agency. 

(4) INVESTMENTS.—Funds of a limited-life regulated entity 

shall be kept on hand in cash, invested in obligations of the 

United States or obligations guaranteed as to principal and interest by the United States, or deposited with the Agency, or any 

Federal Reserve bank. 

(5) EXEMPT STATUS.—Notwithstanding any other provision of 

Federal or State law, the limited-life regulated entity, its franchise, property, and income shall be exempt from all taxation 

now or hereafter imposed by the United States, by any territory, 

dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. 

(6) WINDING UP.— 

(A) IN GENERAL.—Subject to subparagraph (B), unless 

Congress authorizes the sale of the capital stock of the limited-life regulated entity, not later than 2 years after the 

date of its organization, the Agency shall wind up the affairs of the limited-life regulated entity. 

(B) EXTENSION.—The Director may, in the discretion of 

the Director, extend the status of the limited-life regulated 

entity for 3 additional 1-year periods. 

223 

(7) TRANSFER OF ASSETS AND LIABILITIES.— (A) IN GENERAL.— (i) TRANSFER OF ASSETS AND LIABILITIES.—The 

Agency, as receiver, may transfer any assets and liabilities of a regulated entity in default, or in danger of default, to the limited-life regulated entity in accordance 

with paragraph (1). 

(ii) SUBSEQUENT TRANSFERS.—At any time after a 

charter is transferred to a limited-life regulated entity, 

the Agency, as receiver, may transfer any assets and liabilities of such regulated entity in default, or in danger in default, as the Agency may, in its discretion, determine to be appropriate in accordance with paragraph (1). 

(iii) EFFECTIVE WITHOUT APPROVAL.—The transfer of 

any assets or liabilities of a regulated entity in default, 

or in danger of default, transferred to a limited-life 

regulated entity shall be effective without any further 

approval under Federal or State law, assignment, or 

consent with respect thereto. 

(8) PROCEEDS.—To the extent that available proceeds from 

the limited-life regulated entity exceed amounts required to pay 

obligations, such proceeds may be paid to the regulated entity 

in default, or in danger of default. 

(9) POWERS.— (A) IN GENERAL.—Each limited-life regulated entity created under this subsection shall have all corporate powers 

of, and be subject to the same provisions of law as, the regulated entity in default or in danger of default to which it 

relates, except that— 

(i) the Agency may— 

(I) remove the directors of a limited-life regulated entity; and 

(II) fix the compensation of members of the 

board of directors and senior management, as determined by the Agency in its discretion, of a limited-life regulated entity; 

(ii) the Agency may indemnify the representatives for 

purposes of paragraph (1)(B), and the directors, officers, employees, and agents of a limited-life regulated 

entity on such terms as the Agency determines to be appropriate; and 

(iii) the board of directors of a limited-life regulated 

entity— 

(I) shall elect a chairperson who may also serve 

in the position of chief executive officer, except that 

such person shall not serve either as chairperson 

or as chief executive officer without the prior approval of the Agency; and 

(II) may appoint a chief executive officer who is 

not also the chairperson, except that such person 

shall not serve as chief executive officer without the 

prior approval of the Agency. 

(B) STAY OF JUDICIAL ACTION.—Any judicial action to 

which a limited-life regulated entity becomes a party by virVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00223 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
224 

tue of its acquisition of any assets or assumption of any liabilities of a regulated entity in default shall be stayed 

from further proceedings for a period of up to 45 days at 

the request of the limited-life regulated entity. Such period 

may be modified upon the consent of all parties. 

(10) OBTAINING OF CREDIT AND INCURRING OF DEBT.— 

(A) IN GENERAL.—The limited-life regulated entity may 

obtain unsecured credit and incur unsecured debt in the ordinary course of business. 

(B) INABILITY TO OBTAIN CREDIT.—If the limited-life regulated entity is unable to obtain unsecured credit the Director may authorize the obtaining of credit or the incurring 

of debt— 

(i) with priority over any or all administrative expenses; 

(ii) secured by a lien on property that is not otherwise subject to a lien; or 

(iii) secured by a junior lien on property that is subject to a lien. 

(C) LIMITATIONS.— 

(i) IN GENERAL.—The Director, after notice and a 

hearing, may authorize the obtaining of credit or the 

incurring of debt secured by a senior or equal lien on 

property that is subject to a lien (other than mortgages 

that collateralize the mortgage-backed securities issued 

or guaranteed by the regulated entity) only if— 

(I) the limited-life regulated entity is unable to 

obtain such credit otherwise; and 

(II) there is adequate protection of the interest of 

the holder of the lien on the property which such 

senior or equal lien is proposed to be granted. 

(ii) BURDEN OF PROOF.—In any hearing under this 

subsection, the Director has the burden of proof on the 

issue of adequate protection. 

(D) AFFECT ON DEBTS AND LIENS.—The reversal or modification on appeal of an authorization under this paragraph to obtain credit or incur debt, or of a grant under 

this section of a priority or a lien, does not affect the validity of any debt so incurred, or any priority or lien so granted, to an entity that extended such credit in good faith, 

whether or not such entity knew of the pendency of the appeal, unless such authorization and the incurring of such 

debt, or the granting of such priority or lien, were stayed 

pending appeal. 

(11) ISSUANCE OF PREFERRED DEBT.—A limited-life regulated 

entity may, subject to the approval of the Director and subject 

to such terms and conditions as the Director may prescribe, 

issue notes, bonds, or other debt obligations of a class to which 

all other debt obligations of the limited-life regulated entity 

shall be subordinate in right and payment. 

(12) NO FEDERAL STATUS.— 

(A) AGENCY STATUS.—A limited-life regulated entity is 

not an agency, establishment, or instrumentality of the 

United States. 

225 

(B) EMPLOYEE STATUS.—Representatives for purposes of 

paragraph (1)(B), interim directors, directors, officers, employees, or agents of a limited-life regulated entity are not, 

solely by virtue of service in any such capacity, officers or 

employees of the United States. Any employee of the Agency 

or of any Federal instrumentality who serves at the request 

of the Agency as a representative for purposes of paragraph 

(1)(B), interim director, director, officer, employee, or agent 

of a limited-life regulated entity shall not— 

(i) solely by virtue of service in any such capacity lose 

any existing status as an officer or employee of the 

United States for purposes of title 5, United States 

Code, or any other provision of law; or 

(ii) receive any salary or benefits for service in any 

such capacity with respect to a limited-life regulated 

entity in addition to such salary or benefits as are obtained through employment with the Agency or such 

Federal instrumentality. 

(13) ADDITIONAL POWERS.—In addition to any other powers 

granted under this subsection, a limited-life regulated entity 

may— 

(A) extend a maturity date or change in an interest rate 

or other term of outstanding securities; 

(B) issue securities of the limited-life regulated entity, for 

cash, for property, for existing securities, or in exchange for 

claims or interests, or for any other appropriate purposes; 

and 

(C) take any other action not inconsistent with this section. 

(j) OTHER EXEMPTIONS.—When acting as a receiver, the following 

provisions shall apply with respect to the Agency: 

(1) EXEMPTION FROM TAXATION.—The Agency, including its 

franchise, its capital, reserves, and surplus, and its income, 

shall be exempt from all taxation imposed by any State, country, municipality, or local taxing authority, except that any real 

property of the Agency shall be subject to State, territorial, 

county, municipal, or local taxation to the same extent according to its value as other real property is taxed, except that, notwithstanding the failure of any person to challenge an assessment under State law of the value of such property, and the tax 

thereon, shall be determined as of the period for which such tax 

is imposed. 

(2) EXEMPTION FROM ATTACHMENT AND LIENS.—No property 

of the Agency shall be subject to levy, attachment, garnishment, 

foreclosure, or sale without the consent of the Agency, nor shall 

any involuntary lien attach to the property of the Agency. 

(3) EXEMPTION FROM PENALTIES AND FINES.—The Agency 

shall not be liable for any amounts in the nature of penalties 

or fines, including those arising from the failure of any person 

to pay any real property, personal property, probate, or recording tax or any recording or filing fees when due. 

(k) PROHIBITION OF CHARTER REVOCATION.—In no case may a receiver appointed pursuant to this section revoke, annul, or terminate 

the charter of a regulated entity. 

226 

SEC. 1368. NOTICE OF CLASSIFICATION AND ENFORCEMENT ACTION. 

(a) * * * 

* * * * * * * 

(d) CONSIDERATION OF INFORMATION AND DETERMINATION.—After 

the expiration of the response period under subsection (c) or upon 

receipt of information provided during such period by the enterprise, whichever occurs earlier, the Director shall determine whether to take the action proposed, taking into consideration any relevant information submitted by the enterprise during the response 

period. The Director shall provide written notice of a determination 

to take action and the reasons for such determination to the enterprise, the øCommittee on Banking, Finance and Urban Affairs¿ 

Committee on Financial Services of the House of Representatives, 

and the Committee on Banking, Housing, and Urban Affairs of the 

Senate. Such notice shall respond to any information submitted 

during the response period. 

* * * * * * * 

øSEC. 1369. APPOINTMENT OF CONSERVATORS. 

ø(a) APPOINTMENT.— ø(1) DISCRETIONARY AUTHORITY.—The Director may, after 

providing notice under paragraph (3), appoint a conservator for 

an enterprise upon a determination in writing— 

ø(A) that alternative remedies available to the Director 

under this title are not satisfactory; and 

ø(B) that— 

ø(i) the enterprise is not likely to pay its obligations 

in the normal course of business; 

ø(ii) the enterprise has incurred or is reasonably 

likely to incur losses that would deplete substantially 

all of its core capital and it is unlikely that the enterprise will replenish its core capital within a reasonable 

period; 

ø(iii) the enterprise has concealed or is concealing 

books, papers, records, or assets of the enterprise that 

are material to the discharge of the Director’s responsibilities under this subtitle, or has refused or is 

refusing to submit such books, papers, records, or 

information regarding the affairs of the enterprise for 

inspection to the Director upon request; or 

ø(iv) the enterprise has willfully violated, or is willfully violating, a final cease-and-desist order under 

section 1371. 

ø(2) CONSENT OF ENTERPRISE.—Notwithstanding paragraph 

(1), the Director may appoint a conservator for an enterprise 

if the enterprise, by an affirmative vote of a majority of the 

members of its board of directors or by an affirmative vote of 

a majority of its shareholders, consents to such appointment. 

ø(3) NOTICE.—Upon making a determination under paragraph (1) of this subsection or under section 1366 or 1367 to 

appoint a conservator for an enterprise, or upon consent of the 

enterprise under paragraph (2) to such an appointment, the 

Director shall provide written notice to the enterprise, the 

Committee on Banking, Finance and Urban Affairs of the 

227 

House of Representatives, and the Committee on Banking, 

Housing, and Urban Affairs of the Senate— 

ø(A) that a conservator will be appointed for the 

enterprise; 

ø(B) stating the reasons for the appointment of the conservator; and 

ø(C) identifying the person or governmental agency that 

the Director intends to appoint as conservator. 

ø(4) QUALIFICATIONS.—The conservator shall be— 

ø(A) the Director or any other governmental agency; or 

ø(B) any person that— 

ø(i) has no claim against, or financial interest in, the 

enterprise or other basis for a conflict of interest; and 

ø(ii) has the financial and management expertise 

necessary to direct the operations and affairs of the 

enterprise. 

ø(b) JUDICIAL REVIEW.— 

ø(1) TIMING AND JURISDICTION.—Except as provided in paragraph (2), an enterprise for which a conservator is appointed 

(pursuant to this section or section 1366 or 1367) may bring an 

action in the United States District Court for the District of 

Columbia for an order requiring the Director to terminate the 

appointment of the conservator. The court, upon the merits, 

shall dismiss such action or shall direct the Director to terminate the appointment of the conservator. Such an action may 

be commenced only during the 20-day period beginning upon 

the appointment of the conservator. 

ø(2) CONSENSUAL APPOINTMENTS.—Appointment of a conservator pursuant to consent of the enterprise under subsection 

(a)(2) shall not be subject to judicial review under this subsection. 

ø(3) STANDARD OF REVIEW.—A decision of the Director to appoint a conservator may be set aside under this subsection only 

if the court finds that the decision was arbitrary, capricious, an 

abuse of discretion, or otherwise not in accordance with applicable laws. 

ø(4) LIMITATION ON JURISDICTION.—Except as otherwise provided in this subsection, no court may take any action regarding the removal of a conservator or otherwise restrain or affect 

the exercise of powers or functions of a conservator. 

ø(c) REPLACEMENT.—The Director may, without notice or hearing, replace a conservator with another conservator. Such replacement shall not affect the right of the enterprise under subsection 

(b) to obtain judicial review of the decision of the Director to appoint a conservator. 

ø(d) EXAMINATIONS.—The Director may examine and supervise 

any enterprise in conservatorship during the period in which the 

enterprise continues to operate as a going concern. 

ø(e) TERMINATION.— 

ø(1) DISCRETIONARY.—At any time the Director determines 

that termination of a conservatorship pursuant to an appointment under subsection (a) is in the public interest and may 

safely be accomplished, the Director may terminate the conservatorship and permit the enterprise to resume the transVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00227 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
228 

action of its business subject to such terms, conditions, and 

limitations as the Director may prescribe. 

ø(2) MANDATORY.—The Director shall terminate a conservatorship initiated pursuant to section 1366 or 1367 upon a 

determination by the Director that the enterprise has maintained an amount of core capital that is equal to or exceeds the 

minimum capital level for the enterprise established under section 1362, and may by written order prescribe such terms, conditions, and limitations on the enterprise as the Director considers appropriate. 

ø(3) TERMS.—Any terms, conditions, and limitations imposed 

by the Director upon termination of a conservatorship shall be 

enforceable and reviewable under the provisions of sections 

1374 and 1375, to the same extent as any cease-and-desist 

order issued pursuant to subtitle C. 

øSEC. 1369A. POWERS OF CONSERVATORS. 

ø(a) GENERAL POWERS.—A conservator shall have all the powers 

of the shareholders, directors, and officers of the enterprise under 

conservatorship and may operate the enterprise in the name of the 

enterprise, unless the Director provides otherwise. 

ø(b) ADDITIONAL POWER.—A conservator may avoid any security 

interest taken by a creditor with the intent to hinder, delay, or defraud the enterprise or the creditors of the enterprise. 

ø(c) LIMITATIONS BY DIRECTOR.—A conservator shall be subject to 

any rules, regulations, and orders issued from time to time by the 

Director and, except as otherwise specifically provided in such 

rules, regulations, or orders or in section 1369B, shall have the 

same rights and privileges and be subject to the same duties, restrictions, penalties, conditions, and limitations applicable to directors, officers, or employees of the enterprise. 

ø(d) ENFORCEMENT OF CONTRACTS.— ø(1) IN GENERAL.—A conservator may enforce any contract 

described in paragraph (2), notwithstanding any provision of 

the contract providing for the termination, default, acceleration, or other exercise of rights upon, or solely by reason of, the 

insolvency of the enterprise or the appointment of a conservator. 

ø(2) ENFORCEABLE CONTRACTS.—Any contract that is within 

a class of contracts shall be enforceable under paragraph (1) if 

the Director— 

ø(A) determines that the continued enforceability of such 

class of contracts is necessary to achieve the purpose of the 

conservatorship; and 

ø(B) specifically provides for the enforceability of such 

class of contracts in a regulation or order, issued for the 

purpose of this subsection, which describes such class. 

ø(3) APPLICABILITY.—This subsection and any regulation or 

order issued under this subsection shall apply only to contracts 

entered into, modified, extended, or renewed after the effective 

date of the regulation or order. 

ø(e) STAYS.— 

ø(1) IN GENERAL.—Not later than 45 days after appointment 

pursuant to section 1366, 1367, or 1369, or 45 days after receipt of actual notice of an action or proceeding that is pending 

at the time of appointment, a conservator may request that 

229 

any judicial action or proceeding to which the conservator or 

the enterprise is or may become a party be stayed for a period 

not exceeding 45 days after the request. Upon petition, the 

court shall grant such stay as to all parties. 

ø(2) FEDERAL AGENCY AS CONSERVATOR.—In any case in 

which the conservator appointed for an enterprise is a Federal 

agency or an officer or employee of the Federal Government, 

the conservator may make a request for a stay under paragraph (1) only with the prior consent of the Attorney General 

and subject to the direction and control of the Attorney General. 

ø(f) PAYMENT OF CREDITORS.—The Director may require a conservator to set aside and make available for payment to creditors 

any amounts that the Director determines may safely be used for 

such purpose. All creditors who are similarly situated shall be 

treated in a similar manner. 

ø(g) COMPENSATION OF CONSERVATOR AND EMPLOYEES.—A conservator and professional employees (other than Federal employees) appointed to represent or assist the conservator may be compensated for activities conducted as conservator. Compensation 

may not be provided in amounts greater than the compensation 

paid to employees of the Federal Government for similar services, 

except that the Director may provide for compensation at higher 

rates (but not in excess of rates prevailing in the private sector), 

if the Director determines that compensation at higher rates is necessary in order to recruit and retain competent personnel. 

ø(h) EXPENSES.—All expenses of a conservatorship pursuant to 

this section (including compensation pursuant to subsection (f)) 

shall be paid by the enterprise under conservatorship and shall be 

secured by a lien on the enterprise, which shall have priority over 

any other lien. 

ø(i) CONFLICTS OF INTEREST AND FINANCIAL DISCLOSURE.—A conservator shall be subject to any laws and regulations relating to 

conflicts of interest and financial disclosure that apply to employees of the Office. 

øSEC. 1369B. LIABILITY PROTECTION FOR CONSERVATORS. 

ø(a) FEDERAL AGENCIES AND EMPLOYEES.—In any case in which 

a conservator appointed under this subtitle is a Federal agency or 

an officer or employee of the Federal Government, the provisions 

of chapters 161 and 171 of title 28, United States Code, shall apply 

with respect to the liability of the conservator for acts or omissions 

performed pursuant to and in the course of the duties and responsibilities of the conservatorship. 

ø(b) OTHER CONSERVATORS.—In any case where the conservator 

is not a conservator described in subsection (a), the conservator 

shall not be personally liable for damages in tort or otherwise for 

acts or omissions performed pursuant to and in the course of the 

duties and responsibilities of the conservatorship, unless such acts 

or omissions constitute gross negligence or any form of intentional 

tortious conduct or criminal conduct. 

ø(c) INDEMNIFICATION.—The Director, with the approval of the 

Attorney General, may indemnify the conservator on such terms as 

the Director considers appropriate.¿ 

230 

SEC. 1369C. CAPITAL RESTORATION PLANS. 

(a) * * * 

* * * * * * * 

(c) APPROVAL.—The Director shall review each capital restoration 

plan submitted under this section and, not later than 30 days after 

submission of the plan, approve or disapprove the plan. The Director may extend the period for approval or disapproval for any plan 

for a single additional 30-day period if the Director determines it 

necessary. The Director shall provide written notice to øany enterprise¿ any regulated entity submitting a plan of the approval or 

disapproval of the plan (which shall include the reasons for any 

disapproval of the plan) and of any extension of the period for approval or disapproval. 

* * * * * * * 

SEC. 1369D. JUDICIAL REVIEW OF DIRECTOR ACTION. 

(a) JURISDICTION.— 

(1) FILING OF PETITION.—øAn enterprise¿ A regulated entity 

that is not classified as critically undercapitalized and is the 

subject of a classification under section 1364 or a discretionary 

supervisory action taken under this subtitle by the Director 

(other than action to appoint a conservator under øsection 

1366 or 1367 or action under section 1369)¿ section 1367) may 

obtain review of the classification or action by filing, within 10 

days after receiving written notice of the Director’s action, a 

written petition requesting that the classification or action of 

the Director be modified, terminated, or set aside. 

* * * * * * * 

(d) LIMITATION ON JURISDICTION.—Except as provided in this section, no court shall have jurisdiction to affect, by injunction or otherwise, the issuance or effectiveness of any classification or action 

of the Director under this subtitle (other than appointment of a 

conservator under øsection 1366 or 1367 or action under section 

1369)¿ section 1367) or to review, modify, suspend, terminate, or 

set aside such classification or action. 

SEC. 1369E. REVIEWS OF ENTERPRISE ASSETS AND LIABILITIES. 

(a) IN GENERAL.—The Director shall conduct, on a periodic basis, 

a review of the on-balance sheet and off-balance sheet assets and liabilities of each enterprise. 

(b) AUTHORITY TO REQUIRE DISPOSITION OR ACQUISITION.—Pursuant to such a review and notwithstanding the capital classifications of the enterprises, the Director may by order require an enterprise, under such terms and conditions as the Director determines 

to be appropriate, to dispose of or acquire any asset or liability, if 

the Director determines that such action is consistent with the safe 

and sound operation of the enterprise or with the purposes of this 

Act or any of the authorizing statutes. 

Subtitle C—Enforcement Provisions 

SEC. 1371. CEASE-AND-DESIST PROCEEDINGS. 

ø(a) GROUNDS FOR ISSUANCE AGAINST ADEQUATELY CAPITALIZED

ENTERPRISES.—The Director may issue and serve a notice of 

231 

charges under this section upon an enterprise that is classified (for 

purposes of subtitle B) as adequately capitalized or upon any executive officer or director of such an enterprise, if in the determination of the Director, the enterprise, executive officer, or director is 

engaging or has engaged, or the Director has reasonable cause to 

believe that the enterprise, executive officer, or director is about to 

engage, in— 

ø(1) any conduct that threatens to cause a significant depletion of the core capital of the enterprise; 

ø(2) any conduct or violation that may result in the issuance 

of an order described in subsection (d)(1); or 

ø(3) any conduct that violates— 

ø(A) any provision of this title, the Federal National 

Mortgage Association Charter Act, the Federal Home Loan 

Mortgage Corporation Act, or any order, rule, or regulation 

under any such title or Act, except that the Director may 

not enforce compliance with any housing goal established 

under subpart B of part 2 of subtitle A of this title, with 

section 1336 or 1337 of this title, or with subsection (m) or 

(n) of section 309 of the Federal National Mortgage Association Charter Act or subsection (e) or (f) of section 307 

of the Federal Home Loan Mortgage Corporation Act; or 

ø(B) any written agreement entered into by the enterprise with the Director. 

ø(b) GROUNDS FOR ISSUANCE AGAINST UNDERCAPITALIZED, SIG- NIFICANTLY UNDERCAPITALIZED, AND CRITICALLY UNDERCAPITAL- IZED ENTERPRISES.—The Director may issue and serve a notice of 

charges under this section upon an enterprise classified (for purposes of subtitle B) as undercapitalized, significantly undercapitalized, or critically undercapitalized, or any executive officer or director of any such enterprise, if in the determination of the Director 

the enterprise, executive officer, or director is engaging or has engaged, or the Director has reasonable cause to believe that the enterprise, executive officer, or director is about to engage, in— 

ø(1) any conduct likely to result in a material depletion of 

the core capital of the enterprise, or 

ø(2) any conduct or violation described in paragraph (2) or 

(3) of subsection (a), 

except that the Director may not enforce compliance with any housing goal established under subpart B of part 2 of subtitle A of this 

title, with section 1336 or 1337 of this title, or with subsection (m) 

or (n) of section 309 of the Federal National Mortgage Association 

Charter Act or subsection (e) or (f) of section 307 of the Federal 

Home Loan Mortgage Corporation Act.¿ 

(a) ISSUANCE FOR UNSAFE OR UNSOUND PRACTICES AND VIOLATIONS OF RULES OR LAWS.—If, in the opinion of the Director, a regulated entity or any regulated entity-affiliated party is engaging or 

has engaged, or the Director has reasonable cause to believe that the 

regulated entity or any regulated entity-affiliated party is about to 

engage, in an unsafe or unsound practice in conducting the business 

of the regulated entity or is violating or has violated, or the Director 

has reasonable cause to believe that the regulated entity or any regulated entity-affiliated party is about to violate, a law, rule, or regulation, or any condition imposed in writing by the Director in connection with the granting of any application or other request by the 

232 

regulated entity or any written agreement entered into with the Director, the Director may issue and serve upon the regulated entity 

or such party a notice of charges in respect thereof. The Director 

may not, pursuant to this section, enforce compliance with any 

housing goal established under subpart B of part 2 of subtitle A of 

this title, with section 1336 or 1337 of this title, with subsection (m) 

or (n) of section 309 of the Federal National Mortgage Association 

Charter Act (12 U.S.C. 1723a(m), (n)), with subsection (e) or (f) of 

section 307 of the Federal Home Loan Mortgage Corporation Act (12 

U.S.C. 1456(e), (f)), or with paragraph (5) of section 10(j) of the Federal Home Loan Bank Act (12 U.S.C. 1430(j)). 

(b) ISSUANCE FOR UNSATISFACTORY RATING.—If a regulated entity 

receives, in its most recent report of examination, a less-than-satisfactory rating for asset quality, management, earnings, or liquidity, 

the Director may (if the deficiency is not corrected) deem the regulated entity to be engaging in an unsafe or unsound practice for 

purposes of this subsection. 

