I 

112TH CONGRESS 

1ST SESSION H. R. 3644 

To increase standardization, transparency, and to ensure the rule of law 

in the mortgage-backed security system, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 13, 2011 

Mr. GARRETT (for himself, Mr. BACHUS, Mr. HENSARLING, Mr. 

SCHWEIKERT, Mr. NEUGEBAUER, Mrs. BIGGERT, and Mrs. CAPITO) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL 

To increase standardization, transparency, and to ensure the 

rule of law in the mortgage-backed security system, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Private Mortgage Market Investment Act’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; Table of contents. 

TITLE I—STANDARDIZATION AND UNIFORMITY 


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Sec. 101. Facilitating continued standardization and uniformity. 

Sec. 102. Repeal of credit risk retention provisions. 

Sec. 103. Exemption from registration of certain securities conforming to 

standard securitization agreements. 

Sec. 104. Judicial review. 

Sec. 105. Liability for misleading statements. 

Sec. 106. Unlawful representation. 

Sec. 107. Penalties. 

Sec. 108. Contrary stipulations void. 

TITLE II—TRANSPARENCY 

Sec. 201. Requirements for the disclosure of loan-level information to investors, 

rating agencies, and regulators. 

Sec. 202. Mandatory period for review of loan-level information prior to investment. 

Sec. 203. Dissemination of pricing information of asset-backed securities. 

Sec. 204. Alphanumeric identification of residential mortgage loans in assetbacked securities. 

TITLE III—ENSURING THE RULE OF LAW 

Sec. 301. Ensure rule of law and legal certainty. 

Sec. 302. Limitation on mortgages held by loan servicers. 

Sec. 303. Clarification of qualified mortgage exception. 

Sec. 304. FDIC safe harbor. 

Sec. 305. Effective date. 

1 TITLE I—STANDARDIZATION 

2 AND UNIFORMITY 

3 SEC. 101. FACILITATING CONTINUED STANDARDIZATION 

4 AND UNIFORMITY. 

5 (a) ESTABLISHMENT OF STANDARD MORTGAGE

6 CLASSIFICATIONS.— 

7 (1) ESTABLISHMENT.—The Director of the 

8 Federal Housing Finance Agency (hereinafter in this 

9 Act referred to as the ‘‘Director’’) shall, for pur10 poses of this section, prescribe classifications for 

11 mortgages having various degrees of credit risk, 

12 ranging from a classification of mortgages having 

13 little to no credit risk to a classification of mortVerDate Mar 15 2010 02:57 Dec 20, 2011 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3644.IH H3644

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1 gages having higher credit risk, with the goals of 

2 maximizing the pricing of credit risk, allowing for 

3 the trading of securities collateralized by the classi4 fications of mortgages established pursuant to this 

5 section in a forward market, and maintaining well 

6 functioning liquid markets in securities collateralized 

7 by each of the classifications of mortgages estab8 lished pursuant to this section. 

9 (2) UNDERWRITING CRITERIA STANDARDS.— 

10 (A) UNDERWRITING CRITERIA.—For each 

11 of the classifications of mortgages established 

12 under paragraph (1), the Director shall estab13 lish standards for each of the following under14 writing criteria: 

15 (i) DEBT-TO-INCOME RATIO.—The 

16 ratio of the amount of the total monthly 

17 debt of the mortgagor to the amount of the 

18 monthly income of the mortgagor. 

19 (ii) LOAN-TO-VALUE RATIO.—The 

20 ratio of the original principal obligation 

21 under the mortgage to the original value of 

22 the residence subject to the mortgage. 

23 (iii) CREDIT HISTORY.—Information 

24 on the credit history of the mortgagor, in25 cluding the credit score of the mortgagor. 


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1 (iv) LOAN DOCUMENTATION.—The ex2 tent of loan documentation and verification 

3 of the financial resources of the mortgagor 

4 used to qualify the mortgagor for the 

5 mortgage. 

6 (v) OCCUPANCY.—Whether the resi7 dence subject to the mortgage is occupied 

8 by the mortgagor. 

9 (vi) CREDIT ENHANCEMENT.—Wheth10 er any mortgage insurance or other type of 

11 insurance or credit enhancement was ob12 tained at the time of origination. 

13 (vii) LOAN PAYMENT TERMS.— 

14 (I) IN GENERAL.—The terms of 

15 the mortgage that determine the mag16 nitude and timing of payments due 

17 from the mortgagor, including the 

18 term to maturity of the mortgage, the 

19 frequency of payment, the type of am20 ortization, any prepayment penalties, 

21 and whether the interest rate is fixed 

22 or may vary. 

23 (II) INCLUSION OF 30-YEAR

24 FIXED INTEREST RATE.—Terms es25 tablished under subclause (I) shall inVerDate Mar 15 2010 03:57 Dec 20, 2011 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3644.IH H3644

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1 clude a 30-year fixed interest rate 

2 mortgage. 

3 (viii) OTHER.—Such other under4 writing criteria as the Director may estab5 lish consistent with the goals of this title. 

6 (B) OBJECTIVE.—In developing the under7 writing criteria standards under subparagraph 

8 (A), the Director shall seek to ensure that such 

9 standards are readily identifiable to sponsors of, 

10 and investors in, securities collateralized by 

11 mortgages so that such sponsors and investors 

12 can clearly determine the classification to which 

13 a mortgage belongs. 

14 (3) DEFINITIONS.—The Director shall, for pur15 poses of this subsection, prescribe definitions for 

16 each of the following terms: 

17 (A) MORTGAGE.—The term ‘‘mortgage’’, 

18 which definition shall include only mortgages on 

19 residential properties. 

20 (B) DEFAULT.—The term ‘‘default’’, with 

21 respect to a mortgage. 

22 (C) DELINQUENCY.—The term ‘‘delin23 quency’’, with respect to a mortgage. 


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1 (D) LOAN DOCUMENTATION.—The term 

2 ‘‘loan documentation’’, with respect to a mort3 gage. 

4 (E) ADDITIONAL TERMS.—Such other 

5 terms as the Director may establish. 

6 (b) STANDARD FORM SECURITIZATION AGREE7 MENTS.— 

8 (1) IN GENERAL.—The Director shall develop, 

9 adopt, and publish standard form securitization 

10 agreements for mortgages established under sub11 section (a). 

12 (2) REQUIRED CONTENT.—The standard form 

13 securitization agreements to be developed under 

14 paragraph (1) shall only include terms relating to— 

15 (A) pooling and servicing; 

16 (B) purchase and sale; 

17 (C) representations and warranties, includ18 ing representations and warranties as to com19 pliance or conformity with standards estab20 lished by the Director pursuant to subsections 

21 (c), (d), (e), and (f), as appropriate; 

22 (D) indemnification and remedies, includ23 ing principles of a repurchase program that will 

24 ensure an appropriate amount of risk retention 


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1 under the representations and warranties set 

2 forth under subparagraph (C); and 

3 (E) the qualification, responsibilities, and 

4 duties of trustees. 

5 (3) PUBLIC INVOLVEMENT.—In issuing rules 

6 and regulations under this section, the Director shall 

7 allow appropriate notice and comment in accordance 

8 with the chapter 5 of title 5, United States Code 

9 