(c) PROCEDURE.— 

(1) * * * 

(2) ISSUANCE OF ORDER.—If the Director finds on the record 

made at such hearing that any conduct or violation specified 

in the notice of charges has been established (or øthe enterprise¿ the regulated entity consents pursuant to section 

1373(a)(4)), the Director may issue and serve upon the øenterprise, executive officer, or director¿ regulated entity or regulated entity-affiliated party an order requiring such party to 

cease and desist from any such conduct or violation and to take 

affirmative action to correct or remedy the conditions resulting 

from any such conduct or violation. 

(d) AFFIRMATIVE ACTION TO CORRECT CONDITIONS RESULTING

FROM VIOLATIONS OR ACTIVITIES.—The authority under this section 

and section 1372 to issue any order requiring an øenterprise, executive officer, or director¿ regulated entity or regulated entity-affiliated party to take affirmative action to correct or remedy any condition resulting from any conduct or violation with respect to which 

such order is issued includes the authority— 

(1) to require øan executive officer or a director¿ a regulated 

entity affiliated party to make restitution to, or provide reimbursement (including reimbursement of compensation under 

section 1318), indemnification, or guarantee against loss to 

øthe enterprise¿ the regulated entity to the extent that such 

person— 

(A) * * * 

* * * * * * * 

(2) to require øan enterprise¿ a regulated entity to seek restitution, or to obtain reimbursement, indemnification, or guarantee against loss; 

(3) to restrict the growth of øthe enterprise¿ the regulated 

entity; 

(4) to require øthe enterprise¿ the regulated entity to dispose 

of any asset involved; 

(5) to require øthe enterprise¿ the regulated entity to rescind 

agreements or contracts; 

233 

(6) to require øthe enterprise¿ the regulated entity to employ 

qualified officers or employees (who may be subject to approval 

by the Director at the direction of the Director); øand¿ 

(7) to effect an attachment on a regulated entity or regulated 

entity-affiliated party subject to an order under this section or 

section 1372; and 

ø(7)¿ (8) to require øthe enterprise¿ the regulated entity to 

take such other action as the Director determines appropriate. 

(e) AUTHORITY TO LIMIT ACTIVITIES.—The authority to issue an 

order under this section or section 1372 includes the authority to 

place limitations on the activities or functions of øthe enterprise¿ 

the regulated entity or any executive officer or director of øthe enterprise¿ the regulated entity. (f) EFFECTIVE DATE.—An order under this section shall become 

effective upon the expiration of the 30-day period beginning on the 

service of the order upon øthe enterprise¿ the regulated entity, executive officer, or director concerned (except in the case of an order 

issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforceable as provided in the order, except to the extent that the order is stayed, 

modified, terminated, or set aside by action of the Director or otherwise, as provided in this subtitle. 

SEC. 1372. TEMPORARY CEASE-AND-DESIST ORDERS. 

ø(a) GROUNDS FOR ISSUANCE AND SCOPE.—Whenever the Director 

determines that any conduct or violation, or threatened conduct or 

violation, specified in the notice of charges served upon the enterprise, executive officer, or director pursuant to section 1371 (a) or 

(b), or the continuation thereof, is likely— 

ø(1) to cause insolvency, 

ø(2) to cause a significant depletion of the core capital of the 

enterprise, or 

ø(3) otherwise to cause irreparable harm to the enterprise, 

prior to the completion of the proceedings conducted pursuant to 

section 1371(c), the Director may issue a temporary order requiring 

the enterprise, executive officer, or director to cease and desist 

from any such conduct or violation and to take affirmative action 

to prevent or remedy such insolvency, depletion, or harm pending 

completion of such proceedings. Such order may include any requirement authorized under section 1371(d).¿ 

(a) GROUNDS FOR ISSUANCE.—Whenever the Director determines 

that the violation or threatened violation or the unsafe or unsound 

practice or practices specified in the notice of charges served upon 

the regulated entity or any regulated entity-affiliated party pursuant 

to section 1371(a), or the continuation thereof, is likely to cause insolvency or significant dissipation of assets or earnings of the regulated entity, or is likely to weaken the condition of the regulated entity prior to the completion of the proceedings conducted pursuant 

to sections 1371 and 1373, the Director may issue a temporary order 

requiring the regulated entity or such party to cease and desist from 

any such violation or practice and to take affirmative action to prevent or remedy such insolvency, dissipation, condition, or prejudice 

pending completion of such proceedings. Such order may include 

any requirement authorized under section 1371(d). 

(b) EFFECTIVE DATE.—An order issued pursuant to subsection (a) 

shall become effective upon service upon the øenterprise, executive 

234 

officer, or director¿ regulated entity or regulated entity-affiliated 

party and, unless set aside, limited, or suspended by a court in proceedings pursuant to subsection (d), shall remain in effect and enforceable pending the completion of the proceedings pursuant to 

such notice and shall remain effective until the Director dismisses 

the charges specified in the notice or until superseded by a ceaseand-desist order issued pursuant to section 1371. 

(c) INCOMPLETE OR INACCURATE RECORDS.— (1) TEMPORARY ORDER.—If a notice of charges served under 

section 1371 (a) or (b) specifies on the basis of particular facts 

and circumstances that the books and records of øthe enterprise¿ the regulated entity served are so incomplete or inaccurate that the Director is unable, through the normal supervisory process, to determine the financial condition of øthe enterprise¿ the regulated entity or the details or the purpose of 

any transaction or transactions that may have a material effect 

on the financial condition of øthat enterprise¿ that regulated 

entity, the Director may issue a temporary order requiring— 

(A) * * * 

* * * * * * * 

(2) EFFECTIVE PERIOD.—Any temporary order issued under 

paragraph (1)— 

(A) * * * 

(B) unless set aside, limited, or suspended by a court in 

proceedings pursuant to subsection (d), shall remain in effect and enforceable until the earlier of— 

(i) * * * 

(ii) the date the Director determines, by examination 

or otherwise, that the books and records of øthe enterprise¿ the regulated entity are accurate and reflect the 

financial condition of øthe enterprise¿ the regulated 

entity. (d) JUDICIAL REVIEW.—øAn enterprise, executive officer, or director¿ A regulated entity or regulated entity-affiliated party that has 

been served with a temporary order pursuant to this section may 

apply to the United States District Court for the District of Columbia within 10 days after such service for an injunction setting 

aside, limiting, or suspending the enforcement, operation, or effectiveness of the order pending the completion of the administrative 

proceedings pursuant to the notice of charges served upon øthe enterprise, executive officer, or director¿ the regulated entity or regulated entity-affiliated party under section 1371 (a) or (b). Such court 

shall have jurisdiction to issue such injunction. 

ø(e) ENFORCEMENT BY ATTORNEY GENERAL.—In the case of violation or threatened violation of, or failure to obey, a temporary order 

issued pursuant to this section, the Director may request the Attorney General of the United States to bring an action in the United 

States District Court for the District of Columbia for an injunction 

to enforce such order or may, under the direction and control of the 

Attorney General, bring such an action. If the court finds any such 

violation, threatened violation, or failure to obey, the court shall 

issue such injunction.¿ 

(e) ENFORCEMENT.—In the case of violation or threatened violation of, or failure to obey, a temporary cease-and-desist order issued 

pursuant to this section, the Director may apply to the United States 

235 

District Court for the District of Columbia or the United States district court within the jurisdiction of which the headquarters of the 

regulated entity is located, for an injunction to enforce such order, 

and, if the court determines that there has been such violation or 

threatened violation or failure to obey, it shall be the duty of the 

court to issue such injunction. 

* * * * * * * 

SEC. 1375. ENFORCEMENT AND JURISDICTION. 

ø(a) ENFORCEMENT.—The Director may request the Attorney 

General of the United States to bring an action in the United 

States District Court for the District of Columbia for the enforcement of any effective notice or order issued under this subtitle or 

subtitle B or may, under the direction and control of the Attorney 

General, bring such an action. Such court shall have jurisdiction 

and power to order and require compliance herewith.¿ 

(a) ENFORCEMENT.—The Director may, in the discretion of the Director, apply to the United States District Court for the District of 

Columbia, or the United States district court within the jurisdiction 

of which the headquarters of the regulated entity is located, for the 

enforcement of any effective and outstanding notice or order issued 

under this subtitle or subtitle B, or request that the Attorney General of the United States bring such an action. Such court shall 

have jurisdiction and power to order and require compliance with 

such notice or order. 

(b) LIMITATION ON JURISDICTION.—Except as otherwise provided 

in this subtitle and sections 1369 and 1369D, no court shall have 

jurisdiction to affect, by injunction or otherwise, the issuance or enforcement of any notice or order under section 1371, 1372, øor 

1376¿ 1376, or 1377, or subtitle B, or to review, modify, suspend, 

terminate, or set aside any such notice or order. 

SEC. 1375A. PREJUDGMENT ATTACHMENT. 

(a) IN GENERAL.—In any action brought pursuant to this title, or 

in actions brought in aid of, or to enforce an order in, any administrative or other civil action for money damages, restitution, or civil 

money penalties brought pursuant to this title, the court may, upon 

application of the Director or Attorney General, as applicable, issue 

a restraining order that— 

(1) prohibits any person subject to the proceeding from withdrawing, transferring, removing, dissipating, or disposing of 

any funds, assets or other property; and 

(2) appoints a person on a temporary basis to administer the 

restraining order. 

(b) STANDARD.— 

(1) SHOWING.—Rule 65 of the Federal Rules of Civil Procedure shall apply with respect to any proceeding under subsection (a) without regard to the requirement of such rule that 

the applicant show that the injury, loss, or damage is irreparable and immediate. 

(2) STATE PROCEEDING.—If, in the case of any proceeding in 

a State court, the court determines that rules of civil procedure 

available under the laws of such State provide substantially 

similar protections to a party’s right to due process as Rule 65 

(as modified with respect to such proceeding by paragraph (1)), 

236 

the relief sought under subsection (a) may be requested under 

the laws of such State. 

SEC. 1376. CIVIL MONEY PENALTIES. 

(a) IN GENERAL.—The Director may impose a civil money penalty 

in accordance with this section on øany enterprise¿ any regulated 

entity, øor any executive officer or¿ any executive officer of a regulated entity, any regulated entity-affiliated party, or any director of 

øany enterprise¿ any regulated entity, that— 

(1) violates any provision of this title, øthe Federal National 

Mortgage Association Charter Act, the Federal Home Loan 

Mortgage Corporation Act¿ any provision of any of the authorizing statutes, or any order, rule, or regulation under any such 

title øor Act¿ or statute, except that the Director may not enforce compliance with any housing goal established under subpart B of part 2 of subtitle A of this title, with section 1336 

or 1337 of this title, or with subsection (m) or (n) of section 309 

of the Federal National Mortgage Association Charter Act øor 

subsection¿, subsection (e) or (f) of section 307 of the Federal 

Home Loan Mortgage Corporation Act, or paragraph (5) or (12) 

of section 10(j) of the Federal Home Loan Bank Act; 

* * * * * * * 

(3) violates any written agreement between øthe enterprise¿ 

the regulated entity and the Director; or 

(4) engages in any conduct that causes or is likely to cause 

a loss to øthe enterprise¿ the regulated entity. ø(b) AMOUNT OF PENALTY.— ø(1) FIRST TIER.—The Director may impose a penalty on an 

enterprise for any violation described in paragraphs (1) 

through (3) of subsection (a). The amount of a penalty under 

this paragraph shall not exceed $5,000 for each day that a violation continues. 

ø(2) SECOND TIER.—The Director may impose a penalty on 

an executive officer or director in an amount not to exceed 

$10,000, or on an enterprise in an amount not to exceed 

$25,000, for each day that a violation or conduct described in 

subsection (a) continues, if the Director finds that the violation 

or conduct— 

ø(A) is part of a pattern of misconduct; or 

ø(B) involved recklessness and caused or would be likely 

to cause a material loss to the enterprise. 

ø(3) THIRD TIER.—The Director may impose a penalty on an 

executive officer or director in an amount not to exceed 

$100,000, or on an enterprise in an amount not to exceed 

$1,000,000, for each day that a violation or conduct described 

in subsection (a) continues, if the Director finds that the violation or conduct was knowing and caused or would be likely to 

cause a substantial loss to the enterprise.¿ 

(b) AMOUNT OF PENALTY.— (1) FIRST TIER.—Any regulated entity which, or any regulated 

entity-affiliated party who— 

(A) violates any provision of this title, any provision of 

any of the authorizing statutes, or any order, condition, 

rule, or regulation under any such title or statute, except 

that the Director may not, pursuant to this section, enforce 

237 

compliance with any housing goal established under subpart B of part 2 of subtitle A of this title, with section 1336 

or 1337 of this title, with subsection (m) or (n) of section 

309 of the Federal National Mortgage Association Charter 

Act (12 U.S.C. 1723a(m), (n)), with subsection (e) or (f) of 

section 307 of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1456(e), (f)), or with paragraph (5) or 

(12) of section 10(j) of the Federal Home Loan Bank Act; 

(B) violates any final or temporary order or notice issued 

pursuant to this title; 

(C) violates any condition imposed in writing by the Director in connection with the grant of any application or 

other request by such regulated entity; 

(D) violates any written agreement between the regulated 

entity and the Director; or 

(E) engages in any conduct the Director determines to be 

an unsafe or unsound practice, shall forfeit and pay a civil 

penalty of not more than $10,000 for each day during 

which such violation continues. 

(2) SECOND TIER.—Notwithstanding paragraph (1)— 

(A) if a regulated entity, or a regulated entity-affiliated 

party— 

(i) commits any violation described in any subparagraph of paragraph (1); 

(ii) recklessly engages in an unsafe or unsound practice in conducting the affairs of such regulated entity; 

or 

(iii) breaches any fiduciary duty; and 

(B) the violation, practice, or breach— 

(i) is part of a pattern of misconduct; 

(ii) causes or is likely to cause more than a minimal 

loss to such regulated entity; or 

(iii) results in pecuniary gain or other benefit to such 

party, the regulated entity or regulated entity-affiliated 

party shall forfeit and pay a civil penalty of not more 

than $50,000 for each day during which such violation, 

practice, or breach continues. 

(3) THIRD TIER.—Notwithstanding paragraphs (1) and (2), 

any regulated entity which, or any regulated entity-affiliated 

party who— 

(A) knowingly— 

(i) commits any violation or engages in any conduct 

described in any subparagraph of paragraph (1); 

(ii) engages in any unsafe or unsound practice in 

conducting the affairs of such regulated entity; or 

(iii) breaches any fiduciary duty; and 

(B) knowingly or recklessly causes a substantial loss to 

such regulated entity or a substantial pecuniary gain or 

other benefit to such party by reason of such violation, 

practice, or breach, shall forfeit and pay a civil penalty in 

an amount not to exceed the applicable maximum amount 

determined under paragraph (4) for each day during which 

such violation, practice, or breach continues. 

(4) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION DESCRIBED IN PARAGRAPH (3).—The maximum daily amount of 

238 

any civil penalty which may be assessed pursuant to paragraph 

(3) for any violation, practice, or breach described in such paragraph is— 

(A) in the case of any person other than a regulated enti- ty, an amount not to exceed $2,000,000; and (B) in the case of any regulated entity, $2,000,000. 

(c) PROCEDURES.— (1) ESTABLISHMENT.—The Director shall establish standards 

and procedures governing the imposition of civil money penalties under subsections (a) and (b). Such standards and procedures— 

(A) shall provide for the Director to notify øthe enterprise¿ the regulated entity in writing of the Director’s determination to impose the penalty, which shall be made on 

the record; 

(B) shall provide for the imposition of a penalty only 

after the øenterprise, executive officer, or director¿ regulated entity or regulated entity-affiliated party has been 

given an opportunity for a hearing on the record pursuant 

to section 1373; and 

(C) may provide for review by the Director of any determination or order, or interlocutory ruling, arising from a 

hearing. 

(2) FACTORS IN DETERMINING AMOUNT OF PENALTY.—In determining the amount of a penalty under this section, the Director shall give consideration to such factors as the gravity of the 

violation, any history of prior violations, the effect of the penalty on the safety and soundness of øthe enterprise¿ the regulated entity, any injury to the public, any benefits received, and 

deterrence of future violations, and any other factors the Director may determine by regulation to be appropriate. 

(3) REVIEW OF IMPOSITION OF PENALTY.—The order of the Director imposing a penalty under this section shall not be subject to review, except as provided in section 1374. 

(d) ACTION TO COLLECT PENALTY.—øIf an enterprise, executive 

officer, or director fails to comply with an order of the Director imposing a civil money penalty under this section, after the order is 

no longer subject to review as provided under subsection (c)(1) and 

section 1374, the Director may request the Attorney General of the 

United States to bring an action in the United States District 

Court for the District of Columbia to obtain a monetary judgment 

against the enterprise, executive officer, or director and such other 

relief as may be available, or may, under the direction and control 

of the Attorney General, bring such an action.¿ If a regulated entity 

or regulated entity-affiliated party fails to comply with an order of 

the Director imposing a civil money penalty under this section, after 

the order is no longer subject to review as provided under subsection 

(c)(1) and section 1374, the Director may, in the discretion of the Director, bring an action in the United States District Court for the 

District of Columbia, or the United States district court within the 

jurisdiction of which the headquarters of the regulated entity is located, to obtain a monetary judgment against the regulated entity 

or regulated entity affiliated party and such other relief as may be 

available, or request that the Attorney General of the United States 

bring such an action. The monetary judgment may, in the discreVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00238 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
239 

tion of the court, include any attorneys fees and other expenses incurred by the United States in connection with the action. In an 

action under this subsection, the validity and appropriateness of 

the order of the Director imposing the penalty shall not be subject 

to review. 

* * * * * * * 

(g) PROHIBITION OF REIMBURSEMENT OR INDEMNIFICATION.—øAn 

enterprise¿ A regulated entity may not reimburse or indemnify any 

individual for any penalty imposed under øsubsection (b)(3)¿ this 

section, unless authorized by the Director by rule, regulation, or 

order. 

* * * * * * * 

SEC. 1377. REMOVAL AND PROHIBITION AUTHORITY. 

(a) AUTHORITY TO ISSUE ORDER.—Whenever the Director determines that— 

(1) any regulated entity-affiliated party has, directly or indirectly— 

(A) violated— 

(i) any law or regulation; 

(ii) any cease-and-desist order which has become 

final; 

(iii) any condition imposed in writing by the Director 

in connection with the grant of any application or other 

request by such regulated entity; or 

(iv) any written agreement between such regulated 

entity and the Director; 

(B) engaged or participated in any unsafe or unsound 

practice in connection with any regulated entity; or 

(C) committed or engaged in any act, omission, or practice which constitutes a breach of such party’s fiduciary 

duty; 

(2) by reason of the violation, practice, or breach described in 

any subparagraph of paragraph (1)— 

(A) such regulated entity has suffered or will probably 

suffer financial loss or other damage; or 

(B) such party has received financial gain or other benefit 

by reason of such violation, practice, or breach; and 

(3) such violation, practice, or breach— 

(A) involves personal dishonesty on the part of such 

party; or 

(B) demonstrates willful or continuing disregard by such 

party for the safety or soundness of such regulated entity, 

the Director may serve upon such party a written notice of 

the Director’s intention to remove such party from office or 

to prohibit any further participation by such party, in any 

manner, in the conduct of the affairs of any regulated entity. 

(b) SUSPENSION ORDER.— 

(1) SUSPENSION OR PROHIBITION AUTHORITY.—If the Director 

serves written notice under subsection (a) to any regulated entity-affiliated party of the Director’s intention to issue an order 

under such subsection, the Director may— 

240 

(A) suspend such party from office or prohibit such party 

from further participation in any manner in the conduct of 

the affairs of the regulated entity, if the Director— 

(i) determines that such action is necessary for the 

protection of the regulated entity; and 

(ii) serves such party with written notice of the suspension order; and 

(B) prohibit the regulated entity from releasing to or on 

behalf of the regulated entity-affiliated party any compensation or other payment of money or other thing of current or potential value in connection with any resignation, 

removal, retirement, or other termination of employment or 

office of the party. 

(2) EFFECTIVE PERIOD.—Any suspension order issued under 

this subsection— 

(A) shall become effective upon service; and 

(B) unless a court issues a stay of such order under subsection (g) of this section, shall remain in effect and enforceable until— 

(i) the date the Director dismisses the charges contained in the notice served under subsection (a) with 

respect to such party; or 

(ii) the effective date of an order issued by the Director to such party under subsection (a). 

(3) COPY OF ORDER.—If the Director issues a suspension order 

under this subsection to any regulated entity-affiliated party, 

the Director shall serve a copy of such order on any regulated 

entity with which such party is affiliated at the time such order 

is issued. 

(c) NOTICE, HEARING, AND ORDER.—A notice of intention to remove a regulated entity-affiliated party from office or to prohibit 

such party from participating in the conduct of the affairs of a regulated entity shall contain a statement of the facts constituting 

grounds for such action, and shall fix a time and place at which 

a hearing will be held on such action. Such hearing shall be fixed 

for a date not earlier than 30 days nor later than 60 days after the 

date of service of such notice, unless an earlier or a later date is set 

by the Director at the request of (1) such party, and for good cause 

shown, or (2) the Attorney General of the United States. Unless such 

party shall appear at the hearing in person or by a duly authorized 

representative, such party shall be deemed to have consented to the 

issuance of an order of such removal or prohibition. In the event of 

such consent, or if upon the record made at any such hearing the 

Director shall find that any of the grounds specified in such notice 

have been established, the Director may issue such orders of suspension or removal from office, or prohibition from participation in the 

conduct of the affairs of the regulated entity, as it may deem appropriate, together with an order prohibiting compensation described in 

subsection (b)(1)(B). Any such order shall become effective at the expiration of 30 days after service upon such regulated entity and 

such party (except in the case of an order issued upon consent, 

which shall become effective at the time specified therein). Such 

order shall remain effective and enforceable except to such extent as 

it is stayed, modified, terminated, or set aside by action of the Director or a reviewing court. 

241 

(d) PROHIBITION OF CERTAIN SPECIFIC ACTIVITIES.—Any person 

subject to an order issued under this section shall not— 

(1) participate in any manner in the conduct of the affairs of 

any regulated entity; 

(2) solicit, procure, transfer, attempt to transfer, vote, or attempt to vote any proxy, consent, or authorization with respect 

to any voting rights in any regulated entity; 

(3) violate any voting agreement previously approved by the 

Director; or 

(4) vote for a director, or serve or act as a regulated entityaffiliated party. 

(e) INDUSTRY-WIDE PROHIBITION.— (1) IN GENERAL.—Except as provided in paragraph (2), any 

person who, pursuant to an order issued under this section, has 

been removed or suspended from office in a regulated entity or 

prohibited from participating in the conduct of the affairs of a 

regulated entity may not, while such order is in effect, continue 

or commence to hold any office in, or participate in any manner 

in the conduct of the affairs of, any regulated entity. 

(2) EXCEPTION IF DIRECTOR PROVIDES WRITTEN CONSENT.—If, 

on or after the date an order is issued under this section which 

removes or suspends from office any regulated entity-affiliated 

party or prohibits such party from participating in the conduct 

of the affairs of a regulated entity, such party receives the written consent of the Director, the order shall, to the extent of such 

consent, cease to apply to such party with respect to the regulated entity described in the written consent. If the Director 

grants such a written consent, it shall publicly disclose such 

consent. 

(3) VIOLATION OF PARAGRAPH (1) TREATED AS VIOLATION OF

ORDER.—Any violation of paragraph (1) by any person who is 

subject to an order described in such subsection shall be treated 

as a violation of the order. 

(f) APPLICABILITY.—This section shall only apply to a person who 

is an individual, unless the Director specifically finds that it should 

apply to a corporation, firm, or other business enterprise. 

(g) STAY OF SUSPENSION AND PROHIBITION OF REGULATED ENTI- TY-AFFILIATED PARTY.—Within 10 days after any regulated entityaffiliated party has been suspended from office and/or prohibited 

from participation in the conduct of the affairs of a regulated entity 

under this section, such party may apply to the United States District Court for the District of Columbia, or the United States district 

court for the judicial district in which the headquarters of the regulated entity is located, for a stay of such suspension and/or prohibition and any prohibition under subsection (b)(1)(B) pending the 

completion of the administrative proceedings pursuant to the notice 

served upon such party under this section, and such court shall 

have jurisdiction to stay such suspension and/or prohibition. 

(h) SUSPENSION OR REMOVAL OF REGULATED ENTITY-AFFILIATED

PARTY CHARGED WITH FELONY.— (1) SUSPENSION OR PROHIBITION.— 

(A) IN GENERAL.—Whenever any regulated entity-affiliated party is charged in any information, indictment, or 

complaint, with the commission of or participation in a 

crime involving dishonesty or breach of trust which is punVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00241 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
242 

ishable by imprisonment for a term exceeding one year 

under State or Federal law, the Director may, if continued 

service or participation by such party may pose a threat to 

the regulated entity or impair public confidence in the regulated entity, by written notice served upon such party— 

(i) suspend such party from office or prohibit such 

party from further participation in any manner in the 

conduct of the affairs of any regulated entity; and 

(ii) prohibit the regulated entity from releasing to or 

on behalf of the regulated entity-affiliated party any 

compensation or other payment of money or other thing 

of current or potential value in connection with the period of any such suspension or with any resignation, 

removal, retirement, or other termination of employment or office of the party. 

(B) PROVISIONS APPLICABLE TO NOTICE.— (i) COPY.—A copy of any notice under paragraph 

(1)(A) shall also be served upon the regulated entity. 

(ii) EFFECTIVE PERIOD.—A suspension or prohibition 

under subparagraph (A) shall remain in effect until the 

information, indictment, or complaint referred to in 

such subparagraph is finally disposed of or until terminated by the Director. 

(2) REMOVAL OR PROHIBITION.— (A) IN GENERAL.—If a judgment of conviction or an 

agreement to enter a pretrial diversion or other similar program is entered against a regulated entity-affiliated party 

in connection with a crime described in paragraph (1)(A), 

at such time as such judgment is not subject to further appellate review, the Director may, if continued service or participation by such party may pose a threat to the regulated 

entity or impair public confidence in the regulated entity, 

issue and serve upon such party an order that— 

(i) removes such party from office or prohibits such 

party from further participation in any manner in the 

conduct of the affairs of the regulated entity without 

the prior written consent of the Director; and 

(ii) prohibits the regulated entity from releasing to or 

on behalf of the regulated entity-affiliated party any 

compensation or other payment of money or other thing 

of current or potential value in connection with the termination of employment or office of the party. 

(B) PROVISIONS APPLICABLE TO ORDER.— 

(i) COPY.—A copy of any order under paragraph 

(2)(A) shall also be served upon the regulated entity, 

whereupon the regulated entity-affiliated party who is 

subject to the order (if a director or an officer) shall 

cease to be a director or officer of such regulated entity. 

(ii) EFFECT OF ACQUITTAL.—A finding of not guilty 

or other disposition of the charge shall not preclude the 

Director from instituting proceedings after such finding 

or disposition to remove such party from office or to 

prohibit further participation in regulated entity affairs, and to prohibit compensation or other payment of 

money or other thing of current or potential value in 

243 

connection with any resignation, removal, retirement, 

or other termination of employment or office of the 

party, pursuant to subsections (a), (d), or (e) of this section. 

(iii) EFFECTIVE PERIOD.—Any notice of suspension or 

order of removal issued under this subsection shall remain effective and outstanding until the completion of 

any hearing or appeal authorized under paragraph (4) 

unless terminated by the Director. 

(3) AUTHORITY OF REMAINING BOARD MEMBERS.—If at any 

time, because of the suspension of one or more directors pursuant to this section, there shall be on the board of directors of 

a regulated entity less than a quorum of directors not so suspended, all powers and functions vested in or exercisable by 

such board shall vest in and be exercisable by the director or 

directors on the board not so suspended, until such time as 

there shall be a quorum of the board of directors. In the event 

all of the directors of a regulated entity are suspended pursuant 

to this section, the Director shall appoint persons to serve temporarily as directors in their place and stead pending the termination of such suspensions, or until such time as those who 

have been suspended cease to be directors of the regulated entity 

and their respective successors take office. 

(4) HEARING REGARDING CONTINUED PARTICIPATION.—Within 

30 days from service of any notice of suspension or order of removal issued pursuant to paragraph (1) or (2) of this subsection, the regulated entity-affiliated party concerned may request in writing an opportunity to appear before the Director to 

show that the continued service to or participation in the conduct of the affairs of the regulated entity by such party does not, 

or is not likely to, pose a threat to the interests of the regulated 

entity or threaten to impair public confidence in the regulated 

entity. Upon receipt of any such request, the Director shall fix 

a time (not more than 30 days after receipt of such request, unless extended at the request of such party) and place at which 

such party may appear, personally or through counsel, before 

one or more members of the Director or designated employees of 

the Director to submit written materials (or, at the discretion of 

the Director, oral testimony) and oral argument. Within 60 days 

of such hearing, the Director shall notify such party whether the 

suspension or prohibition from participation in any manner in 

the conduct of the affairs of the regulated entity will be continued, terminated, or otherwise modified, or whether the order removing such party from office or prohibiting such party from 

further participation in any manner in the conduct of the affairs of the regulated entity, and prohibiting compensation in 

connection with termination will be rescinded or otherwise 

modified. Such notification shall contain a statement of the 

basis for the Director’s decision, if adverse to such party. The 

Director is authorized to prescribe such rules as may be necessary to effectuate the purposes of this subsection. 

(i) HEARINGS AND JUDICIAL REVIEW.— (1) VENUE AND PROCEDURE.—Any hearing provided for in 

this section shall be held in the District of Columbia or in the 

Federal judicial district in which the headquarters of the reguVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00243 Fmt 6659 Sfmt 6603 E:\HR\OC\HR171P1.XXX HR171P1
244 

lated entity is located, unless the party afforded the hearing 

consents to another place, and shall be conducted in accordance 

with the provisions of chapter 5 of title 5, United States Code. 

After such hearing, and within 90 days after the Director has 

notified the parties that the case has been submitted to it for 

final decision, it shall render its decision (which shall include 

findings of fact upon which its decision is predicated) and shall 

issue and serve upon each party to the proceeding an order or 

orders consistent with the provisions of this section. Judicial review of any such order shall be exclusively as provided in this 

subsection. Unless a petition for review is timely filed in a court 

of appeals of the United States, as provided in paragraph (2), 

and thereafter until the record in the proceeding has been filed 

as so provided, the Director may at any time, upon such notice 

and in such manner as it shall deem proper, modify, terminate, 

or set aside any such order. Upon such filing of the record, the 

Director may modify, terminate, or set aside any such order 

with permission of the court. 

(2) REVIEW OF ORDER.—Any party to any proceeding under 

paragraph (1) may obtain a review of any order served pursuant to paragraph (1) (other than an order issued with the consent of the regulated entity or the regulated entity-affiliated 

party concerned, or an order issued under subsection (h) of this 

section) by the filing in the United States Court of Appeals for 

the District of Columbia Circuit or court of appeals of the 

United States for the circuit in which the headquarters of the 

regulated entity is located, within 30 days after the date of service of such order, a written petition praying that the order of 

the Director be modified, terminated, or set aside. A copy of 

such petition shall be forthwith transmitted by the clerk of the 

court to the Director, and thereupon the Director shall file in 

the court the record in the proceeding, as provided in section 

2112 of title 28, United States Code. Upon the filing of such petition, such court shall have jurisdiction, which upon the filing 

of the record shall (except as provided in the last sentence of 

paragraph (1)) be exclusive, to affirm, modify, terminate, or set 

aside, in whole or in part, the order of the Director. Review of 

such proceedings shall be had as provided in chapter 7 of title 

5, United States Code. The judgment and decree of the court 

shall be final, except that the same shall be subject to review 

by the Supreme Court upon certiorari, as provided in section 

1254 of title 28, United States Code. 

(3) PROCEEDINGS NOT TREATED AS STAY.—The commencement 

of proceedings for judicial review under paragraph (2) shall 

not, unless specifically ordered by the court, operate as a stay 

of any order issued by the Director. 

SEC. 1378. CRIMINAL PENALTY. 

Whoever, being subject to an order in effect under section 1377, 

without the prior written approval of the Director, knowingly participates, directly or indirectly, in any manner (including by engaging in an activity specifically prohibited in such an order) in the 

conduct of the affairs of any regulated entity shall, notwithstanding 

section 3571 of title 18, be fined not more than $1,000,000, imprisoned for not more than 5 years, or both. 

245 

SEC. ø1377¿ 1379. NOTICE AFTER SEPARATION FROM SERVICE. 

The resignation, termination of employment or participation, or 

separation of a director or executive officer of øan enterprise¿ a 

regulated entity, or of a regulated entity-affiliated party, shall not 

affect the jurisdiction and authority of the Director to issue any notice and proceed under this subtitle against any øsuch director or 

executive officer¿ such director, executive officer, or regulated entityaffiliated party, if such notice is served before the end of the 2-year 

period beginning on the date øsuch director or executive officer¿ 

such director, executive officer, or regulated entity-affiliated party 

ceases to be associated with øthe enterprise¿ the regulated entity. 

SEC. ø1378¿ 1379A. PRIVATE RIGHTS OF ACTION. 

This title and the amendments made by this title shall not create 

any private right of action on behalf of any person against øan enterprise¿ a regulated entity, or any director or executive officer of 

øan enterprise¿ a regulated entity, or against a regulated entity-affiliated party, or impair any existing private right of action under 

other applicable law. 

SEC. ø1379¿ 1379B. PUBLIC DISCLOSURE OF FINAL ORDERS AND 

AGREEMENTS. 

(a) * * * 

* * * * * * * 

(c) DELAY OF PUBLIC DISCLOSURE UNDER EXCEPTIONAL CIRCUMSTANCES.—If the Director makes a determination in writing 

that the public disclosure of any final order pursuant to subsection 

(a) would seriously threaten the financial health or security of øthe 

enterprise¿ the regulated entity, the Director may delay the public 

disclosure of such order for a reasonable time. 

* * * * * * * 

SEC. ø1379A¿ 1379C. NOTICE OF SERVICE. 

Any service required or authorized to be made by the Director 

under this subtitle may be made by registered mail, or in such 

other manner reasonably calculated to give actual notice as the Director may by regulation or otherwise provide. 

SEC. ø1379B¿ 1379D. SUBPOENA AUTHORITY. 

(a) * * * 

* * * * * * * 

(c) ENFORCEMENT.—The Director may ørequest the Attorney 

General of the United States to¿, in the discretion of the Director, 

bring an action in the United States district court for the judicial 

district in which such proceeding is being conducted, or where the 

witness resides or conducts business, or the United States District 

Court for the District of Columbia, or request that the Attorney General of the United States bring such an action, for enforcement of 

any subpoena or subpoena duces tecum issued pursuant to this section øor may, under the direction and control of the Attorney General, bring such an action¿. Such courts shall have jurisdiction and 

power to order and require compliance therewith. 

(d) FEES AND EXPENSES.—Witnesses subpoenaed under this section shall be paid the same fees and mileage that are paid witnesses in the district courts of the United States. Any court having 

jurisdiction of any proceeding instituted under this section by øan 

246 

enterprise¿ a regulated entity may allow to any such party such 

reasonable expenses and attorneys fees as the court deems just and 

proper. Such expenses and fees shall be paid by øthe enterprise¿ 

the regulated entity or from its assets. 

Subtitle D—Amendments to Charter Acts 

of Enterprises 

* * * * * * * 

øSEC. 1383. IMPLEMENTATION. 

ø(a) IN GENERAL.—The Secretary of Housing and Urban Development and the Director, as appropriate, shall issue any final regulations necessary to implement the amendments made by this subtitle not later than the expiration of the 18-month period beginning 

on the date of the enactment of this Act. 

ø(b) NOTICE AND COMMENT.—The regulations under this section 

shall be issued after notice and opportunity for public comment 

pursuant to the provisions of section 553 of title 5, United States 

Code.¿ 

* * * * * * * 

SECTION 111 OF THE ACT OF OCTOBER 28, 1974 

(Public Law 93–495) 

AN ACT To increase deposit insurance from $20,000 to $40,000, to provide full insurance for public unit deposits of $100,000 per account, to establish a National 

Commission on Electronic Fund Transfers, and for other purposes. 

INDEPENDENCE OF FINANCIAL REGULATORY AGENCIES

SEC. 111. No officer or agency of the United States shall have 

any authority to require the Securities and Exchange Commission, 

the Board of Governors of the Federal Reserve System, the Federal 

Deposit Insurance Corporation, the Comptroller of the Currency, 

the Director of the Office of Thrift Supervision, øthe Federal Housing Finance Board¿ the Director of the Federal Housing Finance 

Agency, or the National Credit Union Administration to submit legislative recommendations, or testimony, or comments on legislation, to any officer or agency of the United States for approval, 

comments, or review, prior to the submission of such recommendations, testimony, or comments to the Congress if such recommendations, testimony, or comments to the Congress include a statement 

indicating that the views expressed therein are those of the agency 

submitting them and do not necessarily represent the views of the 

President. 

FEDERAL HOME LOAN BANK ACT 

Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, That this Act may 

be cited as the ‘‘Federal Home Loan Bank Act.’’ 

247 

DEFINITIONS

SEC. 2. As used in this Act— 

ø(1) BOARD.—The terms ‘‘Finance Board’’ and ‘‘Board’’ mean 

the Federal Housing Finance Board established under section 

2A.¿ 

ø(2)¿ (1)(A) BANK.—The term ‘‘Federal Home Loan Bank’’ or 

‘‘Bank’’ means a bank established under the authority of the 

Federal Home Loan Bank Act. 

(B) BANK SYSTEM.—The term ‘‘Federal Home Loan Bank System’’ means the Federal Home Loan Banks under the supervision of øthe Board¿ the Director. 

ø(3)¿ (2) STATE.—The term ‘‘State’’, in addition to the States 

of the United States, includes the District of Columbia, Guam, 

Puerto Rico, the United States Virgin Islands, American 

Samoa, and the Commonwealth of the Northern Mariana Islands. 

ø(4)¿ (3) The term ‘‘member’’ means any institution which has 

subscribed for the stock of a Federal Home Loan Bank. 

ø(5)¿ (4) The term ‘‘home mortgage loan’’ means a loan made by 

a member upon the security of a home mortgage. 

ø(6)¿ (5) The term ‘‘home mortgage’’ means a mortgage upon real 

estate, in fee simple, or on a leasehold (1) under a lease for not less 

than ninety-nine years which is renewable or (2) under a lease having a period of not less than fifty years to run from the date the 

mortgage was executed, upon which is located, or which comprises 

or includes, one or more homes or other dwelling units, all of which 

may be defined by øthe Board¿ the Director, and shall include, in 

addition to first mortgages, such classes of first liens as are commonly given to secure advances on real estate by institutions authorized under this Act to become members, under the laws of the 

State in which the real estate is located, together with the credit 

instruments, if any, secured thereby. 

ø(7)¿ (6) The term ‘‘unpaid principal,’’ when used in respect of a 

loan secured by a home mortgage means the principal thereof less 

the sum of (1) payments made on such principal, and (2) in cases 

where shares or stock are pledged as security for the loan, the payments made on such shares or stock plus earnings or dividends apportioned or credited thereon. 

ø(8)¿ (7) An ‘‘amortized’’ or ‘‘installment’’ home mortgage loan 

shall, for the purposes of this Act, be a home mortgage loan to be 

repaid or liquidated in not less than eight years by means of regular weekly, monthly, or quarterly payments made directly in reduction of the debt or upon stock or shares pledged as collateral for 

the repayment of such loan. 

ø(9)¿ (8) SAVINGS ASSOCIATION.—The term ‘‘savings association’’ has the meaning given to such term in section 3 of the 

Federal Deposit Insurance Act. 

ø(10) CHAIRPERSON.—The term ‘‘Chairperson’’ means the 

Chairperson of the Board. 

ø(11) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of Housing and Urban Development.¿ 

ø(12)¿ (9) INSURED DEPOSITORY INSTITUTION.—The term ‘‘insured depository institution’’ means— 

248 

(A) an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act), and 

(B) except as used in sections 21A and 21B, an insured 

credit union (as defined in section 101 of the Federal Credit Union Act). 

ø(13)¿ (10) COMMUNITY FINANCIAL INSTITUTION.— 

(A) IN GENERAL.—The term ‘‘community financial institution’’ means a member— 

(i) the deposits of which are insured under the Federal Deposit Insurance Act; and 

(ii) that has, as of the date of the transaction at 

issue, less than ø$500,000,000¿ $1,000,000,000 in average total assets, based on an average of total assets 

over the 3 years preceding that date. 

(B) ADJUSTMENTS.—The ø$500,000,000¿ $1,000,000,000 

limit referred to in subparagraph (A)(ii) shall be adjusted 

annually by øthe Finance Board¿ the Director, based on 

the annual percentage increase, if any, in the Consumer 

Price Index for all urban consumers, as published by the 

Department of Labor. 

(11) DIRECTOR.—The term ‘‘Director’’ means the Director of 

the Federal Housing Finance Agency. 

(12) AGENCY.—The term ‘‘Agency’’ means the Federal Housing 

Finance Agency. 

øSEC. 2A. FEDERAL HOUSING FINANCE BOARD. 

ø(a) ESTABLISHMENT.— 

ø(1) IN GENERAL.—There is established the Federal Housing 

Finance Board, which shall succeed to the authority of the Federal Home Loan Bank Board with respect to the Federal Home 

Loan Banks. 

ø(2) STATUS.—The Board shall be an independent agency in 

the executive branch of the Government. 

ø(3) DUTIES.— 

ø(A) SAFETY AND SOUNDNESS.—The primary duty of the 

Board shall be to ensure that the Federal Home Loan Banks 

operate in a financially safe and sound manner. 

ø(B) OTHER DUTIES.—To the extent consistent with subparagraph (A), the duties of the Board shall also be— 

ø(i) to supervise the Federal Home Loan Banks; 

ø(ii) to ensure that the Federal Home Loan Banks carry 

out their housing finance mission; and 

ø(iii) to ensure that the Federal Home Loan Banks remain adequately capitalized and able to raise funds in the 

capital markets. 

ø(b) MANAGEMENT.— 

ø(1) IN GENERAL.—The management of the Board shall be 

vested in a Board of Directors consisting of 5 directors as follows: 

ø(A) The Secretary who shall serve without additional 

compensation. 

ø(B) Four citizens of the United States, appointed by the 

President, by and with the advice and consent of the Senate, each of whom shall hold office for a term of 7 years. 

ø(2) PROVISIONS RELATING TO APPOINTED DIRECTORS.— 

249 

ø(A) IN GENERAL.—The directors appointed pursuant to 

paragraph (1)(B) shall be from among persons with extensive experience or training in housing finance or with a 

commitment to providing specialized housing credit. An 

appointed director shall not hold any other appointed office 

during his or her term as director. Not more than 3 directors shall be members of the same political party. Not 

more than 1 appointed director shall be from any single 

district of the Federal Home Loan Bank System. Nominations pursuant to this subparagraph shall be referred in 

the Senate to the Committee on Banking, Housing, and 

Urban Affairs. 

ø(B) CONSUMER REPRESENTATIVE.—At least 1 director 

shall be chosen from an organization with more than a 2- 

year history of representing consumer or community interests on banking services, credit needs, housing, or financial consumer protections. 

ø(C) LIMITATIONS ON CONFLICTS OF INTEREST.—No director may— 

ø(i) serve as a director or officer of any Federal 

Home Loan Bank or any member of any Bank; or 

ø(ii) hold shares of, or any other financial interest 

in, any member of any such Bank. 

ø(D) CLARIFICATION OF STATUS.— ø(i) IN GENERAL.—The directors appointed pursuant 

to paragraph (1)(B) shall serve on a full-time basis 

after December 31, 1993. 

ø(ii) RULE OF CONSTRUCTION.—Clause (i) shall not 

be construed as implying that any other position may 

be filled or held on a less than full-time basis. 

ø(3) INITIAL TERMS.—Notwithstanding paragraph (2), of the 

directors first appointed— 

ø(A) one shall be appointed for a term of 1 year; 

ø(B) one shall be appointed for a term of 3 years; and 

ø(C) one shall be appointed for a term of 5 years. 

ø(c) CHAIRPERSON; TRANSITIONAL PROVISIONS.— ø(1) IN GENERAL.—The President shall designate 1 of the appointed directors to be the Chairperson of the Board. The 

Chairperson shall designate another director to serve as Acting 

Chairperson during the absence or disability of the Chairperson. 

ø(2) TRANSITIONAL PROVISION.—Beginning on the date of enactment of the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989, until such time that at least 2 directors are appointed and confirmed pursuant to subsection (b), 

the Secretary shall act for all purposes and with the full powers of the Board of Directors. The Secretary may utilize the 

services of employees from the Department of Housing and 

Urban Development to perform services for the Board of Directors during such transition period. 

ø(d) VACANCIES.— 

ø(1) IN GENERAL.—Any vacancy on the Board of Directors 

shall be filled in the manner in which the original appointment 

was made. Any director appointed to fill a vacancy occurring 

before the expiration of the term for which such director’s predVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00249 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
250 

ecessor was appointed shall be appointed only for the remainder of such term. Each director may continue to serve until a 

successor has been appointed and qualified. 

ø(2) THE SECRETARY.—In the event of a vacancy in the office 

of Secretary or during the absence or disability of the Secretary, the Acting Secretary shall act as a director in place of 

the Secretary. 

øSEC. 2B. POWERS AND DUTIES. 

ø(a) GENERAL POWERS.—The Board shall have the following powers: 

ø(1) To supervise the Federal Home Loan Banks and to promulgate and enforce such regulations and orders as are necessary from time to time to carry out the provisions of this Act. 

ø(2) To suspend or remove for cause a director, officer, employee, or agent of any Federal Home Loan Bank or joint office. 

The cause of such suspension or removal shall be communicated in writing to such director, officer, employee, or agent 

and to such Bank or joint office. Notwithstanding any other 

provision of this Act, no officer, employee, or agent of a Bank 

or joint office shall be a Federal officer or employee under any 

definition of either term in title 5, United States Code. 

ø(3) To determine necessary expenditures of the Board under 

this Act and the manner in which such expenditures shall be 

incurred, allowed, and paid. 

ø(4) To use the United States mails in the same manner and 

under the same conditions as a department or agency of the 

United States. 

ø(5) To issue and serve a notice of charges upon a Federal 

home loan bank or upon any executive officer or director of a 

Federal home loan bank if, in the determination of the Finance 

Board, the Bank, executive officer, or director is engaging or 

has engaged in, or the Finance Board has reasonable cause to 

believe that the Bank, executive officer, or director is about to 

engage in an unsafe or unsound practice in conducting the 

business of the bank, or any conduct that violates any provision of this Act or any law, order, rule, or regulation or any 

condition imposed in writing by the Finance Board in connection with the granting of any application or other request by 

the Bank, or any written agreement entered into by the Bank 

with the agency, in accordance with the procedures provided in 

subsection (c) or (f) of section 1371 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. Such authority includes the same authority to issue an order requiring 

a party to take affirmative action to correct conditions resulting from violations or practices or to limit activities of a Bank 

or any executive officer or director of a Bank as appropriate 

Federal banking agencies have to take with respect to insured 

depository institutions under paragraphs (6) and (7) of section 

8(b) of the Federal Deposit Insurance Act, and to have all other 

powers, rights, and duties to enforce this Act with respect to 

the Federal home loan banks and their executive officers and 

directors as the Office of Federal Housing Enterprise Oversight 

has to enforce the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, the Federal National Mortgage 

Association Charter Act, or the Federal Home Loan Mortgage 

251 

Corporation Act with respect to the Federal housing enterprises under subtitle C (other than section 1371) of the Federal 

Housing Enterprises Financial Safety and Soundness Act of 

1992. 

ø(6) To address any insufficiencies in capital levels resulting 

from the application of section 5(f) of the Home Owners’ Loan 

Act. 

ø(7) To act in its own name and through its own attorneys— 

ø(A) in enforcing any provision of this Act or any regulation promulgated under this Act; or 

ø(B) in any action, suit, or proceeding to which the Finance Board is a party that involves the Board’s regulation 

or supervision of any Federal home loan bank. 

ø(b) STAFF.— ø(1) BOARD STAFF.—Subject to title IV of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the 

Board may employ, direct, and fix the compensation and number of employees, attorneys, and agents of the Federal Housing 

Finance Board, except that in no event shall the Board delegate any function to any employee, administrative unit of any 

Bank, or joint office of the Federal Home Loan Bank System. 

The prohibition contained in the preceding sentence shall not 

apply to the delegation of ministerial functions including 

issuing consolidated obligations pursuant to section 11(b). In 

directing and fixing such compensation, the Board shall consult with and maintain comparability with the compensation at 

the Federal bank regulatory agencies. Such compensation shall 

be paid without regard to the provisions of other laws applicable to officers or employees of the United States, except the 

Chairperson and other Directors shall be compensated as prescribed in sections 5314 and 5315 of title 5, United States 

Code, respectively. 

ø(2) ABOLITION OF JOINT OFFICES.—The joint or collective offices of the Federal Home Loan Bank System, except for the 

Office of Finance, are hereby abolished. 

ø(c) RECEIPTS OF THE BOARD.—Receipts of the Board derived 

from assessments levied upon the Federal Home Loan Banks and 

from other sources (other than receipts from the sale of consolidated Federal Home Loan Bank bonds and debentures issued 

under section 11 of this Act) shall be deposited in the Treasury of 

the United States. Salaries of the directors and other employees of 

the Board and all other expenses thereof may be paid from such 

assessments or other sources and shall not be construed to be Government Funds or appropriated monies, or subject to apportionment for the purposes of chapter 15 of title 31, United States Code, 

or any other authority. 

ø(d) ANNUAL REPORT.—The Board shall make an annual report 

to the Congress.¿ 

FEDERAL HOME LOAN BANKS

SEC. 3. As soon as practicable øthe Board¿ the Director shall divide the continental United States, Puerto Rico, the Virgin Islands, 

Guam, and the Territories of Alaska and Hawaii into not less than 

eight nor more than twelve districts. Such districts shall be apportioned with due regard to the convenience and customary course of 

252 

business of the institutions eligible to and likely to subscribe for 

stock of a Federal Home Loan Bank to be formed under this Act, 

but no such district shall contain a fractional part of any State. 

The districts thus created may be readjusted and new districts may 

from time to time be created by øthe Board¿ the Director, not to 

exceed twelve in all. Such districts shall be known as Federal 

Home Loan Bank districts and may be designated by number. As 

soon as practicable øthe Board¿ the Director shall establish, in each 

district, a Federal Home Loan Bank at such city as may be designated by øthe Board¿ the Director. Its title shall include the 

name of the city at which it is established. 

ELIGIBILITY OF MEMBERS AND NONMEMBER BORROWERS

SEC. 4. (a) CRITERIA FOR ELIGIBILITY.— 

(1) IN GENERAL.—Any building and loan association, savings 

and loan association, cooperative bank, homestead association, 

insurance company, savings bank, or any insured depository 

institution (as defined in section 2 of this Act), shall be eligible 

to become a member of a Federal Home Loan Bank if such institution— 

(A) is duly organized under the laws of any State or of 

the United States; 

(B) is subject to inspection and regulation under the 

banking laws, or under similar laws, of the State or of the 

United States; and 

(C) makes such home mortgage loans as, in the judgment of øthe Board¿ the Director, are long-term loans (except that in the case of a savings bank, this subparagraph 

applies only if, in the judgment of øthe Board¿ the Director, its time deposits, as defined in section 19 of the Federal Reserve Act, warrant its making such loans). 

* * * * * * * 

(3) CERTAIN INSTITUTIONS.—An insured depository institution commencing its initial business operations after January 

1, 1989, may become a member of a Federal Home Loan Bank 

if it complies with regulations and orders prescribed by øthe 

Board¿ the Director for the 10 percent asset requirement (described in the paragraph (2)) within one year after the commencement of its operations. 

* * * * * * * 

(b) An institution eligible to become a member under this section 

may become a member only of, or secure advances from, the Federal Home Loan Bank of the district in which is located the institution’s principal place of business, or of the bank of a district adjoining such district, if demanded by convenience and then only with 

the approval of øthe Board¿ the Director. 

(c) Notwithstanding the provisions of clause (2) of subsection (a) 

of this section requiring inspection and regulation under law as a 

condition with respect to eligibility for membership, any building 

and loan association which would be eligible to become a member 

of a Federal Home Loan Bank except for the fact that it is not subject to inspection and regulation under the banking laws or similar 

laws of the State in which such association is organized shall, upon 

253 

subjecting itself to such inspection and regulation as øthe Board¿ 

the Director shall prescribe, be eligible to become a member. 

SEC. 6. CAPITAL STRUCTURE OF FEDERAL HOME LOAN BANKS. 

(a) REGULATIONS.— 

(1) CAPITAL STANDARDS.—Not later than 18 months after the 

date of the enactment of the Federal Home Loan Bank System 

Modernization Act of 1999, øthe Finance Board¿ the Director 

shall issue regulations prescribing uniform capital standards 

applicable to each Federal home loan bank, which shall require 

each such bank to meet— 

(A) * * * 

* * * * * * * 

(3) RISK-BASED CAPITAL STANDARDS.— 

ø(A) IN GENERAL.—Each Federal home loan bank shall 

maintain permanent capital in an amount that is sufficient, as determined in accordance with the regulations of 

the Finance Board, to meet— 

ø(i) the credit risk to which the Federal home loan 

bank is subject; and 

ø(ii) the market risk, including interest rate risk, to 

which the Federal home loan bank is subject, based on 

a stress test established by the Finance Board that 

rigorously tests for changes in market variables, including changes in interest rates, rate volatility, and 

changes in the shape of the yield curve.¿ 

(A) RISK-BASED CAPITAL STANDARDS.—The Director shall, 

by regulation, establish risk-based capital standards for the 

Federal home loan banks to ensure that the Federal home 

loan banks operate in a safe and sound manner, with sufficient permanent capital and reserves to support the risks 

that arise in the operations and management of the Federal 

home loans banks. 

(B) CONSIDERATION OF OTHER RISK-BASED STANDARDS.— 

In establishing the risk-based standard under subparagraph ø(A)(ii)¿ (A), øthe Finance Board¿ the Director shall 

take due consideration of any risk-based capital test established pursuant to section 1361 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 

U.S.C. 4611) for the enterprises (as defined in that Act), 

with such modifications as øthe Finance Board¿ the Director determines to be appropriate to reflect differences in 

operations between the Federal home loan banks and 

those enterprises. 

(4) OTHER REGULATORY REQUIREMENTS.—The regulations 

issued by øthe Finance Board¿ the Director under paragraph 

(1) shall— 

(A) * * * 

* * * * * * * 

(5) DEFINITIONS OF CAPITAL.—For purposes of determining 

compliance with the capital standards established under this 

subsection— 

(A) * * * 

254 

(B) total capital of a Federal home loan bank shall include— 

(i) permanent capital; 

(ii) the amounts paid for the Class A stock; 

(iii) consistent with generally accepted accounting 

principles, and subject to the regulation of øthe Finance Board¿ the Director, a general allowance for 

losses, which may not include any reserves or allowances made or held against specific assets; and 

(iv) any other amounts from sources available to absorb losses incurred by the bank that øthe Finance 

Board¿ the Director determines by regulation to be appropriate to include in determining total capital. 

(6) TRANSITION PERIOD.—Notwithstanding any other provision of this Act, the requirements relating to purchase and retention of capital stock of a Federal home loan bank by any 

member thereof in effect on the day before the date of the enactment of the Federal Home Loan Bank System Modernization Act of 1999, shall continue in effect with respect to each 

Federal home loan bank until the regulations required by this 

subsection have taken effect and the capital structure plan required by subsection (b) has been approved by øthe Finance 

Board¿ the Director and implemented by such bank. 

(b) CAPITAL STRUCTURE PLAN.— 

(1) APPROVAL OF PLANS.—Not later than 270 days after the 

date of publication by øthe Finance Board¿ the Director of final 

regulations in accordance with subsection (a), the board of directors of each Federal home loan bank shall submit for øFinance Board approval¿ approval by the Director a plan establishing and implementing a capital structure for such bank 

that— 

(A) * * * 

* * * * * * * 

(C) meets the minimum capital standards and requirements established under subsection (a) and other regulations prescribed by øthe Finance Board¿ the Director. 

(2) APPROVAL OF MODIFICATIONS.—The board of directors of 

a Federal home loan bank shall submit to øthe Finance Board¿ 

the Director for approval any modifications that the bank proposes to make to an approved capital structure plan. 

(c) CONTENTS OF PLAN.—The capital structure plan of each Federal home loan bank shall contain provisions addressing each of the 

following: 

(1) MINIMUM INVESTMENT.— 

(A) * * * 

(B) INVESTMENT ALTERNATIVES.— 

(i) IN GENERAL.—In establishing the minimum investment required for each member under subparagraph (A), a Federal home loan bank may, in its discretion, include any 1 or more of the requirements referred to in clause (ii), or any other provisions approved by øthe Finance Board¿ the Director. 

* * * * * * * 

255 

(C) MINIMUM AMOUNT.—Each capital structure plan of a 

Federal home loan bank shall require that the minimum 

stock investment established for members shall be set at 

a level that is sufficient for the bank to meet the minimum 

capital requirements established by øthe Finance Board¿ 

the Director under subsection (a). 

(D) ADJUSTMENTS TO MINIMUM REQUIRED INVESTMENT.— The capital structure plan of each Federal home loan bank 

shall impose a continuing obligation on the board of directors of the bank to review and adjust the minimum investment required of each member of that bank, as necessary 

to ensure that the bank remains in compliance with applicable minimum capital levels established by øthe Finance 

Board¿ the Director, and shall require each member to 

comply promptly with any adjustments to the required 

minimum investment. 

* * * * * * * 

(4) CLASSES OF STOCK.— 

(A) IN GENERAL.—The capital structure plan of a Federal 

home loan bank shall afford each member of that bank the 

option of maintaining its required investment in the bank 

through the purchase of any combination of classes of 

stock authorized by the board of directors of the bank and 

approved by øthe Finance Board¿ the Director in accordance with its regulations. 

(B) RIGHTS REQUIREMENT.—A Federal home loan bank 

shall include in its capital structure plan provisions establishing terms, rights, and preferences, including minimum 

investment, dividends, voting, and liquidation preferences 

of each class of stock issued by the bank, consistent with 

øFinance Board regulations¿ regulations of the Director 

and market requirements. 

(C) REDUCED MINIMUM INVESTMENT.—The capital structure plan of a Federal home loan bank may provide for a 

reduced minimum stock investment for any member of 

that bank that elects to purchase Class B in a manner 

that is consistent with meeting the minimum capital requirements of the bank, as established by øthe Finance 

Board¿ the Director. 

* * * * * * * 

(6) BANK REVIEW OF PLAN.—Before filing a capital structure 

plan with øthe Finance Board¿ the Director, each Federal 

home loan bank shall conduct a review of the plan by— 

(A) * * * 

* * * * * * * 

(d) TERMINATION OF MEMBERSHIP.— 

(1) VOLUNTARY WITHDRAWAL.—Any member may withdraw 

from a Federal home loan bank if the member provides written 

notice to the bank of its intent to do so and if, on the date of 

withdrawal, there is in effect a certification by øthe Finance 

Board¿ the Director that the withdrawal will not cause the 

Federal Home Loan Bank System to fail to meet its obligation 

under section 21B(f)(2)(C) to contribute to the debt service for 

256 

the obligations issued by the Resolution Funding Corporation. 

The applicable stock redemption notice periods shall commence 

upon receipt of the notice by the bank. Upon the expiration of 

the applicable notice period for each class of redeemable stock, 

the member may surrender such stock to the bank, and shall 

be entitled to receive in cash the par value of the stock. During 

the applicable notice periods, the member shall be entitled to 

dividends and other membership rights commensurate with 

continuing stock ownership. 

(2) INVOLUNTARY WITHDRAWAL.— (A) IN GENERAL.—The board of directors of a Federal 

home loan bank may terminate the membership of any institution if, subject to øFinance Board regulations¿ regulations of the Director, it determines that— 

(i) * * * 

* * * * * * * 

(f) IMPAIRMENT OF CAPITAL.—If øthe Finance Board¿ the Director 

or the board of directors of a Federal home loan bank determines 

that the bank has incurred or is likely to incur losses that result 

in or are expected to result in charges against the capital of the 

bank, the bank shall not redeem or repurchase any stock of the 

bank without the prior approval of øthe Finance Board¿ the Director while such charges are continuing or are expected to continue. 

In no case may a bank redeem or repurchase any applicable capital 

stock if, following the redemption, the bank would fail to satisfy 

any minimum capital requirement. 

(g) REJOINING AFTER DIVESTITURE OF ALL SHARES.— (1) * * * 

(2) EXCEPTION FOR WITHDRAWALS FROM MEMBERSHIP BEFORE

1998.—Any institution that withdrew from membership in any 

Federal home loan bank before December 31, 1997, may acquire shares of a Federal home loan bank at any time after 

that date, subject to the approval of øthe Finance Board¿ the 

Director and the requirements of this Act. 

* * * * * * * 

MANAGEMENT OF BANKS

SEC. 7. ø(a) The management of each Federal Home Loan Bank 

shall be vested in a board of fourteen directors, eight of whom shall 

be elected by the members as hereinafter provided in this section 

and six of whom shall be appointed by the Board referred to in section 2A, all of whom shall be citizens of the United States, and 

each of whom shall be either a bona fide resident of the district in 

which such bank is located or an officer or director of a member 

of such bank located in that district: Provided, That in any district 

which includes five or more States the Board may by regulation increase the elective directors to a number not exceeding thirteen 

and may increase the appointive directors to a number not exceeding three-fourths the number of elective directors: Provided further, 

That, if at any time the number of elective directors in the case of 

any district is not at least equal to the number of States in such 

district the Board shall exercise the authority conferred by the next 

preceding proviso so as to increase such elective directors to a number at least equal to the number of States in such district. At least 

257 

2 of the Federal Home Loan Bank directors who are appointed by 

the Board shall be representatives chosen from organizations with 

more than a 2-year history of representing consumer or community 

interests on banking services, credit needs, housing, or financial 

consumer protections. No Federal Home Loan Bank director who is 

appointed pursuant to this subsection may, during such Bank director’s term of office, serve as an officer of any Federal Home Loan 

Bank or a director or officer of any member of a Bank, or hold 

shares, or any other financial interest in, any member of a Bank.¿ 

(a) NUMBER; ELECTION; QUALIFICATIONS; CONFLICTS OF INTER- EST.— (1) IN GENERAL.—The management of each Federal Home 

Loan Bank shall be vested in a board of 13 directors, or such 

other number as the Director determines appropriate, each of 

whom shall be elected by the members and shall be a citizen of 

the United States. 

(2) MEMBER DIRECTORS.—A majority of the directors of each 

Bank shall be officers or directors of a member of such Bank 

that is located in the district in which such Bank is located. 

(3) INDEPENDENT DIRECTORS.—At least one-third of the directors of each Bank shall be independent directors as follows: 

(A) IN GENERAL.—Each independent director shall be a 

bona fide resident of the district in which such Bank is located. 

(B) PUBLIC INTEREST DIRECTORS.—At least 2 of the independent directors under this paragraph of each Bank shall 

be representatives chosen from organizations with more 

than a 2-year history of representing consumer or community interests on banking services, credit needs, housing, or 

financial consumer protections. 

(C) OTHER DIRECTORS.—Each independent director that 

is not a public interest director under subparagraph (B) 

shall have demonstrated knowledge of, or experience in, financial management, auditing and accounting, risk management practices, derivatives, project development, or organizational management, or such other knowledge or expertise as the Director may provide by regulation. 

(D) CONFLICTS OF INTEREST.—An independent director 

under this paragraph of a Bank may not, during such director’s term of office, serve as an officer of any Federal 

Home Loan Bank or as a director or officer of any member 

of a Bank. 

(b) Each øelective directorship¿ member directorship pursuant to 

subsection (a)(2) shall be designated by øthe Board¿ the Director as 

representing the members located in a particular State, and shall 

be filled by a person who is an officer or director of a member located in that State, each of which members shall be entitled to 

nominate an eligible person for such directorship, and such office 

shall be filled from such nominees by a plurality of the votes which 

such members may cast in an election held for the purpose of filling such office, in which election each such member may cast for 

such office a number of votes equal to the number of shares of 

stock in such bank required by this Act to be held by such member 

at the end of the calendar year next preceding the election, as determined pursuant to regulation of øthe Board¿ the Director, but 

258 

not in excess of the average number of shares of stock in such bank 

required by this Act to be held at the end of such calendar year 

by the respective members of such bank located in such State, as 

so determined. Each independent directorship pursuant to subsection (a)(3) shall be filled by election by a plurality of the votes 

of the members of the Bank at large, in which election each member 

shall be entitled to nominate candidates and to cast the same number of votes as in an election to fill a directorship allocated to the 

member’s State. No person who is an officer or director of a member 

that fails to meet any applicable capital requirement is eligible to 

hold the office of Federal Home Loan Bank director. As used in this 

subsection and in subsection (c) of this section, the term ‘‘member’’ 

means a member of a Federal home loan bank which was a member of such bank at the end of such calendar year. 

(c) The number of øelective¿ directorships designated as representing the members located in each separate State in a bank 

district shall be determined by øthe Board¿ the Director in the approximate ratio of the percentage of the required stock, as determined pursuant to regulation of øthe Board¿ the Director, of the 

members located in that State at the end of the calendar year next 

preceding the date of the election to the total required stock, as so 

detemined, of all members of such bank at the end of such year, 

except that in the case of each State such number shall not be less 

than one and shall not be more than six. øNotwithstanding any 

other provision of this section, if at any time the number of elective 

directorships so designated as representing the members located in 

any State would not be at least equal to the total number of elective directorships which, on December 31, 1960, were filled by officers or directors of members whose principal places of business 

were located in such State, the Board shall add to the board of directors of the bank of the district in which such State is located 

such number of elective directorships, and shall so designate the 

directorship or directorships thus added, that the number of elective directorships designated as representing the members located 

in such State will equal said total number. Any elective directorship so added shall exist only until the expiration of its first term. 

The Board¿ The Director shall, with respect to each member of a 

Federal home loan bank, designate the State in the district of such 

bank in which such member shall, for the purposes of this subsection and subsection (b) of this section, be deemed to be located, 

and may from time to time change any such designation, but if the 

principal place of business of any such member is located in a State 

of such district it shall be the duty of øthe Board¿ the Director to 

designate such State as the State in which such member shall, for 

said purposes, be deemed to be located. øAs used in the second sentence of this subsection, the term ‘‘total number of elective directorships’’ means the total number of elective directorships on the 

board of directors of the bank of the district in which such State 

was located on December 31, 1960, and the term ‘‘members’’ where 

used for the second time in such sentence means members of such 

bank.¿ 

(d) The term of each directorø, whether elected or appointed,¿ 

shall be ø3¿ 4 years. The board of directors of each Federal home 

loan bank and øthe Finance Board¿ the Director shall adjust the 

terms of members first elected øor appointed¿ after the date of the 

259 

enactment of the øFederal Home Loan Bank System Modernization 

Act of 1999¿ Federal Housing Finance Reform Act of 2005 to ensure 

that the terms of the members of the board of directors are staggered with approximately ø1⁄3¿ 1⁄4 of the terms expiring each year. 

If any person, before or after, or partly before and partly after, the 

date of the enactment of this sentence, has been elected to each of 

three consecutive full terms as øan elective¿ a director of a Federal 

home loan bank in any øelective¿ directorship or øelective¿ directorships and has served for all or part of each of said terms, such 

person shall not be eligible for election to øan elective¿ a directorship of such bank for a term which begins earlier than two years 

after the expiration of the last expiring of said three terms. øThe 

Board¿ The Director is hereby authorized to prescribe such rules 

and regulations as it may deem necessary or appropriate for the 

nomination and election of directors of Federal home loan banks, 

including, without limitation on the generality of the foregoing, 

rules and regulations with respect to the breaking of ties and with 

respect to the inclusion of more than one directorship on a single 

ballot and the methods of voting and of determining the results of 

voting in such cases. 

* * * * * * * 

ø(f) VACANCIES.— 

ø(1) IN GENERAL.—A Bank director appointed or elected to 

fill a vacancy shall be appointed or elected for the unexpired 

term of his or her predecessor in office. 

ø(2) APPOINTED BANK DIRECTORS.—In the event of a vacancy 

in any appointive Bank directorship, such vacancy shall be 

filled through appointment by the Board for the unexpired 

term. If any appointive Bank director shall cease to have the 

qualifications set forth in subsection (a), the office held by such 

person shall immediately become vacant, but such person may 

continue to act as a Bank director until his or her successor 

assumes the vacated office or the term of such office expires, 

whichever occurs first. 

ø(3) ELECTED BANK DIRECTORS.—In the event of a vacancy in 

any elective Bank directorship, such vacancy shall be filled by 

an affirmative vote of a majority of the remaining Bank directors, regardless of whether such remaining Bank directors constitute a quorum of the Bank’s board of directors. A Bank director so elected shall satisfy the requirements for eligibility 

which were applicable to his predecessor. If any elective Bank 

director shall cease to have any qualification set forth in this 

section, the office held by such person shall immediately become vacant, and such person shall not continue to act as a 

Bank director.¿ 

(f) VACANCIES.—A Bank director elected to fill a vacancy shall be 

elected for the unexpired term of his or her predecessor in office. In 

the event of a vacancy in any Bank directorship, such vacancy shall 

be filled by an affirmative vote of a majority of the remaining Bank 

directors, regardless of whether such remaining Bank directors constitute a quorum of the Bank’s board of directors. A Bank director 

so elected shall satisfy the requirements for eligibility which were 

applicable to his predecessor. If any Bank director shall cease to 

260 

have any qualification set forth in this section, the office held by 

such person shall immediately become vacant. 

* * * * * * * 

(h) If at any time when nominations are required members shall 

hold less than $1,000,000 of the capital stock of the Federal home 

loan bank, øthe Board¿ the Director shall appoint a director or directors to fill the place or places for which such nominations are 

required, and øthe Board¿ the Director may, prior to the filing of 

the certificate mentioned in section 12, appoint directors who shall 

be respectively designated by it as appointive directors and as 

øelective¿ directors, in accordance with the provisions of this section. 

ø(i) DIRECTORS’ COMPENSATION.— 

ø(1) IN GENERAL.—Subject to paragraph (2), each bank may 

pay its directors reasonable compensation for the time required 

of them, and their necessary expenses, in the performance of 

their duties, in accordance with the resolutions adopted by the 

such directors, subject to the approval of the board. 

ø(2) LIMITATION.— 

ø(A) IN GENERAL.—The annual salary of each of the following members of the board of directors of a Federal 

home loan bank may not exceed the amount specified: 

The annual compensation 

øIn the case of the— may not exceed—

Chairperson ...................................................................................... $25,000

Vice Chairperson .............................................................................. $20,000

All other members ............................................................................ $15,000. 

ø(B) ADJUSTMENT.—Beginning January 1, 2001, each 

dollar amount referred to in the table in subparagraph (A) 

shall be adjusted annually by the Finance Board, based on 

the annual percentage increase, if any, in the Consumer 

Price Index for all urban consumers, as published by the 

Department of Labor. 

ø(C) EXPENSES.—Subparagraph (A) shall not be construed as prohibiting the reimbursement of expenses incurred by members of the board of directors of any Federal 

home loan bank in connection with service on the board of 

directors.¿ 

(i) DIRECTORS’ COMPENSATION.— 

(1) IN GENERAL.—Each Federal home loan bank may pay the 

directors on the board of directors for the bank reasonable and 

appropriate compensation for the time required of such directors, and reasonable and appropriate expenses incurred by such 

directors, in connection with service on the board of directors, 

in accordance with resolutions adopted by the board of directors 

and subject to the approval of the Director. 

(2) ANNUAL REPORT BY THE BOARD.—The Director shall include, in the annual report submitted to the Congress pursuant 

to section 1319B of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992, information regarding the 

compensation and expenses paid by the Federal home loan 

banks to the directors on the boards of directors of the banks. 

* * * * * * * 

261 

(l) WITHHOLDING OF COMPENSATION.—Notwithstanding any other 

provision of this section, a Federal home loan bank shall not transfer, disburse, or pay compensation to any executive officer, or enter 

into an agreement with such executive officer, without the approval 

of the Director, for matters being reviewed under section 1318 of the 

Federal Housing Enterprises Financial Safety and Soundness Act of 

1992 (12 U.S.C. 4518). 

EXAMINATIONS AND STUDIES øBY THE BOARD¿ 

SEC. 8. øThe Board¿ The Director shall cause to be made from 

time to time examinations of the laws of the various States of the 

United States and the regulations and procedure thereunder governing conditions under which institutions of the kinds which may 

become members or nonmember borrowers under this Act are permitted to be formed or to do business, or relating to the conveying 

or recording of land titles, or to homestead and other rights, or to 

the enforcement of the rights of holders of mortgages on lands securing loans, or otherwise. If any such examination shall indicate, 

in the opinion of øthe Board¿ the Director, that under the laws of 

any such State or the regulations or procedure thereunder there 

would be inadequate protection to a Federal Home Loan Bank in 

making or collecting advances under this Act, øthe Board¿ the Director may withhold or limit the operation of any Federal Home 

Loan Bank in such State until satisfactory conditions of law, regulation, or procedure shall be established. In any State where State 

examination of members or nonmember borrowers is deemed inadequate for the purposes of the Federal Home Loan Banks, øthe 

Board¿ the Director shall establish such examination, all or part of 

the cost of which may be considered as part of the cost of making 

advances in such State. The banks and/or øthe Board¿ the Director 

may make studies of trends of home and other property values, 

methods of appraisals, and other subjects such as they may deem 

useful for the general guidance of their policies and operations and 

those of institutions authorized to secure advances. 

* * * * * * * 

SEC. 10. ADVANCES TO MEMBERS. 

(a) IN GENERAL.— (1) * * * 

(2) PURPOSES OF ADVANCES.—A long-term advance may only 

be made for the purposes of— 

(A) providing funds to any member for residential housing finance; and 

(B) providing funds to any community financial institution for small businesses, small farms, øand¿ small agribusinesses, and community development activities. (3) COLLATERAL.—A Bank, at the time of origination or renewal of a loan or advance, shall obtain and maintain a security interest in collateral eligible pursuant to one or more of 

the following categories: 

(A) * * * 

* * * * * * * 

(E) Secured loans for small business, agriculture, or community development activities or securities representing a 

262 

whole interest in such secured loans, in the case of any 

community financial institution. 

* * * * * * * 

(5) REVIEW OF CERTAIN COLLATERAL STANDARDS.—øThe 

Board¿ The Director may review the collateral standards applicable to each Federal home loan bank for the classes of collateral described in subparagraphs (D) and (E) of paragraph (3), 

and may, if necessary for safety and soundness purposes, require an increase in the collateral standards for any or all of 

those classes of collateral. 

(6) DEFINITIONS.—For purposes of this subsection, the terms 

‘‘small business’’, ‘‘agriculture’’, ‘‘small farm’’, øand¿ ‘‘small 

agri-business’’, and ‘‘community development activities’’ shall 

have the meanings given those terms by regulation of øthe Finance Board¿ the Director. 

(b) For the purposes of this section, each Federal Home Loan 

Bank shall have power to make, or to cause or require to be made, 

such appraisals and other investigations as it may deem necessary. 

No home mortgage otherwise eligible to be accepted as collateral 

security for an advance by a Federal Home Loan Bank shall be accepted if any director, officer, employee, attorney, or agent of the 

Federal Home Loan Bank or of the borrowing institution is personally liable theron, unless øthe Board¿ the Director has specifically 

approved øby formal resolution¿ such acceptance. 

* * * * * * * 

(g) COMMUNITY SUPPORT REQUIREMENTS.— 

(1) IN GENERAL.—Before the end of the 2-year period beginning on the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, øthe Board¿ the 

Director shall adopt regulations establishing standards of community investment or service for members of Banks to maintain continued access to long-term advances. 

* * * * * * * 

(j) AFFORDABLE HOUSING PROGRAM.— 

(1) IN GENERAL.—Pursuant to regulations promulgated by 

øthe Board¿ the Director, each Bank shall establish an Affordable Housing Program to subsidize the interest rate on advances to members engaged in lending for long term, low- and 

moderate-income, owner-occupied and affordable rental housing at subsidized interest rates. 

(2) STANDARDS.—øThe Board’s¿ The Director’s regulations 

shall permit Bank members to use subsidized advances received from the Banks to— 

(A) * * * 

* * * * * * * 

(6) GROUNDS FOR SUSPENDING CONTRIBUTIONS.— 

(A) IN GENERAL.—If a Bank finds that the payments required under this paragraph are contributing to the financial instability of such Bank, it may apply to the øFederal 

Housing Finance Board¿ Director for a temporary suspension of such payments. 

(B) FINANCIAL INSTABILITY.—In determining the financial instability of a Bank, the øFederal Housing Finance 

263 

Board¿ Director shall consider such factors as (i) whether 

the Bank’s earnings are severely depressed, (ii) whether 

there has been a substantial decline in membership capital, and (iii) whether there has been a substantial reduction in advances outstanding. 

(C) REVIEW.—øThe Board¿ The Director shall review the 

application and any supporting financial data and issue a 

written decision approving or disapproving such application. øThe Board’s¿ The Director’s decision shall be accompanied by specific findings and reasons for its action. 

(D) MONITORING SUSPENSION.—If øthe Board¿ the Director grants a suspension, it shall specify the period of time 

such suspension shall remain in effect and shall continue 

to monitor the Bank’s financial condition during such suspension. 

(E) LIMITATIONS ON GROUNDS FOR SUSPENSION.—øThe 

Board¿ The Director shall not suspend payments to the Affordable Housing Program if the Bank’s reduction in earnings is a result of (i) a change in the terms for advances 

to members which is not justified by market conditions, (ii) 

inordinate operating and administrative expenses, or (iii) 

mismanagement. 

(F) The øFederal Housing Finance Board¿ Director shall 

notify the Committee on Banking, Finance and Urban Affairs of the House of Representatives and the Committee 

on Banking, Housing, and Urban Affairs of the Senate not 

less than 60 days before such suspension takes effect. Such 

suspension shall become effective unless a joint resolution 

is enacted disapproving such suspension. 

(7) FAILURE TO USE AMOUNTS FOR AFFORDABLE HOUSING.—If 

any Bank fails to utilize or commit the full amount provided 

in this subsection in any year, 90 percent of the amount that 

has not been utilized or committed in that year shall be deposited by the Bank in an Affordable Housing Reserve Fund administered by øthe Board¿ the Director. The 10 percent of the 

unutilized and uncommitted amount retained by a Bank 

should be fully utilized or committed by that Bank during the 

following year and any remaining portion must be deposited in 

the Affordable Housing Reserve Fund. Under regulations established by øthe Board¿ the Director, funds from the Affordable Housing Reserve Fund may be made available to any 

Bank to meet additional affordable housing needs in such 

Bank’s district pursuant to this section. 

* * * * * * * 

(9) REGULATIONS.—The øFederal Housing Finance Board¿ 

Director shall promulgate regulations to implement this subsection. Such regulations shall, at a minimum— 

(A) * * * 

* * * * * * * 

(11) ADVISORY COUNCIL.—Each Bank shall appoint an Advisory Council of 7 to 15 persons drawn from community and 

nonprofit organizations actively involved in providing or promoting low- and moderate-income housing in its district. The 

Advisory Council shall meet with representatives of the board 

264 

of directors of the Bank quarterly to advise the Bank on lowand moderate-income housing programs and needs in the district and on the utilization of the advances for these purposes. 

Each Advisory Council established under this paragraph shall 

submit to øthe Board¿ the Director at least annually its analysis of the low-income housing activity of the Bank by which 

it is appointed. 

(12) REPORTS TO CONGRESS.— (A) øThe Board¿ The Director shall monitor and report 

annually to the Congress and the Advisory Council for 

each Bank the support of low-income housing and community development by the Banks and the utilization of advances for these purposes. 

(B) The analyses submitted by the Advisory Councils to 

øthe Board¿ the Director under paragraph (11) shall be included as part of the report required by this paragraph. 

* * * * * * * 

SEC. 10b. (a) IN GENERAL.—Each Federal Home Loan Bank is 

authorized to make advances to nonmember mortgagees approved 

under title II of the National Housing Act. Such mortgagees must 

be chartered institutions having succession and subject to the inspection and supervision of some governmental agency, and whose 

principal activity in the mortgage field must consist of lending 

their own funds. Such advances shall not be subject to the other 

provisions and restrictions of this Act, but shall be made upon the 

security of insured mortgages, insured under title II of the National Housing Act. Advances made under the terms of this section 

shall be at such rates of interest and upon such terms and conditions as shall be determined by øthe Board¿ the Director, but no 

advance may be for an amount in excess of 90 per centum of the 

unpaid principal of the mortgage loan given as security. 

* * * * * * * 

GENERAL POWERS AND DUTIES OF BANKS

SEC. 11. (a) Each Federal Home Loan Bank shall have power, 

subject to rules and regulations prescribed by øthe Board¿ the Director to borrow and give security therefor and to pay interest 

thereon, to issue debentures, bonds, or other obligations upon such 

terms and conditions as øthe Board¿ the Director may approve, and 

to do all things necessary for carrying out the provisions of this Act 

and all things incident thereto. 

(b) øThe Board¿ The Office of Finance, as agent for the Banks, 

may issue consolidated Federal Home Loan Bank debentures which 

shall be the joint and several obligations of all Federal Home Loan 

Banks organized and existing under this Act, in order to provide 

funds for any such bank or banks, and such debentures shall be 

issued upon such terms and conditions as øthe Board¿ such Office 

may prescribe. No such debentures shall be issued at any time if 

any of the assets of any Federal Home Loan Bank are pledged to 

secure any debts or subject to any lien, and neither øthe Board¿ 

such Office of Finance nor any Federal Home Loan Bank shall have 

power to pledge any of the assets of any Federal Home Loan Bank, 

or voluntarily to permit any lien to attach to the same while any 

of such debentures so issued are outstanding. The debentures 

265 

issued under this section and outstanding shall at no time exceed 

five times the total paid-in capital of all the Federal Home Loan 

Banks as of the time of the issue of such debentures. It shall be 

the duty of øthe Board¿ such Office of Finance not to issue debentures under this section in excess of the notes or obligations of 

member institutions held and secured under section 10(a) of this 

Act by all the Federal Home Loan Banks. 

(c) At any time that no debentures are outstanding under this 

Act, or in order to refund all outstanding consolidated debentures 

issued under this section, øthe Board¿ the Office of Finance, as 

agent for the Banks, may issue consolidated Federal Home Loan 

Bank bonds which shall be the joint and several obligations of all 

the Federal Home Loan Banks, and shall be secured and be issued 

upon such terms and conditions as øthe Board¿ such Office may 

prescribe. 

(d) øThe Board¿ The Director shall have full power to require 

any Federal Home Loan Bank to deposit additional collateral or to 

make substitutions of collateral or to adjust equities between the 

Federal Home Loan Banks. 

(e)(1) Each Federal Home Loan Bank shall have power to accept 

deposits made by members of such bank or by any other Federal 

Home Loan Bank or other instrumentality of the United States, 

upon such terms and conditions as øthe Board¿ the Director may 

prescribe, but no Federal Home Loan Bank shall transact any 

banking or other business not incidental to activities authorized by 

this Act. 

(2)(A) øThe Board¿ The Director may, subject to such rules and 

regulations, including definitions of terms used in this paragraph, 

as øthe Board¿ the Director shall from time to time prescribe, authorize Federal Home Loan Banks to be drawees of, and to engage 

in, or be agents or intermediaries for, or otherwise participate or 

assist in, the collection and settlement of (including presentment, 

clearing, and payment of, and remitting for), checks, drafts, or any 

other negotiable or nonnegotiable items or instruments of payment 

drawn on or issued by members of any Federal Home Loan Bank 

or by institutions which are eligible to make application to become 

members pursuant to section 4, and to have such incidental powers 

as øthe Board¿ the Director shall find necessary for the exercise of 

any such authorization. 

(B) A Federal Home Loan Bank shall make charges, to be determined and regulated by øthe Board¿ the Director consistent with 

the principles set forth in section 11A(c) of the Federal Reserve Act, 

or utilize the services of, or act as agent for, or be a member of, 

a Federal Reserve bank, clearinghouse, or any other public or private financial institution or other agency, in the exercise of any 

powers or functions pursuant to this paragraph. 

(C) øThe Board¿ The Director is authorized, with respect to participation in the collection and settlement of any items by Federal 

Home Loan Banks, and with respect to the collection and settlement (including payment by the payor institution) of items payable 

by Federal savings and loan associations and Federal mutual savings banks, to prescribe rules and regulations regarding the rights, 

powers, responsibilities, duties, and liabilities, including standards 

relating thereto, of such Federal Home Loan Banks, associations, 

or banks and other parties to any such items or their collection and 

266 

settlement. In prescribing such rules and regulations, øthe Board¿ 

the Director may adopt or apply, in whole or in part, general banking usage and practices, and, in instances or respects in which they 

would otherwise not be applicable, Federal Reserve regulations and 

operating letters, the Uniform Commercial Code, and clearinghouse 

rules. 

(f) øThe Board¿ The Director is authorized and empowered to 

permitø,,¿ or to requireø,¿ Federal Home Loan Banks, upon such 

terms and conditions as øthe Board¿ the Director may prescribe, to 

rediscount the discounted notes of members held by other Federal 

Home Loan Banks, or to make loans to, or make deposits with, 

such other Federal Home Loan Banks, or to purchase any bonds or 

debentures issued under this section. 

(g) Each Federal Home Loan Bank shall at all times have at 

least an amount equal to the current deposits received from its 

members invested in (1) obligations of the United States, (2) deposits in banks or trust companies, (3) advances with a maturity of not 

to exceed five years which are made to members, upon such terms 

and conditions as øthe Board¿ the Director may prescribe, and (4) 

advances with a maturity of not to exceed five years which are 

made to members whose creditor liabilities (not including advances 

from the Federal Home Loan Bank) do not exceed 5 per centum of 

their net assets, and which may be made without the security of 

home mortgages or other security, upon such terms and conditions 

as øthe Board¿ the Director may prescribe. 

(h) Such part of the assets of each Federal Home Loan Bank (except reserves and amounts provided for in subsection (g)) as are not 

required for advances to members, may be invested, to such extent 

as the bank may deem desirable and subject to such regulations, 

restrictions, and limitations as may be prescribed by øthe Board¿ 

the Director, in obligations of the United States, in obligations, participations, or other instruments of or issued by the Federal National Mortgage Association, or the Government National Mortgage 

Association, 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, in the stock of the Federal 

National Mortgage Association in stock, obligations, or other securities of any small business investment company formed pursuant 

to section 301 of the Small Business Investment Act of 1958, for 

the purpose of aiding members of the Federal Home Loan Bank 

System, and in such securities as fiduciary and trust funds may be 

invested in under the laws of the State in which the Federal Home 

Loan Bank is located. 

(i) The Secretary of the Treasury is authorized in his discretion 

to purchase any obligations issued pursuant to this section, as 

heretofore, now, or hereafter in force and for such purpose the Secretary of the Treasury is authorized to use as a public-debt transaction the proceeds of the sale of any securities hereafter issued 

under the Second Liberty Bond Act, as now or hereafter in force, 

and the purposes for which securities may be issued under the Second Liberty Bond Act, as now or hereafter in force, are extended 

to include such purchases. The Secretary of the Treasury may, at 

any time, sell, upon such terms and conditions and at such price 

or prices as he shall determine, any of the obligations acquired by 

267 

him under this subsection. All redemptions, purchases, and sales 

by the Secretary of the Treasury of such obligations under this subsection shall be treated as public-debt transactions of the United 

States. The Secretary of the Treasury shall not at any time purchase any obligations under this paragraph if such purchase would 

increase the aggregate principal amount of his then outstanding 

holdings of such obligations under this paragraph to an amount 

greater than $4,000,000,000. Each purchase of obligations by the 

Secretary of the Treasury under this subsection shall be upon 

terms and conditions as shall be determined by the Secretary of the 

Treasury and shall bear such rate of interest as may be determined 

by the Secretary of the Treasury taking into consideration the current average market yield for the month preceding the month of 

such purchase on outstanding marketable obligations of the United 

States. 

In addition to obligations authorized to be purchased by the preceding paragraph, the Secretary of the Treasury is authorized to 

purchase any obligations issued pursuant to this section in 

amounts not to exceed $2,000,000,000. The authority provided in 

this paragraph shall expire August 10, 1975. 

Notwithstanding the foregoing, the authority provided in this 

subsection may be exercised during any calendar quarter beginning 

after the date of enactment of the Depository Institutions Amendments of 1974 only if the Secretary of the Treasury and øthe Chairperson of the Board¿ the Director certify to the Congress that (1) 

alternative means cannot be effectively employed to permit members of the Federal Home Loan Bank System to continue to supply 

reasonable amounts of funds to the mortgage market, and (2) the 

ability to supply such funds is substantially impaired because of 

monetary stringency and a high level of interest rates. Any funds 

borrowed under this subsection shall be repaid by the Home Loan 

Banks at the earliest practicable date. 

* * * * * * * 

(l) JOINT ACTIVITIES.—Subject to the regulation of the Director, 

any two or more Federal Home Loan Banks may establish a joint 

office for the purpose of performing functions for, or providing services to, the Banks on a common or collective basis, or may require 

that the Office of Finance perform such functions or services, but 

only if the Banks are otherwise authorized to perform such functions or services individually. 

INCORPORATION OF BANKS, AND CORPORATE POWERS

SEC. 12. (a) The directors of each Federal Home Loan Bank shall, 

in accordance with such rules and regulations as øthe Board¿ the 

Director may prescribe, make and file with øthe Board¿ the Director at the earliest practicable date after the establishment of such 

bank, an organization certificate which shall contain such information as øthe Board¿ the Director may require. Upon the making 

and filing of such organization certificate with øthe Board¿ the Director, such bank shall become, as of the date of the execution of 

its organization certificate, a body corporate, and as such and in its 

name as designated by øthe Board¿ the Director it shall have 

power to adopt, alter, and use a corporate seal; to make contracts; 

to purchase or lease and hold or dispose of such real estate as may 

268 

be necessary or convenient for the transaction of its business; to 

sue and be sued, to complain, and to defend, in any court of competent jurisdiction, State or Federal; to select, employ, and fix the 

compensation of such officers, employees, attorneys, and agents as 

shall be necessary for the transaction of its business; to define their 

duties, require bonds of them and fix the penalties thereof, and to 

dismiss at pleasure such officers, employees, attorneys, and agents; 

and, by the board of directors of the bank, to prescribe, amend, and 

repeal by-laws governing the manner in which its affairs may be 

administered, consistent with applicable laws and regulations, as 

administered by øthe Finance Board¿ the Director. No officer, employee, attorney, or agent of a Federal home loan bank who receives compensation, may be a member of the board of directors. 

Each such bank shall have all such incidental powers, not inconsistent with the provisions of this Act, as are customary and usual 

in corporations generally. 

(b) Subject to such regulations as may be prescribed by øthe 

Board¿ the Director, one or more Federal home loan banks may acquire, hold, or dispose of, in whole or in part, or facilitate such acquisition, holding, or disposition by members of any such bank of, 

housing project loans, or interests therein, having the benefit of 

any guaranty under section 221 of the Foreign Assistance Act of 

1961, as now or hereafter in effect, or loans, or interests therein, 

having the benefit of any guaranty under section 224 of such Act, 

or any commitment or agreement with respect to such loans, or interests therein, made pursuant to either of such sections. This authority extends to the acquisition, holding, and disposition of loans, 

or interests therein, having the benefit of any guaranty under section 221 or 222 of the Foreign Assistance Act of 1961, as amended 

by section 105 of the Foreign Assistance Act of 1969 or as hereafter 

amended or extended, or of any commitment or agreement for any 

such guaranty. 

* * * * * * * 

SEC. 15. Obligations of the Federal Home Loan Banks issued 

with the approval of the Board or the Director under this Act shall 

be lawful investments, and may be accepted as security, for all fiduciary, trust, and public funds the investment or deposit of which 

shall be under the authority or control of the United States or any 

officer or officers thereof. The Federal reserve banks are authorized 

to act as depositaries, custodians, and/or fiscal agents for Federal 

Home Loan Banks in the general performance of their powers 

under this Act. All obligations of Federal Home Loan Banks shall 

plainly state that such obligations are not obligations of the United 

States and are not guaranteed by the United States. 

RESERVES AND DIVIDENDS

SEC. 16. (a) Each Federal Home Loan Bank may carry to a reserve account from time-to-time such portion of its net earnings as 

may be determined by its board of directors. Each Federal Home 

Loan Bank shall establish such additional reserves and/or make 

such charge-offs on account of depreciation or impairment of its assets as øthe Board¿ the Director shall require from time to time. 

No dividends shall be paid except out of previously retained earnings or current net earnings remaining after reductions for all reVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00268 Fmt 6659 Sfmt 9001 E:\HR\OC\HR171P1.XXX HR171P1
269 

serves, chargeoffs, purchases of capital certificates of the Financing 

Corporation, and payments relating to the Funding Corporation required under this Act have been provided for, other than chargeoffs 

or expenses incurred by a Bank in connection with the purchase of 

capital stock of the Financing Corporation under section 21 or payments relating to the Funding Corporation Principal Fund under 

section 21B(e). The reserves of each Federal Home Loan Bank shall 

be invested, subject to such regulations, restrictions, and limitations as may be prescribed by øthe Board¿ the Director, in direct 

obligations of the United States, in obligations, participations, or 

other instruments of or issued by the Federal National Mortgage 

Association or the Government National Mortgage Association, 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, and in such securities as fiduciary and trust 

funds may be invested in under the laws of the State in which the 

Federal Home Loan Bank is located. 

(b) Notwithstanding subsection (a) or any other provision of this 

Act, if øthe Board¿ the Director determines that severe financial 

conditions exist threatening the stability of member institutions, 

øthe Board¿ the Director may suspend temporarily the requirements of subsection (a) that a portion of net earnings be set aside 

semiannually by each Federal Home Loan Bank to a reserve account and permit each Federal Home Loan Bank to declare and 

pay dividends out of undivided profits. 

(c) EXCEPTION IN CASE OF LOSSES IN CONNECTION WITH FINANCING CORPORATION STOCK.— 

(1) IN GENERAL.—Notwithstanding subsection (a) of this section, if— 

(A) * * * 

(B) øthe Board¿ the Director determines there is an extraordinary need for the member institutions of the bank 

to receive dividends; and 

(C) the bank has reduced all reserves (other than the reserve account required by the first 2 sentences of subsection (a)) to zero, 

øthe Board¿ the Director may authorize such bank to declare and 

pay dividends out of undivided profits (as such term is defined in 

section 21(d)(7)) or the reserve account required by the first 2 sentences of subsection (a). 

(2) REQUIREMENTS OF SECTION 21 NOT AFFECTED.—Notwithstanding any payment of dividends by any Federal Home Loan 

Bank pursuant to an authorization by øthe Board¿ the Director 

under paragraph (1), the applicable provisions of section 21 

shall continue to apply with respect to such bank, and to such 

bank’s investment in the Financing Corporation, in the same 

manner and to the same extent as if such payment had not 

been made. 

ADMINISTRATIVE EXPENSES

SEC. 18. 

ø(b) ASSESSMENTS FOR ADMINISTRATIVE EXPENSES.— 

ø(1) IN GENERAL.—The Board may impose a semiannual assessment on the Federal Home Loan Banks, the aggregate 

270 

amount of which is sufficient to provide for the payment of the 

Board’s estimated expenses for the period for which such assessment is made. 

ø(2) DEFICIENCIES.—If, at any time, amounts available from 

any assessment for any semiannual period are insufficient to 

cover the expenses of the Board incurred in carrying out the 

provisions of this Act during such period, the Board may make 

an immediate assessment against the Banks to cover the 

amount of the deficiency for such semiannual period. 

ø(3) SURPLUSES.—If, at the end of any semiannual period for 

which an assessment is made, any amount remains from such 

assessment, such amount will be deducted from the assessment on the Banks by the Board for the following semiannual 

period.¿ 

* * * * * * * 

EXAMINATIONS AND øREPORTS¿ GAO AUDITS

SEC. 20. øThe Board shall from time to time, at least annually, 

require examinations and reports of condition of all Federal Home 

Loan Banks in such form as the Board shall prescribe and shall 

furnish periodically statements based upon the reports of the banks 

to the Board. For the purposes of this Act, examiners appointed by 

the Board shall be subject to the same requirements, responsibilities, and penalties as are applicable to examiners under the National Bank Act and the Federal Reserve Act, and shall have, in 

the exercise of functions under this Act, the same powers and privileges as are vested in such examiners by law.¿ The Federal home 

loan banks shall be subject to examinations by the Director to the 

extent provided in section 1317 of the Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992 (12 U.S.C. 4517). In 

addition to such examinations, the Comptroller General may audit 

or examine øthe Board and¿ the Banks, to determine the extent to 

which øthe Board and¿ the Banks are fairly and effectively fulfilling the purposes of this Act. 

SEC. 20A. SHARING OF INFORMATION BETWEEN FEDERAL HOME LOAN 

BANKS. 

(a) REGULATORY AUTHORITY.—The Director shall prescribe such 

regulations as may be necessary to ensure that each Federal Home 

Loan Bank has access to information that the Bank needs to determine the nature and extent of its joint and several liability. 

(b) NO WAIVER OF PRIVILEGE.—The Director shall not be deemed 

to have waived any privilege applicable to any information concerning a Federal Home Loan Bank by transferring, or permitting 

the transfer of, that information to any other Federal Home Loan 

Bank for the purpose of enabling the recipient to evaluate the nature 

and extent of its joint and several liability. 

SEC. 21. FINANCING CORPORATION. 

(a) ESTABLISHMENT.—Notwithstanding any other provision of 

law, the øFederal Housing Finance Board¿ Director shall charter a 

corporation to be known as the Financing Corporation. 

(b) MANAGEMENT OF FINANCING CORPORATION.— 

(1) DIRECTORATE.—The Financing Corporation shall be under 

the management of a directorate composed of 3 members as 

follows: 

271 

(A) The Director of the Office of Finance of the Federal 

Home Loan Banks (or the head of any successor to such 

office). 

(B) 2 members selected by the øFederal Housing Finance 

Board¿ Director from among the presidents of the Federal 

Home Loan Banks. 

* * * * * * * 

(5) CHAIRPERSON.—The øChairperson of the Federal Housing 

Finance Board¿ Director shall select the chairperson of the Directorate from among the 3 members of the Directorate. 

(6) STAFF.— (A) NO PAID EMPLOYEES.—The Financing Corporation 

shall have no paid employees. 

(B) POWERS.—The Directorate may, with the approval of 

the øFederal Housing Finance Board¿ Director, authorize 

the officers, employees, or agents of the Federal Home 

Loan Banks to act for and on behalf of the Financing Corporation in such manner as may be necessary to carry out 

the functions of the Financing Corporation. 

(7) ADMINISTRATIVE EXPENSES.— (A) * * * 

(B) PRO RATA DISTRIBUTION.—The amount each Federal 

Home Loan Bank shall pay shall be determined by the 

øFederal Housing Finance Board¿ Director by multiplying 

the total administrative expenses for any period by the 

percentage arrived at by dividing— 

(i) the aggregate amount the øFederal Housing Finance Board¿ Director required such bank to invest in 

the Financing Corporation (as of the time of such determination) under paragraphs (4) and (5) of subsection (d) (as computed without regard to paragraph 

(3) or (6) of such subsection); by 

(ii) the aggregate amount the øFederal Housing Finance Board¿ Director required all Federal Home 

Loan Banks to invest (as of the time of such determination) under such paragraphs. 

* * * * * * * 

(8) REGULATION BY øFEDERAL HOUSING FINANCE BOARD¿ DI- RECTOR.—The Directorate shall be subject to such regulations, 

orders, and directions as the øFederal Housing Finance Board¿ 

Director may prescribe. 

* * * * * * * 

(c) POWERS OF FINANCING CORPORATION.—The Financing Corporation shall have only the following powers, subject to the other 

provisions of this section and such regulations, orders, and directions as the øFederal Housing Finance Board¿ Director may prescribe: 

(1) * * * 

* * * * * * * 

(d) CAPITALIZATION OF FINANCING CORPORATION.— 

(1) PURCHASE OF CAPITAL STOCK BY FEDERAL HOME LOAN

BANKS.— 

272 

(A) IN GENERAL.—Each Federal Home Loan Bank shall 

invest in nonvoting capital stock of the Financing Corporation at such times and in such amounts as the øFederal 

Housing Finance Board¿ Director may prescribe under this 

subsection. 

(B) PAR VALUE; TRANSFERABILITY.—Each share of stock 

issued by the Financing Corporation to a Federal Home 

Loan Bank shall have par value in an amount determined 

by the øFederal Housing Finance Board¿ Director and 

shall be transferable only among the Federal Home Loan 

Banks in the manner and to the extent prescribed by the 

øFederal Housing Finance Board¿ Director at not less than 

par value. 

* * * * * * * 

(4) PRO RATA DISTRIBUTION OF 1ST $1,000,000,000 INVESTED IN

FINANCING CORPORATION BY HOME LOAN BANKS.—Of the first 

$1,000,000,000 in the aggregate which the Thrift Depositor 

Protection Oversight Board pursuant to section 21B or the 

øFederal Housing Finance Board¿ Director under this section 

(as the case may be) may require the Federal Home Loan 

Banks collectively to invest in the stock of the Funding Corporation or invest in the capital stock of the Financing Corporation, respectively, the amount which each Federal Home 

Loan Bank (or any successor to such Bank) shall invest shall 

be determined by the Thrift Depositor Protection Oversight 

Board or the øFederal Housing Finance Board¿ Director (as 

the case may be) by multiplying the aggregate amount of such 

payment or investment by all Banks by the percentage appearing in the following table for each such Bank: 

Bank Percentage 

Federal Home Loan Bank of Boston ................................................... 1.8629 

Federal Home Loan Bank of New York .............................................. 9.1006 

Federal Home Loan Bank of Pittsburgh ............................................. 4.2702 

Federal Home Loan Bank of Atlanta .................................................. 14.4007 

Federal Home Loan Bank of Cincinnati ............................................. 8.2653 

Federal Home Loan Bank of Indianapolis .......................................... 5.2863 

Federal Home Loan Bank of Chicago .................................................. 9.6886 

Federal Home Loan Bank of Des Moines ........................................... 6.9301 

Federal Home Loan Bank of Dallas .................................................... 8.8181 

Federal Home Loan Bank of Topeka ................................................... 5.2706 

Federal Home Loan Bank of San Francisco ....................................... 19.9644 

Federal Home Loan Bank of Seattle ................................................... 6.1422 

(5) PRO RATA DISTRIBUTION OF AMOUNTS REQUIRED TO BE INVESTED IN EXCESS OF $1,000,000,000.—With respect to any 

amount in excess of the $1,000,000,000 amount referred to in 

paragraph (4) which the øFederal Housing Finance Board¿ Director may require the Federal Home Loan Banks to invest in 

capital stock of the Financing Corporation under this subsection, the amount which each Federal Home Loan Bank (or 

any successor to such bank) shall invest shall be determined 

by the øFederal Housing Finance Board¿ Director by multiplying such excess amount by the percentage arrived at by dividing— 

(A) * * * 

* * * * * * * 

273 

(6) SPECIAL PROVISIONS RELATING TO MAXIMUM AMOUNT LIMI- TATIONS.— 

(A) IN GENERAL.—If the amount any Federal Home Loan 

Bank is required to invest in capital stock of the Financing 

Corporation pursuant to a determination by the øFederal 

Housing Finance Board¿ Director under paragraph (5) (or 

under subparagraph (B) of this paragraph) exceeds the 

maximum investment amount applicable with respect to 

such bank under paragraph (3) at the time of such determination (hereinafter in this paragraph referred to as the 

‘‘excess amount’’)— 

(i) the øFederal Housing Finance Board¿ Director 

shall require each remaining Federal Home Loan 

Bank to invest (in addition to the amount determined 

under paragraph (5) for such remaining bank and subject to the maximum investment amount applicable 

with respect to such remaining bank under paragraph 

(3) at the time of such determination) in such capital 

stock on behalf of the bank in the amount determined 

under subparagraph (B); 

(ii) the øFederal Housing Finance Board¿ Director 

shall require the bank to subsequently purchase the 

excess amount of capital stock from the remaining 

banks in the manner described in subparagraph (C); 

and 

* * * * * * * 

(B) ALLOCATION OF EXCESS AMOUNT AMONG REMAINING

HOME LOAN BANKS.—The amount each remaining Federal 

Home Loan Bank shall be required to invest under subparagraph (A)(i) is the amount determined by the øFederal 

Housing Finance Board¿ Director by multiplying the excess amount by the percentage arrived at by dividing— 

(i) the amount of capital stock of the Financing Corporation held by such remaining bank at the time of 

such determination; by 

(ii) the aggregate amount of such stock held by all 

remaining banks at such time. 

(C) PURCHASE PROCEDURE.—The bank on whose behalf 

an investment in capital stock is made under subparagraph (A)(i) shall purchase, annually and at the issuance 

price, from each remaining bank an amount of such stock 

determined by the øFederal Housing Finance Board¿ Director by multiplying the amount available for such purchases (at the time of such determination) by the percentage determined under subparagraph (B) with respect to 

such remaining bank until the aggregate amount of such 

capital stock has been purchased by the bank. 

* * * * * * * 

(E) TRANSFER TO ACCOUNT FOR PURCHASE OF STOCK REQUIRED.—Of the net earnings for any year of a bank on 

whose behalf an investment is made under subparagraph 

(A)(i), such amount as is necessary to make the purchases 

of stock required under subparagraph (A)(ii) shall be 

placed in a reserve account (established in such manner as 

274 

the øFederal Housing Finance Board¿ Director shall prescribe by regulations) the balance in which shall be available only for such purchases. 

* * * * * * * 

(e) OBLIGATIONS OF THE FINANCING CORPORATION.— 

(1) LIMITATION ON AMOUNT OF OUTSTANDING OBLIGATIONS.— 

The aggregate amount of obligations of the Financing Corporation which may be outstanding at any time (as determined by 

the øFederal Housing Finance Board¿ Director) shall not exceed the lesser of— 

(A) * * * 

* * * * * * * 

(4) INVESTMENT OF UNITED STATES FUNDS IN OBLIGATIONS.— 

Obligations issued under this section by the Financing Corporation with the approval of the øFederal Housing Finance 

Board¿ Director shall be lawful investments, and may be accepted as security, for all fiduciary, trust, and public funds the 

investment or deposit of which shall be under the authority or 

control of the United States or any officer of the United States. 

* * * * * * * 

(9) MINORITY PARTICIPATION IN PUBLIC OFFERINGS.—The 

øChairperson of the Federal Housing Finance Board¿ Director 

and the Directorate shall ensure that minority owned or controlled commercial banks, investment banking firms, underwriters, and bond counsels throughout the United States have 

an opportunity to participate to a significant degree in any 

public offering of obligations issued under this section. 

* * * * * * * 

(g) USE AND DISPOSITION OF ASSETS OF THE FINANCING CORPORATION NOT INVESTED IN FSLIC.— 

(1) IN GENERAL.—Subject to such regulations, restrictions, 

and limitations as may be prescribed by the øFederal Housing 

Finance Board¿ Director, assets of the Financing Corporation, 

which are not invested in capital certificates or capital stock 

issued by the Federal Savings and Loan Insurance Corporation 

under section 402(b)(1)(A) of the National Housing Act before 

the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and after such date in 

capital certificates issued by the FSLIC Resolution Fund, shall 

be invested in— 

(A) * * * 

* * * * * * * 

(i) TERMINATION OF THE FINANCING CORPORATION.— 

(1) * * * 

(2) øFEDERAL HOUSING FINANCE BOARD¿ DIRECTOR AUTHOR- ITY TO CONCLUDE THE AFFAIRS OF FINANCING CORPORATION.— Effective on the date of the dissolution of the Financing Corporation under paragraph (1), the øFederal Housing Finance 

Board¿ Director may exercise, on behalf of the Financing Corporation, any power of the Financing Corporation which the 

øFederal Housing Finance Board¿ Director determines to be 

275 

necessary to settle and conclude the affairs of the Financing 

Corporation. 

(j) REGULATIONS.—The øFederal Housing Finance Board¿ Director may prescribe such regulations as may be necessary to carry 

out the provisions of this section, including regulations defining 

terms used in this section. 

* * * * * * * 

SEC. 21A. THRIFT DEPOSITOR PROTECTION OVERSIGHT BOARD AND 

RESOLUTION TRUST CORPORATION. 

(a) * * * 

* * * * * * * 

(h) GUARANTEES OF FSLIC.— 

(1) ASSUMPTION BY CORPORATION.—On the date of the enactment of this section, the Corporation shall, by operation of law 

(and without further action by the Corporation, the Thrift Depositor Protection Oversight Board, the øFederal Housing Finance Board¿ Director, the Federal Savings and Loan Insurance Corporation, or any court), assume all rights and obligations of the Federal Savings and Loan Insurance Corporation 

with respect to any guarantee issued by the Federal Savings 

and Loan Insurance Corporation during the period beginning 

on January 1, 1989, and ending on such date of enactment, in 

connection with any loan to any savings association by any 

Federal Reserve bank or Federal Home Loan Bank (hereinafter 

in this subsection referred to as a ‘‘lender’’). 

* * * * * * * 

SEC. 21B. RESOLUTION FUNDING CORPORATION ESTABLISHED. 

(a) * * * 

* * * * * * * 

(c) MANAGEMENT OF FUNDING CORPORATION.— (1) * * * 

* * * * * * * 

(6) STAFF.— 

(A) NO PAID EMPLOYEES.—The Funding Corporation 

shall have no paid employees. 

(B) POWERS.—The Directorate may, with the approval of 

the øFederal Housing Finance Board¿ Director authorize 

the officers, employees, or agents of the Federal Home 

Loan Banks to act for and on behalf of the Funding Corporation in such manner as may be necessary to carry out 

the functions of the Funding Corporation. 

* * * * * * * 

(e) CAPITALIZATION OF FUNDING CORPORATION, ETC.— 

(1) * * * 

* * * * * * * 

(4) PRO RATA DISTRIBUTION OF FIRST $1,000,000,000 INVESTED

IN FUNDING CORPORATION BY FEDERAL HOME LOAN BANKS.—Of 

the first $1,000,000,000 of the aggregate that the øFederal 

Housing Finance Board¿ Director (pursuant to section 21) or 

the Thrift Depositor Protection Oversight Board (under this 

section) may require the Federal Home Loan Banks collectively 

276 

to invest in the capital stock of the Financing Corporation or 

invest in the capital stock of the Funding Corporation, respectively, the amount which each Federal Home Loan Bank (or 

any successor to the Bank) shall invest shall be determined by 

the øFederal Housing Finance Board¿ Director or the Thrift 

Depositor Protection Oversight Board (as the case may be) by 

multiplying the aggregate amount of such investment by all 

Banks by the percentage appearing in the following table for 

each such Bank: 

Bank Percentage 

Federal Home Loan Bank of Boston ................................................... 1.8629 

Federal Home Loan Bank of New York .............................................. 9.1006 

Federal Home Loan Bank of Pittsburgh ............................................. 4.2702 

Federal Home Loan Bank of Atlanta .................................................. 14.4007 

Federal Home Loan Bank of Cincinnati ............................................. 8.2653 

Federal Home Loan Bank of Indianapolis .......................................... 5.2863 

Federal Home Loan Bank of Chicago .................................................. 9.6886 

Federal Home Loan Bank of Des Moines ........................................... 6.9301 

Federal Home Loan Bank of Dallas .................................................... 8.8181 

Federal Home Loan Bank of Topeka ................................................... 5.2706 

Federal Home Loan Bank of San Francisco ....................................... 19.9644 

Federal Home Loan Bank of Seattle ................................................... 6.1422 

* * * * * * * 

(f) OBLIGATIONS OF FUNDING CORPORATION.— (1) * * * 

(2) INTEREST PAYMENTS.—The Funding Corporation shall pay 

the interest due on such obligations from funds obtained for 

such interest payments from the following sources: 

(A) * * * 

(C) PAYMENTS BY FEDERAL HOME LOAN BANKS.— 

(i) * * * 

(ii) ANNUAL DETERMINATION.—øThe Board¿ The Director annually shall determine the extent to which 

the value of the aggregate amounts paid by the Federal home loan banks exceeds or falls short of the 

value of an annuity of $300,000,000 per year that commences on the issuance date and ends on the final 

scheduled maturity date of the obligations, and shall 

select appropriate present value factors for making 

such determinations, in consultation with the Secretary of the Treasury. 

(iii) PAYMENT TERM ALTERATIONS.—øThe Board¿ The 

Director shall extend or shorten the term of the payment obligations of a Federal home loan bank under 

this subparagraph as necessary to ensure that the 

value of all payments made by the Banks is equivalent 

to the value of an annuity referred to in clause (ii). 

(iv) TERM BEYOND MATURITY.—If the Board extends 

the term of payment obligations beyond the final 

scheduled maturity date for the obligations, each Federal home loan bank shall continue to pay 20.0 percent 

of its net earnings (after deducting expenses relating 

to section 10(j) and operating expenses) to the Treasury of the United States until the value of all such 

payments by the Federal home loan banks is equivalent to the value of an annuity referred to in clause 

277 

(ii). In the final year in which the Federal home loan 

banks are required to make any payment to the Treasury under this subparagraph, if the dollar amount represented by 20.0 percent of the net earnings of the 

Federal home loan banks exceeds the remaining obligation of the Banks to the Treasury, øthe Finance 

Board¿ the Director shall reduce the percentage pro 

rata to a level sufficient to pay the remaining obligation. 

* * * * * * * 

SEC. 22. MEMBER FINANCIAL INFORMATION. 

(a) IN GENERAL.—In order to enable the Federal Home Loan 

Banks to carry out the provisions of this Act, the Secretary of the 

Treasury, the Comptroller of the Currency, the Chairman of the 

Board of Governors of the Federal Reserve System, the Chairperson of the Federal Deposit Insurance Corporation, the Chairperson of the National Credit Union Administration, and the Director of the Office of Thrift Supervision, upon request by any Federal 

Home Loan Bank— 

(1) * * * 

* * * * * * * 

In addition, the Comptroller of the Currency, the Chairman of the 

Board of Governors of the Federal Reserve System, the Chairperson of the National Credit Union Administration, and the Director of the Office of Thrift Supervision shall make available to øthe 

Board¿ the Director or any Federal Home Loan Bank the financial 

reports filed by members of any Bank to enable øthe Board¿ the 

Director or a Bank to compile and publish cost of funds indices or 

other financial or statistical reports. 

(b) CONSENT BY MEMBERS.—Every member of a Federal Home 

Loan Bank shall, as a condition precedent thereto, be deemed— 

(1) to consent to such examinations as the Bank or øthe 

Board¿ the Director may require for the purposes of this Act; 

(2) to agree that reports of examinations by local, State, or 

Federal agencies or institutions may be furnished by such authorities to the Bank or øthe Board¿ the Director upon request; 

and 

* * * * * * * 

SEC. 23. FORMS OF BANK STOCK AND OBLIGATIONS. 

Any stock, debentures, bonds, notes, or other obligations issued 

under the authority of this Act may be issued in uncertificated 

form, utilizing a book entry method, or in certificated form under 

such rules, regulations, or guidelines as the øBoard of Directors of 

the Federal Housing Finance Board¿ Director may provide. 

SEC. 24. (a) * * * 

(b) In all respects, but subject to such additional rules and regulations as øthe Board¿ the Director may provide, any such organization shall be a member for the purposes of this Act. 

SEC. 25. Each Federal Home Loan Bank shall have succession 

until dissolved by øthe Board¿ the Director under this Act or by 

further Act of Congress. 

SEC. 26. (a) REORGANIZATION.—Whenever øthe Board¿ the Director finds that the efficient and economical accomplishment of the 

278 

purposes of this Act will be aided by such action, and in accordance 

with such rules, regulations, and orders as øthe Board¿ the Director may prescribe, any Federal Home Loan Bank may be øliquidated or¿ reorganized, and its stock paid off and retired in whole 

or in part in connection therewith after paying or making provision 

for the payment of its liabilities. In the case of any such øliquidation or¿ reorganization, any other Federal Home Loan Bank may, 

with the approval of øthe Board¿ the Director, acquire assets of any 

such øliquidated or¿ reorganized bank and assume liabilities thereof, in whole or in part. 

(b) VOLUNTARY MERGERS.—Any Bank may, with the approval of 

the Director, and the approval of the boards of directors of the 

Banks involved, merge with another Bank. The Director shall promulgate regulations establishing the conditions and procedures for 

the consideration and approval of any such voluntary merger, including the procedures for Bank member approval. 

* * * * * * * 

FEDERAL NATIONAL MORTGAGE ASSOCIATION 

CHARTER ACT 

TITLE III—NATIONAL MORTGAGE ASSOCIATIONS 

* * * * * * * 

CREATION OF ASSOCIATION

SEC. 302. (a) * * * 

(b)(1) * * * 

(2) For the purposes set forth in section 301(a), the corporation 

is authorized, pursuant to commitments or otherwise, to purchase, 

service, sell, lend on the security of, or otherwise deal in mortgages 

which are not insured or guaranteed as provided in paragraph (1) 

(such mortgages referred to hereinafter as ‘‘conventional mortgages’’). No such purchase of a conventional mortgage secured by 

a property comprising one- to four-family dwelling units shall be 

made if the outstanding principal balance of the mortgage at the 

time of purchase exceeds 80 per centum of the value of the property securing the mortgage, unless (A) the seller retains a participation of not less than 10 per centum in the mortgage; (B) for such 

period and under such circumstances as the corporation may require, the seller agrees to repurchase or replace the mortgage upon 

demand of the corporation in the event that the mortgage is in default; or (C) that portion of the unpaid principal balance of the 

mortgage which is in excess of such 80 per centum is guaranteed 

or insured by a qualified insurer as determined by the corporation. 

The corporation shall not issue a commitment to purchase a conventional mortgage prior to the date the mortgage is originated, if 

such mortgage is eligible for purchase under the preceding sentence only by reason of compliance with the requirements of clause 

(A) of such sentence. The corporation may purchase a conventional 

mortgage which was originated more than one year prior to the 

purchase date only if the seller is the Federal Deposit Insurance 

Corporation, the Resolution Trust Corporation, the National Credit 

Union Administration, or any other seller currently engaged in 

279 

mortgage lending or investing activities. For the purpose of this 

section, the term ‘‘conventional mortgages’’ shall include a mortgage, lien, or other security interest on the stock or membership 

certificate issued to a tenant-stockholder or resident-member of a 

cooperative housing corporation, as defined in section 216 of the Internal Revenue Code of 1954, and on the proprietary lease, occupancy agreement, or right of tenancy in the dwelling unit of the 

tenant-stockholder or resident-member in such cooperative housing 

corporation. The corporation shall establish limitations governing 

the maximum original principal obligation of conventional mortgages that are purchased by it; in any case in which the corporation purchases a participation interest in such a mortgage, the limitation shall be calculated with respect to the total original principal obligation of the mortgage and not merely with respect to the 

interest purchased by the corporation. øSuch limitations shall not 

exceed $93,750 for a mortgage secured by a single-family residence, 

$120,000 for a mortgage secured by a two-family residence, 

$145,000 for a mortgage secured by a three-family residence, and 

$180,000 for a mortgage secured by a four-family residence, except 

that such maximum limitations shall be adjusted effective January 

1 of each year beginning with 1981. Each such adjustment shall be 

made by adding to each such amount (as it may have been previously adjusted) a percentage thereof equal to the percentage increase during the twelve-month period ending with the previous 

October in the national average one-family house price in the 

monthly survey of all major lenders conducted by the Federal 

Housing Finance Board.¿ Such limitations shall not exceed 

$359,650 for a mortgage secured by a single-family residence, 

$460,400 for a mortgage secured by a 2-family residence, $556,500 

for a mortgage secured by a 3-family residence, and $691,600 for a 

mortgage secured by a 4-family residence, except that such maximum limitations shall be adjusted effective January 1 of each year 

beginning after the effective date under section 185 of the Federal 

Housing Finance Reform Act of 2005, subject to the limitations in 

this paragraph. Each adjustment shall be made by adding to or 

subtracting from each such amount (as it may have been previously 

adjusted) a percentage thereof equal to the percentage increase or 

decrease, during the most recent 12-month or fourth-quarter period 

ending before the time of determining such annual adjustment, in 

the housing price index maintained by the Director of the Federal 

Housing Finance Agency (pursuant to section 1322 of the Housing 

and Community Development Act of 1992 (12 U.S.C. 4541)). The 

foregoing limitations may be increased by not to exceed 50 per centum with respect to properties located in Alaska, Guam, Hawaii, 

and the Virgin Islands. Such foregoing limitations shall also be increased with respect to properties of a particular size located in any 

area for which the median price for such size residence exceeds the 

foregoing limitation for such size residence, to the lesser of 150 percent of such foregoing limitation for such size residence or the 

amount that is equal to the median price in such area for such size 

residence, except that, subject to the order, if any, issued by the Director of the Federal Housing Finance Agency pursuant to section 

123(d)(3) of the Federal Housing Finance Reform Act of 2005, such 

280 

increase shall apply only with respect to mortgages on which are 

based securities issued and sold by the corporation. 

* * * * * * * 

(6) The corporation may not implement any ønew program (as 

such term is¿ new program or new business activity (as such terms 

are defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992) øbefore obtaining the 

approval of the Secretary under section 1322¿ except in accordance 

with section 1321 of such Act. 

* * * * * * * 

CAPITALIZATION—FEDERAL NATIONAL MORTGAGE ASSOCIATION

SEC. 303. (a) * * * 

* * * * * * * 

(c)(1) * * * 

(2) The corporation may not make any capital distribution that 

would decrease the total capital of the corporation (as such term 

is defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992) to an amount less than 

the risk-based capital level for the corporation established under 

section 1361 of such Act or that would decrease the core capital of 

the corporation (as such term is defined in section 1303 of such 

Act) to an amount less than the minimum capital level for the corporation established under section 1362 of such Act, without prior 

written approval of the distribution by the øDirector of the Office 

of Federal Housing Enterprise Oversight of the Department of 

Housing and Urban Development¿ Director of the Federal Housing 

Finance Agency. 

* * * * * * * 

MANAGEMENT

SEC. 308. (a) * * * 

(b) The Federal National Mortgage Association shall have a 

board of directors, which shall consist of øeighteen persons, five of 

whom shall be appointed annually by the President of the United 

States, and the remainder of whom¿ not less than 7 and not more 

than 15 persons, who shall be elected annually by the common 

stockholders. øThe¿ Except to the extent that action under section 

1377 of the Housing and Community Development Act of 1992 temporarily results in a lesser number, the board shall at all times 

have as members øappointed by the President¿ at least one person 

from the homebuilding industry, at least one person from the mortgage lending industry, at least one person from the real estate industry, and at least one person from an organization that has represented consumer or community interests for not less than 2 years 

or one person who has demonstrated a career commitment to the 

provision of housing for low-income households. Each member of 

the board of directors shall be øappointed or¿ elected for a term 

ending on the date of the next annual meeting of the stockholdersø, 

except that any such appointed member may be removed from office by the President for good cause¿. Any øelective¿ seat on the 

board which becomes vacant after the annual election of the direcVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00280 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
281 

tors shall be filled by the board, but only for the unexpired portion 

of the term. øAny appointive seat which becomes vacant shall be 

filled by appointment of the President, but only for the unexpired 

portion of the term.¿ Within the limitations of law and regulation, 

the board shall determine the general policies which shall govern 

the operations of the corporation, and shall have power to adopt, 

amend, and repeal by laws governing the performance of the powers and duties granted to or imposed upon it by law. The board of 

directors shall select and effect the appointment of qualified persons to fill the offices of president and vice president, and such 

other offices as may be provided for in the bylaws. Any member of 

the board who is a full-time officer or employee of the Federal Government shall not, as such member, receive compensation for his 

services. 

GENERAL POWERS

SEC. 309. (a) * * * 

* * * * * * * 

(d)(1) * * * 

* * * * * * * 

(3)(A) Not later than June 30, 1993, and annually thereafter, the 

corporation shall submit a report to the Committee on øBanking, 

Finance and Urban Affairs¿ Financial Services of the House of 

Representatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate on (i) the comparability of the compensation policies of the corporation with the compensation policies 

of other similar businesses, (ii) in the aggregate, the percentage of 

total cash compensation and payments under employee benefit 

plans (which shall be defined in a manner consistent with the corporation’s proxy statement for the annual meeting of shareholders 

for the preceding year) earned by executive officers of the corporation during the preceding year that was based on the corporation’s 

performance, and (iii) the comparability of the corporation’s financial performance with the performance of other similar businesses. 

The report shall include a copy of the corporation’s proxy statement 

for the annual meeting of shareholders for the preceding year. 

(B) Notwithstanding the first sentence of paragraph (2), after the 

date of the enactment of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992, the corporation may not enter 

into any agreement or contract to provide any payment of money 

or other thing of current or potential value in connection with the 

termination of employment of any executive officer of the corporation, unless such agreement or contract is approved in advance by 

the øDirector of the Office of Federal Housing Enterprise Oversight 

of the Department of Housing and Urban Development¿ Director of 

the Federal Housing Finance Agency. The Director may not approve 

any such agreement or contract unless the Director determines 

that the benefits provided under the agreement or contract are 

comparable to benefits under such agreements for officers of other 

public and private entities involved in financial services and housing interests who have comparable duties and responsibilities. For 

purposes of this subparagraph, any renegotiation, amendment, or 

change after such date of enactment to any such agreement or conVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00281 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
282 

tract entered into on or before such date of enactment shall be considered entering into an agreement or contract. 

* * * * * * * 

(4) Notwithstanding any other provision of this section, the corporation shall not transfer, disburse, or pay compensation to any executive officer, or enter into an agreement with such executive officer, without the approval of the Director, for matters being reviewed 

under section 1318 of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 U.S.C. 4518). 

* * * * * * * 

(k)(1) The corporation shall submit to the øDirector of the Office 

of Federal Housing Enterprise Oversight of the Department of 

Housing and Urban Development¿ Director of the Federal Housing 

Finance Agency annual and quarterly reports of the financial condition and operations of the corporation which shall be in such form, 

contain such information, and be submitted on such dates as the 

Director shall require. 

* * * * * * * 

(m)(1) The corporation shall collect, maintain, and provide to the 

øSecretary¿ Director of the Federal Housing Finance Agency, in a 

form determined by the øSecretary¿ Director, data relating to its 

mortgages on housing consisting of 1 to 4 dwelling units. Such data 

shall include— 

(A) * * * 

* * * * * * * 

(E) any other characteristics that the øSecretary¿ Director of 

the Federal Housing Finance Agency considers appropriate, to 

the extent practicable. 

(2) The corporation shall collect, maintain, and provide to the 

øSecretary¿ Director of the Federal Housing Finance Agency, in a 

form determined by the øSecretary¿ Director, data relating to its 

mortgages on housing consisting of more than 4 dwelling units. 

Such data shall include— 

(A) * * * 

* * * * * * * 

(H) any other information that the øSecretary¿ Director of 

the Federal Housing Finance Agency considers appropriate, to 

the extent practicable. 

* * * * * * * 

(n)(1) The corporation shall submit to the Committee on øBanking, Finance and Urban Affairs¿ Financial Services of the House of 

Representatives, the Committee on Banking, Housing, and Urban 

Affairs of the Senate, and the øSecretary¿ Director of the Federal 

Housing Finance Agency a report on its activities under subpart B 

of part 2 of subtitle A of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992. 

(2) The report under this subsection shall— 

(A) * * * 

* * * * * * * 

283 

(E) include, in aggregate form and by appropriate category, 

the data provided to the øSecretary¿ Director of the Federal 

Housing Finance Agency under subsection (m)(1)(B); 

* * * * * * * 

(L) include any other information that the øSecretary¿ Director of the Federal Housing Finance Agency considers appropriate. 

(3)(A) The corporation shall make each report under this subsection available to the public at the principal and regional offices 

of the corporation. 

(B) Before making a report under this subsection available to the 

public, the corporation may exclude from the report information 

that the øSecretary¿ Director of the Federal Housing Finance Agency has determined is proprietary information under section 1326 of 

the Federal Housing Enterprises Financial Safety and Soundness 

Act of 1992. 

* * * * * * * 

FEDERAL HOME LOAN MORTGAGE CORPORATION ACT 

TITLE III—FEDERAL HOME LOAN MORTGAGE 

CORPORATION 

* * * * * * * 

ESTABLISHMENT OF THE CORPORATION

SEC. 303. (a)(1) * * * 

(2)(A) The Board of Directors of the Corporation shall consist 

of ø18 persons, 5 of whom shall be appointed annually by the President of the United States and the remainder of whom¿ not less 

than 7 and not more than 15 persons, who shall be elected annually 

by the voting common stockholders. øThe¿ Except to the extent that 

action under section 1377 of the Housing and Community Development Act of 1992 temporarily results in a lesser number, the Board 

of Directors shall at all times have as members øappointed by the 

President of the United States¿ at least 1 person from the homebuilding industry, at least 1 person from the mortgage lending industry, at least 1 person from the real estate industry, and at least 

1 person from an organization that has represented consumer or 

community interests for not less than 2 years or 1 person who has 

demonstrated a career commitment to the provision of housing for 

low-income households. 

(B) Each member of the Board of Directors shall be øsuch or¿ 

elected for a term ending on the date of the next annual meeting 

of the voting common stockholdersø, except that any appointed 

member may be removed from office by the President for good 

cause¿. 

(C) øAny appointive seat on the Board of Directors that becomes vacant shall be filled by appointment by the President of the 

United States, but only for the unexpired portion of the term.¿ Any 

øelective¿ seat on the Board of Directors that becomes vacant after 

284 

the annual election of the directors shall be filled by the Board of 

Directors, but only for the unexpired portion of the term. 

* * * * * * * 

(b)(1) * * * 

(2) The Corporation may not make any capital distribution that 

would decrease the total capital of the Corporation (as such term 

is defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992) to an amount less than 

the risk-based capital level for the Corporation established under 

section 1361 of such Act or that would decrease the core capital of 

the Corporation (as such term is defined in section 1303 of such 

Act) to an amount less than the minimum capital level for the Corporation established under section 1362 of such Act, without prior 

written approval of the distribution by the øDirector of the Office 

of Federal Housing Enterprise Oversight of the Department of 

Housing and Urban Development¿ Director of the Federal Housing 

Finance Agency. 

* * * * * * * 

(h)(1) Not later than June 30, 1993, and annually thereafter, the 

Corporation shall submit a report to the Committee on øBanking, 

Finance and Urban Affairs¿ Financial Services of the House of 

Representatives and the Committee on Banking, Housing, and 

Urban Affairs of the Senate on (A) the comparability of the compensation policies of the Corporation with the compensation policies of other similar businesses, (B) in the aggregate, the percentage of total cash compensation and payments under employee benefit plans (which shall be defined in a manner consistent with the 

Corporation’s proxy statement for the annual meeting of shareholders for the preceding year) earned by executive officers of the 

Corporation during the preceding year that was based on the Corporation’s performance, and (C) the comparability of the Corporation’s financial performance with the performance of other similar 

businesses. The report shall include a copy of the Corporation’s 

proxy statement for the annual meeting of shareholders for the preceding year. 

(2) Notwithstanding the first sentence of subsection (c), after the 

date of the enactment of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992, the Corporation may not enter 

into any agreement or contract to provide any payment of money 

or other thing of current or potential value in connection with the 

termination of employment of any executive officer of the Corporation, unless such agreement or contract is approved in advance by 

the øDirector of the Office of Federal Housing Enterprise Oversight 

of the Department of Housing and Urban Development¿ Director of 

the Federal Housing Finance Agency. The Director may not approve 

any such agreement or contract unless the Director determines 

that the benefits provided under the agreement or contract are 

comparable to benefits under such agreements for officers of other 

public and private entities involved in financial services and housing interests who have comparable duties and responsibilities. For 

purposes of this paragraph, any renegotiation, amendment, or 

change after such date of enactment to any such agreement or conVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00284 Fmt 6659 Sfmt 9001 E:\HR\OC\HR171P1.XXX HR171P1
285 

tract entered into on or before such date of enactment shall be considered entering into an agreement or contract. 

* * * * * * * 

(4) Notwithstanding any other provision of this section, the Corporation shall not transfer, disburse, or pay compensation to any executive officer, or enter into an agreement with such executive officer, without the approval of the Director, for matters being reviewed 

under section 1318 of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 U.S.C. 4518). 

* * * * * * * 

MORTGAGE OPERATIONS

SEC. 305. (a)(1) * * * 

(2) No conventional mortgages secured by a property comprising one- to four-family dwelling units shall be purchased under 

this section if the outstanding principal balance of the mortgage at 

the time of purchase exceeds 80 per centum of the value of the 

property securing the mortgage, unless (A) the seller retains a participation of not less than 10 per centum in the mortgage; (B) for 

such period and under such circumstances as the Corporation may 

require, the seller agrees to repurchase or replace the mortgage 

upon demand of the Corporation in the event that the mortgage is 

in default; or (C) that portion of the unpaid principal balance of the 

mortgage which is in excess of such 80 per centum is guaranteed 

or insured by a qualified insurer as determined by the Corporation. 

The Corporation shall not issue a commitment to purchase a conventional mortgage prior to the date the mortgage is originated, if 

such mortgage is eligible for purchase under the preceding sentence only by reason of compliance with the requirements of clause 

(A) of such sentence. The Corporation may purchase a conventional 

mortgage which was originated more than one year prior to the 

purchase date only if the seller is the Federal Deposit Insurance 

Corporation, the Resolution Trust Corporation, the National Credit 

Union Administration, or any other seller currently engaged in 

mortgage lending or investing activities. With respect to any transaction in which a seller contemporaneously sells mortgages originated more than one year old prior to the date of sale to the Corporation and receives in payment for such mortgages securities representing undivided interests only in those mortgages, the Corporation shall not impose any fee or charge upon an eligible seller 

which is not a member of a Federal Home Loan Bank which differs 

from that imposed upon an eligible seller which is such a member. 

The Corporation shall establish limitations governing the maximum original principal obligation of conventional mortgages that 

are purchased by it; in any case in which the Corporation purchases a participation interest in such a mortgage, the limitation 

shall be calculated with respect to the total original principal obligation of the mortgage and not merely with respect to the interest 

purchased by the Corporation. øSuch limitations shall not exceed 

$93,750 for a mortgage secured by a single-family residence, 

$120,000 for a mortgage secured by a two-family residence, and 

$145,000 for a mortgage secured by a three-family residence, and 

$180,000 for a mortgage secured by a four-family residence, except 

that such maximum limitations shall be adjusted effective January 

286 

1 of each year beginning with 1981. Each such adjustment shall be 

made by adding to each such amount (as it may have been previously adjusted) a percentage thereof equal to the percentage increase during the twelve-month period ending with the previous 

October in the national average one-family house price in the 

monthly survey of all major lenders conducted by the Federal 

Housing Finance Board.¿ Such limitations shall not exceed 

$359,650 for a mortgage secured by a single-family residence, 

$460,400 for a mortgage secured by a 2-family residence, $556,500 

for a mortgage secured by a 3-family residence, and $691,600 for a 

mortgage secured by a 4-family residence, except that such maximum limitations shall be adjusted effective January 1 of each year 

beginning after the effective date under section 185 of the Federal 

Housing Finance Reform Act of 2005, subject to the limitations in 

this paragraph. Each adjustment shall be made by adding to or 

subtracting from each such amount (as it may have been previously 

adjusted) a percentage thereof equal to the percentage increase or 

decrease, during the most recent 12-month or fourth-quarter period 

ending before the time of determining such annual adjustment, in 

the housing price index maintained by the Director of the Federal 

Housing Finance Agency (pursuant to section 1322 of the Housing 

and Community Development Act of 1992 (12 U.S.C. 4541)). The 

foregoing limitations may be increased by not to exceed 50 per centum with respect to properties located in Alaska, Guam, Hawaii, 

and the Virgin Islands. Such foregoing limitations shall also be increased with respect to properties of a particular size located in any 

area for which the median price for such size residence exceeds the 

foregoing limitation for such size residence, to the lesser of 150 percent of such foregoing limitation for such size residence or the 

amount that is equal to the median price in such area for such size 

residence, except that, subject to the order, if any, issued by the Director of the Federal Housing Finance Agency pursuant to section 

123(d)(3) of the Federal Housing Finance Reform Act of 2005, such 

increase shall apply only with respect to mortgages on which are 

based securities issued and sold by the Corporation. 

(c) The Corporation may not implement any ønew program (as 

such term is¿ new program or new business activity (as such terms 

are defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992) øbefore obtaining the 

approval of the Secretary under section 1322¿ except in accordance 

with section 1321 of such Act. 

OBLIGATIONS AND SECURITIES

SEC. 306. (a) * * * 

* * * * * * * 

(i) Except for fees paid pursuant to sections 303(c) and 

ø1316(c)¿ 306(c) of this Act and assessments pursuant to section 

ø106¿ 1316 of the Federal Housing Enterprises Financial Safety 

and Soundness Act of 1992, no fee or charge may be assessed or 

collected by the United States (including any executive department, 

agency, or independent establishment of the United States) on or 

with regard to the purchase, acquisition, sale, pledge, issuance, 

guarantee, or redemption of any mortgage, asset, obligation, or 

other security by the Corporation. No provision of this subsection 

287 

shall affect the purchase of any obligation by any Federal home 

loan bank pursuant to section 303(a). 

* * * * * * * 

MISCELLANEOUS PROVISIONS

SEC. 307. (a) * * * 

* * * * * * * 

(c)(1) The Corporation shall submit to the øDirector of the Office 

of Federal Housing Enterprise Oversight of the Department of 

Housing and Urban Development¿ Director of the Federal Housing 

Finance Agency annual and quarterly reports of the financial condition and operations of the Corporation which shall be in such form, 

contain such information, and be submitted on such dates as the 

Director shall require. 

* * * * * * * 

(e)(1) The Corporation shall collect, maintain, and provide to the 

øSecretary¿ Director of the Federal Housing Finance Agency, in a 

form determined by the øSecretary¿ Director, data relating to its 

mortgages on housing consisting of 1 to 4 dwelling units. Such data 

shall include— 

(A) * * * 

* * * * * * * 

(E) any other characteristics that the øSecretary¿ Director of 

the Federal Housing Finance Agency considers appropriate, to 

the extent practicable. 

(2) The Corporation shall collect, maintain, and provide to the 

øSecretary¿ Director of the Federal Housing Finance Agency, in a 

form determined by the øSecretary¿ Director, data relating to its 

mortgages on housing consisting of more than 4 dwelling units. 

Such data shall include— 

(A) * * * 

* * * * * * * 

(H) any other information that the øSecretary¿ Director of 

the Federal Housing Finance Agency considers appropriate, to 

the extent practicable. 

* * * * * * * 

(f)(1) The Corporation shall submit to the Committee on øBanking, Finance and Urban Affairs¿ Financial Services of the House of 

Representatives, the Committee on Banking, Housing, and Urban 

Affairs of the Senate, and the øSecretary¿ Director of the Federal 

Housing Finance Agency a report on its activities under subpart B 

of part 2 of subtitle A of the Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992. 

(2) The report under this subsection shall— 

(A) * * * 

* * * * * * * 

(E) include, in aggregate form and by appropriate category, 

the data provided to the øSecretary¿ Director of the Federal 

Housing Finance Agency under subsection (e)(1)(B); 

* * * * * * * 

288 

(L) include any other information that the øSecretary¿ Director of the Federal Housing Finance Agency considers appropriate. 

(3)(A) The Corporation shall make each report under this subsection available to the public at the principal and regional offices 

of the Corporation. 

(B) Before making a report under this subsection available to the 

public, the Corporation may exclude from the report information 

that the øSecretary¿ Director of the Federal Housing Finance Agency has determined is proprietary information under section 1326 of 

the Federal Housing Enterprises Financial Safety and Soundness 

Act of 1992. 

* * * * * * * 

FEDERAL FINANCIAL INSTITUTIONS EXAMINATION 

COUNCIL ACT OF 1978 

TITLE X—FEDERAL FINANCIAL INSTITUTIONS 

EXAMINATION COUNCIL 

SEC. 1001. This title may be cited as the ‘‘Federal Financial Institutions Examination Council Act of 1978’’. 

* * * * * * * 

DEFINITIONS

SEC. 1003. As used in this title— 

(1) the term ‘‘Federal financial institutions regulatory agencies’’ means the Office of the Comptroller of the Currency, the 

Board of Governors of the Federal Reserve System, the Federal 

Deposit Insurance Corporation, the Office of Thrift Supervision, Director of the Federal Housing Finance Agency, and the 

National Credit Union Administration; 

* * * * * * * 

(3) the term ‘‘financial institution’’ means a commercial 

bank, a savings bank, a trust company, a savings association, 

a building and loan association, a homestead association, a cooperative bank, øor a credit union;¿ a credit union, or a regulated entity (as such term is defined in section 1303 of the 

Housing and Community Development Act of 1992 (12 U.S.C. 

4502)). 

* * * * * * * 

ESTABLISHMENT OF THE COUNCIL

SEC. 1004. (a) There is established the Financial Institutions Examination Council which shall consist of— 

(1) * * * 

* * * * * * * 

(4) the Director, Office of Thrift Supervision; 

(5) the Director of the Federal Housing Finance Agency; and 

289 

ø(5)¿ (6) the Chairman of the National Credit Union Administration Board. 

* * * * * * * 

FUNCTIONS OF THE COUNCIL

SEC. 1006. (a) * * * 

* * * * * * * 

(d) The Council shall conduct schools for examiners and assistant 

examiners employed by the Federal financial institutions regulatory agencies. Such schools shall be open to enrollment by employees of State financial institutions supervisory agencies øand 

employees of the Federal Housing Finance Board¿ under conditions 

specified by the Council. 

* * * * * * * 

TITLE 18, UNITED STATES CODE 

* * * * * * * 

PART I—CRIMES 

* * * * * * * 

CHAPTER 11—BRIBERY, GRAFT, AND CONFLICTS OF 

INTEREST 

* * * * * * * 

§ 212. Offer of loan or gratuity to financial institution examiner 

(a) * * * 

* * * * * * * 

(c) DEFINITIONS.—In this section: 

(1) * * * 

(2) FEDERAL FINANCIAL INSTITUTION REGULATORY AGENCY.— 

The term ‘‘Federal financial institution regulatory agency’’ 

means— 

(A) * * * 

* * * * * * * 

(E) the Federal Housing Finance øBoard¿ Agency; 

* * * * * * * 

CHAPTER 31—EMBEZZLEMENT AND THEFT 

* * * * * * * 

§ 657. Lending, credit and insurance institutions 

Whoever, being an officer, agent or employee of or connected in 

any capacity with the Federal Deposit Insurance Corporation, National Credit Union Administration, Office of Thrift Supervision, 

the Resolution Trust Corporation, any Federal home loan bank, the 

Federal Housing Finance øBoard¿ Agency, Farm Credit AdminisVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00289 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
290 

tration, Department of Housing and Urban Development, Federal 

Crop Insurance Corporation, the Secretary of Agriculture acting 

through the Farmers Home Administration or successor agency, 

the Rural Development Administration or successor agency, or the 

Farm Credit System Insurance Corporation, a Farm Credit Bank, 

a bank for cooperatives or any lending, mortgage, insurance, credit 

or savings and loan corporation or association authorized or acting 

under the laws of the United States or any institution, other than 

an insured bank (as defined in section 656), the accounts of which 

are insured by the Federal Deposit Insurance Corporation, or by 

the National Credit Union Administration Board or any small business investment company, or any community development financial 

institution receiving financial assistance under the Riegle Community Development and Regulatory Improvement Act of 1994, and 

whoever, being a receiver of any such institution, or agent or employee of the receiver, embezzles, abstracts, purloins or willfully 

misapplies any moneys, funds, credits, securities or other things of 

value belonging to such institution, or pledged or otherwise 

intrusted to its care, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both; but if the amount or 

value embezzled, abstracted, purloined or misapplied does not exceed $1,000, he shall be fined under this title or imprisoned not 

more than one year, or both. 

* * * * * * * 

CHAPTER 47—FRAUD AND FALSE STATEMENTS 

* * * * * * * 

§ 1006. Federal credit institution entries, reports and transactions 

Whoever, being an officer, agent or employee of or connected in 

any capacity with the Federal Deposit Insurance Corporation, National Credit Union Administration, Office of Thrift Supervision, 

any Federal home loan bank, the Federal Housing Finance 

øBoard¿ Agency, the Resolution Trust Corporation, Farm Credit 

Administration, Department of Housing and Urban Development, 

Federal Crop Insurance Corporation, the Secretary of Agriculture 

acting through the Farmers Home Administration or successor 

agency, the Rural Development Administration or successor agency, or the Farm Credit System Insurance Corporation, a Farm 

Credit Bank, a bank for cooperatives or any lending, mortgage, insurance, credit or savings and loan corporation or association authorized or acting under the laws of the United States or any institution, other than an insured bank (as defined in section 656), the 

accounts of which are insured by the Federal Deposit Insurance 

Corporation, or by the National Credit Union Administration Board 

or any small business investment company, with intent to defraud 

any such institution or any other company, body politic or corporate, or any individual, or to deceive any officer, auditor, examiner or agent of any such institution or of department or agency of 

the United States, makes any false entry in any book, report or 

statement of or to any such institution, or without being duly authorized, draws any order or bill of exchange, makes any acceptance, or issues, puts forth or assigns any note, debenture, bond or 

291 

other obligation, or draft, bill of exchange, mortgage, judgment, or 

decree, or, with intent to defraud the United States or any agency 

thereof, or any corporation, institution, or association referred to in 

this section, participates or shares in or receives directly or indirectly any money, profit, property, or benefits through any transaction, loan, commission, contract, or any other act of any such corporation, institution, or association, shall be fined not more than 

$1,000,000 or imprisoned not more than 30 years, or both. 

* * * * * * * 

§ 1014. Loan and credit applications generally; renewals and 

discounts; crop insurance 

Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of 

influencing in any way the action of the Farm Credit Administration, Federal Crop Insurance Corporation or a company the Corporation reinsures, the Secretary of Agriculture acting through the 

Farmers Home Administration or successor agency, the Rural Development Administration or successor agency, any Farm Credit 

Bank, production credit association, agricultural credit association, 

bank for cooperatives, or any division, officer, or employee thereof, 

or of any regional agricultural credit corporation established pursuant to law, or a Federal land bank, a Federal land bank association, a Federal Reserve bank, a small business investment company, as defined in section 103 of the Small Business Investment 

Act of 1958 (15 U.S.C. 662), or the Small Business Administration 

in connection with any provision of that Act, a Federal credit 

union, an insured State-chartered credit union, any institution the 

accounts of which are insured by the Federal Deposit Insurance 

Corporation, the Office of Thrift Supervision, any Federal home 

loan bank, the Federal Housing Finance øBoard¿ Agency, the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Farm Credit System Insurance Corporation, or the National Credit Union Administration Board, a branch or agency of 

a foreign bank (as such terms are defined in paragraphs (1) and 

(3) of section 1(b) of the International Banking Act of 1978), or an 

organization operating under section 25 or section 25(a) of the Federal Reserve Act, upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or 

loan, or any change or extension of any of the same, by renewal, 

deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, shall be fined not more than 

$1,000,000 or imprisoned not more than 30 years, or both. The 

term ‘‘State-chartered credit union’’ includes a credit union chartered under the laws of a State of the United States, the District 

of Columbia, or any commonwealth, territory, or possession of the 

United States. 

* * * * * * * 

CHAPTER 93—PUBLIC OFFICERS AND EMPLOYEES 

* * * * * * * 

292 

§ 1905. Disclosure of confidential information generally 

Whoever, being an officer or employee of the United States or of 

any department or agency thereof, any person acting on behalf of 

the øOffice of Federal Housing Enterprise Oversight¿ Federal 

Housing Finance Agency, or agent of the Department of Justice as 

defined in the Antitrust Civil Process Act (15 U.S.C. 1311–1314), 

or being an employee of a private sector organization who is or was 

assigned to an agency under chapter 37 of title 5, publishes, divulges, discloses, or makes known in any manner or to any extent 

not authorized by law any information coming to him in the course 

of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to 

or filed with, such department or agency or officer or employee 

thereof, which information concerns or relates to the trade secrets, 

processes, operations, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, 

profits, losses, or expenditures of any person, firm, partnership, 

corporation, or association; or permits any income return or copy 

thereof or any book containing any abstract or particulars thereof 

to be seen or examined by any person except as provided by law; 

shall be fined under this title, or imprisoned not more than one 

year, or both; and shall be removed from office or employment. 

* * * * * * * 

FLOOD DISASTER PROTECTION ACT OF 1973 

* * * * * * * 

TITLE I—EXPANSION OF NATIONAL FLOOD INSURANCE 

PROGRAM 

* * * * * * * 

FLOOD INSURANCE PURCHASE AND COMPLIANCE REQUIREMENTS AND

ESCROW ACCOUNTS

SEC. 102. (a) * * * 

* * * * * * * 

(f) CIVIL MONETARY PENALTIES FOR FAILURE TO REQUIRE FLOOD

INSURANCE OR NOTIFY.— 

(1) * * * 

* * * * * * * 

(3) CIVIL MONETARY PENALTIES AGAINST GSE’S.— 

(A) IN GENERAL.—If the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation 

is found by the øDirector of the Office of Federal Housing 

Enterprise Oversight of the Department of Housing and 

Urban Development¿ Director of the Federal Housing Finance Agency to have a pattern or practice of purchasing 

loans in violation of the procedures established pursuant 

to subsection (b)(3), the Director of such Office shall assess 

293 

a civil penalty against such enterprise in the amount provided under paragraph (5) of this subsection. 

* * * * * * * 

SECTION 5 OF THE DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT ACT 

TRANSFERS TO DEPARTMENT

SEC. 5. (a) * * * 

* * * * * * * 

ø(d) Notwithstanding any other provision of this Act, the Secretary may not merge or consolidate the Office of Federal Housing 

Enterprise Oversight of the Department, or any of the functions or 

responsibilities of such Office, with any function or program administered by the Secretary.¿ 

TITLE 5, UNITED STATES CODE 

* * * * * * * 

PART III—EMPLOYEES 

* * * * * * * 

SUBPART B—EMPLOYMENT AND RETENTION 

* * * * * * * 

CHAPTER 31—AUTHORITY FOR EMPLOYMENT 

* * * * * * * 

SUBCHAPTER II—THE SENIOR EXECUTIVE SERVICE 

* * * * * * * 

§ 3132. Definitions and exclusions 

(a) For the purpose of this subchapter— 

(1) ‘‘agency’’ means an Executive agency, except a Government corporation and the Government Accountability Office, 

but does not include— 

(A) * * * 

* * * * * * * 

(D) the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Housing Finance 

Board, the Resolution Trust Corporation, the Farm Credit 

Administration, øthe Office of Federal Housing Enterprise 

Oversight of the Department of Housing and Urban Development¿ the Federal Housing Finance Agency, and the National Credit Union Administration; 

* * * * * * * 

294 

SUBPART D—PAY AND ALLOWANCES 

* * * * * * * 

CHAPTER 53—PAY RATES AND SYSTEMS 

* * * * * * * 

SUBCHAPTER II—EXECUTIVE SCHEDULE PAY RATES 

* * * * * * * 

§ 5313. Positions at level II 

Level II of the Executive Schedule applies to the following positions, for which the annual rate of basic pay shall be the rate determined with respect to such level under chapter 11 of title 2, as 

adjusted by section 5318 of this title: 

Deputy Secretary of Defense. 

* * * * * * * 

øDirector of the Office of Federal Housing Enterprise Oversight, Department of Housing and Urban Development.¿ 

Director of the Federal Housing Finance Agency. 

* * * * * * * 

§ 5314. Positions at level III 

Level III of the Executive Schedule applies to the following positions, for which the annual rate of basic pay shall be the rate determined with respect to such level under chapter 11 of title 2, as 

adjusted by section 5318 of this title: 

Solicitor General of the United States. 

* * * * * * * 

Deputy Directors, Federal Housing Finance Agency (3). 

§ 5315. Positions at level IV 

Level IV of the Executive Schedule applies to the following positions, for which the annual rate of basic pay shall be the rate determined with respect to such level under chapter 11 of title 2, as 

adjusted by section 5318 of this title: 

Deputy Administrator of General Services. 

* * * * * * * 

Members, Housing Finance Oversight Board. 

* * * * * * * 

SECTION 8G OF THE INSPECTOR GENERAL ACT OF 1978 

REQUIREMENTS FOR FEDERAL ENTITIES AND DESIGNATED FEDERAL

ENTITIES

SEC. 8G. (a) Notwithstanding section 11 of this Act, as used in 

this section— 

(1) * * * 

(2) the term ‘‘designated Federal entity’’ means Amtrak, the 

Appalachian Regional Commission, the Board of Governors of 

the Federal Reserve System, the Board for International 

295 

Broadcasting, the Commodity Futures Trading Commission, 

the Consumer Product Safety Commission, the Corporation for 

Public Broadcasting, the Equal Employment Opportunity Commission, the Farm Credit Administration, the Federal Communications Commission, the Federal Deposit Insurance Corporation, the Federal Election Commission, the Election Assistance 

Commission, the Federal Housing Finance øBoard¿ Agency, the 

Federal Labor Relations Authority, the Federal Maritime Commission, the Federal Trade Commission, the Legal Services 

Corporation, the National Archives and Records Administration, the National Credit Union Administration, the National 

Endowment for the Arts, the National Endowment for the Humanities, the National Labor Relations Board, the National 

Science Foundation, the Panama Canal Commission, the Peace 

Corps, the Pension Benefit Guaranty Corporation, the Securities and Exchange Commission, the Smithsonian Institution, 

the United States International Trade Commission, and the 

United States Postal Service; 

* * * * * * * 

SECTION 11 OF THE FEDERAL INSURANCE ACT 

SEC. 11. (a) * * * 

* * * * * * * 

(t) AGENCIES MAY SHARE INFORMATION WITHOUT WAIVING PRIVILEGE.— 

(1) * * * 

(2) DEFINITIONS.—For purposes of this subsection: 

(A) COVERED AGENCY.—The term ‘‘covered agency’’ 

means any of the following: 

(i) * * * 

* * * * * * * 

(vii) The Federal Housing Finance Agency. 

* * * * * * * 

SECTION 10001 OF THE 1997 EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT FOR RECOVERY 

FROM NATURAL DISASTERS, AND FOR OVERSEAS 

PEACEKEEPING EFFORTS, INCLUDING THOSE IN BOSNIA 

SEC. 10001. The Secretary shall submit semi-annually to the 

Committees on Appropriations a list of all contracts and task orders issued under such contracts in excess of $250,000 which were 

entered into during the prior 6-month period by the Secretary, øthe 

Government National Mortgage Association, and the Office of Federal Housing Enterprise Oversight¿ and the Government National 

Mortgage Association (or by any officer of the Department of Housing and Urban Developmentø, the Government National Mortgage 

Association, or the Office of Federal Housing Enterprise Oversight¿ 

or the Government National Mortgage Association acting in his or 

her capacity to represent the Secretary or these entities). Each listVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00295 Fmt 6659 Sfmt 6601 E:\HR\OC\HR171P1.XXX HR171P1
296 

ing shall identify the parties to the contract, the term and amount 

of the contract, and the subject matter and responsibilities of the 

parties to the contract. 

SECTION 302 OF THE CRANSTON-GONZALEZ NATIONAL 

AFFORDABLE HOUSING ACT 

SEC. 302. NATIONAL HOMEOWNERSHIP TRUST. 

(a) * * * 

(b) BOARD OF DIRECTORS.—The Trust shall be governed by a 

Board of Directors, which shall be composed of— 

(1) * * * 

* * * * * * * 

(4) øthe chairperson of the Federal Housing Finance Board¿ 

the Director of the Federal Housing Finance Agency; 

* * * * * * * 

SECTION 1113 OF THE RIGHT TO FINANCIAL PRIVACY 

ACT OF 1978 

EXCEPTIONS

SEC. 1113. (a) * * * 

* * * * * * * 

(o) This title shall not apply to the examination by or disclosure 

to the Federal Housing Finance øBoard¿ Agency or any of the Federal home loan banks of financial records or information in the exercise of the Federal Housing Finance øBoard’s¿ Agency’s authority 

to extend credit (either directly or through a Federal home loan 

bank) to financial institutions or others. 

* * * * * * * 

SECTION 117 OF THE RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY IMPROVEMENT ACT OF 1994 

SEC. 117. STUDIES AND REPORTS; EXAMINATION AND AUDIT. 

(a) * * * 

* * * * * * * 

(e) CONSULTATION.—In the conduct of the studies required under 

this section, the Fund shall consult, as appropriate, with the Comptroller of the Currency, the Federal Deposit Insurance Corporation, 

the Board of Governors of the Federal Reserve System, the Federal 

Housing Finance øBoard¿ Agency, the Farm Credit Administration, 

the Director of the Office of Thrift Supervision, the National Credit 

Union Administration Board, Indian tribal governments, community reinvestment organizations, civil rights organizations, consumer organizations, financial organizations, and such representatives of agencies or other persons, at the discretion of the Fund. 

* * * * * * * 

297 

SECTION 517 OF THE MULTIFAMILY ASSISTED HOUSING 

REFORM AND AFFORDABILITY ACT OF 1997 

SEC. 517. RESTRUCTURING TOOLS. 

(a) * * * 

(b) RESTRUCTURING TOOLS.—In addition to the requirements of 

subsection (a) and to the extent these actions are consistent with 

this section and with the control of the Secretary of applicable accounts in the Treasury of the United States, an approved mortgage 

restructuring and rental assistance sufficiency plan under this subtitle may include one or more of the following actions: 

(1) * * * 

* * * * * * * 

(4) CREDIT ENHANCEMENT.—Providing any additional State 

or local mortgage credit enhancements and risk-sharing arrangements that may be established with State or local housing finance agencies, the Federal Housing Finance øBoard¿ 

Agency, the Federal National Mortgage Association, and the 

Federal Home Loan Mortgage Corporation, to a modified or refinanced first mortgage. 

* * * * * * * 

SECTION 3502 OF TITLE 44, UNITED STATES CODE 

§ 3502. Definitions 

As used in this subchapter— 

(1) * * * 

* * * * * * * 

(5) the term ‘‘independent regulatory agency’’ means the 

Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Product 

Safety Commission, the Federal Communications Commission, 

the Federal Deposit Insurance Corporation, the Federal Energy 

Regulatory Commission, the Federal Housing Finance øBoard¿ 

Agency, the Federal Maritime Commission, the Federal Trade 

Commission, the Interstate Commerce Commission, the Mine 

Enforcement Safety and Health Review Commission, the National Labor Relations Board, the Nuclear Regulatory Commission, the Occupational Safety and Health Review Commission, 

the Postal Rate Commission, the Securities and Exchange 

Commission, and any other similar agency designated by statute as a Federal independent regulatory agency or commission; 

* * * * * * * 

SECTION 1004 OF THE LAUNCHING OUR COMMUNITIES’ 

ACCESS TO LOCAL TELEVISION ACT OF 2000 

SEC. 1004. APPROVAL OF LOAN GUARANTEES. 

(a) * * * 

* * * * * * * 

(d) REQUIREMENTS AND CRITERIA APPLICABLE TO APPROVAL.— 

298 

(1) * * * 

(2) PREREQUISITES.—In addition to meeting the underwriting 

criteria under paragraph (1), a loan may not be guaranteed 

under this Act unless— 

(A) * * * 

* * * * * * * 

(D)(i) * * * 

* * * * * * * 

(iii) no loan may be made for purposes of this Act by a 

governmental entity or affiliate thereof, or by the Federal 

Agricultural Mortgage Corporation, or any institution supervised by the øOffice of Federal Housing Enterprise 

Oversight, the Federal Housing Finance Board¿ Federal 

Housing Finance Agency, or any affiliate of such entities; 

* * * * * * * 

(299) 

ADDITIONAL AND DISSENTING VIEWS

ADDITIONAL VIEWS 

We believe that an essential component of the legislation reported by the committee is the establishment of an Affordable 

Housing Fund for both Fannie Mae and Freddie Mac. Such establishment is patterned after the highly successful Affordable Housing Program (AHP) of the Federal Home Loan Banks, which has 

been in existence for more than a decade. This fund would address 

underserved housing markets through the provision of assistance 

for housing that would be affordable for very-low and extremelylow income families. This would fill a gap not being met in today’s 

marketplace, in a manner consistent with the GSEs’ charter and 

mission. 

We understand that some members of the committee are opposed 

to the creation of an Affordable Housing Fund. However, we also 

note that an amendment to eliminate this provision from the bill 

failed on a vote of 53 to 17, with a majority of members from both 

sides of the aisle voting to retain the fund in the bill. 

A common complaint by critics of the fund is that it would violate 

‘‘free market principles.’’ In response, we note that both Fannie 

Mae and Freddie Mac are both federally chartered and are Government Sponsored Enterprises (as are the Federal Home Loan Banks, 

which operate the AHP). These GSEs are unlike most private corporations in that they receive substantial federal governmental 

benefits, such as an exemption from state and local taxes and a 

federal line of credit. 

Moreover, there is a consensus, explicitly shared by the housing 

policies of both Democratic and Republican administrations, that 

the free market cannot by itself meet the entire need for housing 

for those with the lack of income and resources that define the 

homeless and extremely low income families. Some form of subsidy 

or assistance is necessary to make housing affordable for families 

in these income categories. A GSE affordable housing fund would 

help fill this gap, while maximizing the role of the private sector 

by extending the scope of these privately owned, but governmentally sponsored, entities, which work in concert with other private sector mortgage loan originators. 

We also note that criticisms of the fund do not square with the 

specific provisions of the bill. For example, the claim is made that 

funds may be used by organizations for their own activities or for 

advocacy purposes. In fact, the bill clearly states that funds may 

be used ‘‘only for the production, preservation, and rehabilitation’’ 

of housing, and it specifically prohibits any funds being used for 

‘‘administrative, outreach, or other costs of’’ any fund applicant. It 

is our intent that 100% of the funds be used for housing. 

300 

The claim is also made that the fund would become a ‘‘slush 

fund’’ for the GSEs. In fact, the bill requires that funds be allocated 

under an application process according to criteria to be established 

by the regulator, that the fund be audited every year to ensure 

compliance with program rules, that fund use be monitored for 

compliance with affordability standards and other requirements, 

and that a GSE may not condition funding on applicants using that 

GSE for financing. 

Therefore, we would oppose efforts made by these critics to weaken the fund’s impact or effectiveness as the bill moves to the full 

House for its consideration. 

For example, we support retention of the provision now in the 

bill requiring that any investment returns in the fund must be 

used for other fund activities, and may not be retained by the 

GSEs. This avoids the potential conflict of interest that the GSEs 

might fund activities based on the likelihood of investment returns, 

instead of allocating funds based on the most meritorious fund applications. 

We support the proposed 5% fund level, with a 3.5% transition 

level in the first year after bill enactment. We would not want to 

see the bill modified to have fund levels reduced, to have the fund’s 

implementation unnecessarily delayed or truncated, or to have 

funding made contingent on certain discretionary findings of the 

regulator. 

We are somewhat disappointed that the bill’s fund provision did 

not permit, as last year’s Senate version did, the use of funds for 

internal GSE loan loss reserves, to cover potential risks of new or 

more flexible GSE loan products. However, we are pleased that the 

bill explicitly retains a provision to encourage the leveraging of 

funds through an externalized grant process through such purposes 

as loan loss reserves or revolving loan funds. Regardless of whether 

this leveraged grant option is or is not explicitly stated in the bill, 

we believe that the flexible fund use language stated elsewhere in 

the bill clearly permits such types and forms of fund use, with application selection based on the best projects being proposed. 

With regard to the Congressional Budget Office (CBO) scoring of 

the Affordable Housing Fund, we note that the Fund actually reduces the deficit by $370 million over the 5-year budget window the 

House uses for scoring provisions of this type. However, over a 10- 

year period, CBO scores the fund as increasing the deficit by $280 

million. This apparently results from CBO’s concluding that fund 

assessments are not counted as offsetting receipts—even though 

CBO claimed that the GSEs receive tens of billions of dollars in annual federal benefits—on the grounds that such benefits are not 

new and directly related to the fund contributions. This position 

appears inconsistent with CBO treatment of previous CBOGSE 

budget options and inconsistent with treatment of various items in 

the current budget. 

Finally, we support the other housing mission provisions of the 

bill, including the improved targeting of numerical GSE housing 

goals and the section explicitly stating a GSE duty to serve underserved markets. With regard to the goals, we believe that the use 

of HMDA data as a factor in setting the housing goals is a useful 

statutory addition. However, such historical data should not be 

301 

used presumptively in setting prospective goals, but should just be 

one more factor to be taken into consideration. Actual HMDA data 

is probably of most use by the regulator during a multi-year goal 

promulgation, under which a regulator can use such data to make 

appropriate mid-course corrections if the overall market can be 

shown to deviate from the assumptions used in setting the multiyear goals. 

We are also concerned that the goal realignment no longer measures mortgage refinancings in any way, and would urge consideration of the creation of home purchase refinancings as a statutory 

subgoal. 

BARNEY FRANK. MAXINE WATERS. 

(302) 

ADDITIONAL VIEWS 

The bill reported out of the Committee provides the new regulator authority to order an enterprise to dispose of or acquire an 

asset or liability if the Director determines it is consistent with 

safety and soundness or the purposes of this legislation or the enterprises’ charters, but does not require that the regulator place 

limits on the size of the enterprises or order reductions in their retained portfolios. We believe that this authority should be used 

only as necessary to ensure the safe and sound operation of the enterprises, not to place arbitrary limits on the size of retained portfolios. 

We believe the strengthened safety and soundness oversight authority provided to the new regulator obviates any need for limits 

on the portfolios of the enterprises. In particular, this bill removes 

any restrictions on the type or level of risk-based capital that the 

regulator may require. We expect that the new regulator will use 

this expanded authority to determine whether the enterprises’ existing risk-based capital rules, which focus primarily on interest 

rate risk, should be strengthened, supplemented, or replaced with 

capital requirements more explicitly focused on the particular assets held by the enterprises. As with banking institutions, a strong 

risk-based capital requirement, rather than inherently arbitrary 

limits on asset size, is the best means of assuring that the enterprises operate safely and do not pose a threat to the financial system. 

Additionally, we believe that it would be inappropriate and counterproductive to adopt asset limits of the type proposed by the Administration, under which the enterprises could hold assets only at 

levels ‘‘necessary’’ to provide adequate liquidity to the mortgage 

markets. The enterprises generally purchase mortgages and mortgage-backed securities when prices are out of line with the broader 

markets, which provides a source of support, particularly in periods 

of market turmoil, that helps reduce volatility and keep mortgage 

funding costs stable. Limiting the portfolios of the enterprises to a 

level ‘‘necessary’’ to provide adequate liquidity to the markets effectively puts the regulator in the position of determining when mortgage rates are too high and liquidity is needed, turning what is 

currently a market function into a regulatory one. 

Finally, portfolio limits will discourage the enterprises from creating innovative or tailored products to respond to market needs. 

Because such products are more difficult and expensive to 

securitize, limiting the ability of the enterprises to hold assets in 

portfolio will result in higher costs for any product that does not 

have a broad market. This is clearly contrary to a key goal of this 

legislation: to encourage the enterprises to do more to fulfill their 

housing missions. 

BARNEY FRANK. 

303 

PAUL E. KANJORSKI. 

(304) 

DISSENTING VIEWS 

H.R. 1461 fails to address the core problems with the Government Sponsored Enterprises (GSEs). Furthermore, since this legislation creates new government programs that will further artificially increase the demand for housing, H.R. 1461 increases the 

economic damage that will occur when the housing bubble bursts. 

The main problem with the GSEs is the special privileges the federal government gives the GSEs. According to the Congressional 

Budget Office, the housing-related GSEs received almost 20 billion 

dollars worth of indirect federal subsidies in fiscal year 2004 alone. 

One of the major privileges the federal government grants to the 

GSEs is a line of credit from the United States Treasury. According 

to some estimates, the line of credit may be worth over two billion 

dollars. GSEs also benefit from an explicit grant of legal authority 

given to the Federal Reserve to purchase the debt of the GSEs. 

GSEs are the only institutions besides the United States Treasury 

granted explicit statutory authority to monetize their debt through 

the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors. 

This implicit promise by the government to bail out the GSEs in 

times of economic difficulty helps the GSEs attract investors who 

are willing to settle for lower yields than they would demand in the 

absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on 

behalf of the government to engage in a massive unconstitutional 

and immoral income transfer from working Americans to holders of 

GSE debt. This is why I offered an amendment at the committee 

mark-up to cut off this line of credit. I was disappointed to see my 

colleagues reject this opportunity to protect taxpayers from having 

to bail out Fannie Mae and Freddie Mac when the housing bubble 

bursts. 

The connection between the GSEs and the government helps isolate the GSEs’ managements from market discipline. This isolation 

from market discipline is the root cause of the mismanagement occurring at Fannie and Freddie. After all, if investors did not believe 

that the federal government would bail out Fannie and Freddie if 

the GSEs faced financial crises, then investors would have forced 

the GSEs to provide assurances that the GSEs are following accepted management and accounting practices before investors 

would consider Fannie and Freddie to be good investments. 

Federal Reserve Chairman Alan Greenspan has expressed concern that the government subsidies provided to the GSEs make investors underestimate the risk of investing in Fannie Mae and 

Freddie Mac. Although he has endorsed many of the regulatory ‘‘solutions’’ being considered here today, Chairman Greenspan has implicitly admitted the subsidies are the true source of the problems 

with Fannie and Freddie. 

305 

H.R. 1461 compounds these problems by further insulating the 

GSEs from market discipline. By creating a ‘‘world-class’’ regulator, 

Congress would send a signal to investors that investors need not 

concern themselves with investigating the financial health and stability of Fannie and Freddie since a ‘‘world-class’’ regulator is performing that function. 

However, one of the forgotten lessons of the financial scandals of 

a few years ago is that the market is superior at discovering and 

punishing fraud and other misbehavior than are government regulators. After all, the market discovered, and began to punish, the 

accounting irregularities of Enron before the government regulators did. 

Concerns have been raised about the new regulator’s independence from the Treasury Department. This is more than a bureaucratic ‘‘turf battle’’ as there are legitimate worries that isolating the 

regulator from Treasury oversight may lead to regulatory capture. 

Regulatory capture occurs when regulators serve the interests of 

the businesses they are supposed to be regulating instead of the 

public interest. While H.R. 1461 does have some provisions that 

claim to minimize the risk of regulatory capture, regulatory capture is always a threat where regulators have significant control 

over the operations of an industry. After all, the industry obviously 

has a greater incentive than any other stakeholder to influence the 

behavior of the regulator. 

The flip side of regulatory capture is that managers and owners 

of highly subsidized and regulated industries are more concerned 

with pleasing the regulators than with pleasing consumers or investors, since the industries know that investors will believe all is 

well if the regulator is happy. Thus, the regulator and the regulated industry may form a symbiosis where each looks out for the 

other’s interests while ignoring the concerns of investors. 

Furthermore, my colleagues should consider the constitutionality 

of an ‘‘independent regulator.’’ The Founders provided for three 

branches of government—an executive, a judiciary, and a legislature. Each branch was created as sovereign in its sphere, and there 

were to be clear lines of accountability for each branch. However, 

independent regulators do not fit comfortably within the three 

branches; nor are they totally accountable to any branch. Regulators at these independent agencies often make judicial-like decisions, but they are not part of the judiciary. They often make rules, 

similar to the ones regarding capital requirements, that have the 

force of law, but independent regulators are not legislative. And, of 

course, independent regulators enforce the laws in the same way, 

as do other parts of the executive branch; yet independent regulators lack the day-to-day accountability to the executive that provides a check on other regulators. 

Thus, these independent regulators have a concentration of powers of all three branches and lack direct accountability to any of the 

democratically chosen branches of government. This flies in the 

face of the Founders’ opposition to concentrations of power and government bureaucracies that lack accountability. These concerns are 

especially relevant considering the remarkable degree of power and 

autonomy this bill gives to the regulator. For example, in the 

scheme established by H.R. 1461 the regulator’s budget is not subVerDate Aug 04 2004 01:01 Jul 19, 2005 Jkt 039006 PO 00000 Frm 00305 Fmt 6604 Sfmt 6604 E:\HR\OC\HR171P1.XXX HR171P1
306 

ject to appropriations. This removes a powerful mechanism for 

holding the regulator accountable to Congress. While the regulator 

is accountable to a board of directors, this board may conduct all 

deliberations in private because it is not subject to the sunshine 

act. 

Ironically, by transferring the risk of widespread mortgage defaults to the taxpayers through government subsidies and convincing investors that all is well because a ‘‘world-class’’ regulator 

is ensuring the GSEs’ soundness, the government increases the 

likelihood of a painful crash in the housing market. This is because 

the special privileges of Fannie and Freddie have distorted the 

housing market by allowing Fannie and Freddie to attract capital 

they could not attract under pure market conditions. As a result, 

capital is diverted from its most productive uses into housing. This 

reduces the efficacy of the entire market and thus reduces the 

standard of living of all Americans. 

Despite the long-term damage to the economy inflicted by the 

government’s interference in the housing market, the government’s 

policy of diverting capital into housing creates a short-term boom 

in housing. Like all artificially created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. 

These losses will be greater than they would have been had government policy not actively encouraged over-investment in housing. 

H.R. 1461 further distorts the housing market by artificially inflating the demand for housing through the creation of a national 

housing trust fund. This fund further diverts capital to housing 

that, absent government intervention, would be put to a use more 

closely matching the demands of consumers. Thus, this new housing program will reduce efficacy and create yet another unconstitutional redistribution program. 

Perhaps the Federal Reserve can stave off the day of reckoning 

by purchasing the GSEs’ debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the 

housing market forever. In fact, postponing the necessary and painful market corrections will only deepen the inevitable fall. The 

more people are invested in the market, the greater the effects 

across the economy when the bubble bursts. 

Instead of addressing government policies encouraging the 

misallocation of resources to the housing market, H.R. 1461 further 

introduces distortion into the housing market by expanding the authority of federal regulators to approve the introduction of new 

products by the GSEs. Such regulation inevitability delays the introduction of new innovations to the market, or even prevents some 

potentially valuable products from making it to the market. Of 

course, these new regulations are justified in part by the GSEs’ 

government subsidies. We once again see how one bad intervention 

in the market (the GSEs’ government subsidies) leads to another 

(the new regulations). 

In conclusion, H.R. 1461 compounds the problems with the GSEs 

and may increase the damage that will be inflicted by a bursting 

of the housing bubble. This is because this bill creates a new unaccountable regulator and introduces further distortions into the 

307 

housing market via increased regulatory power. H.R. 1461 also violates the Constitution by creating yet another unaccountable regulator with quasi-executive, judicial, and legislative powers. Instead 

of expanding unconstitutional and market distorting government 

bureaucracies, Congress should act to remove taxpayer support 

from the housing GSEs before the bubble bursts and taxpayers are 

once again forced to bail out investors who were misled by foolish 

government interference in the market. 

RON PAUL. 

Æ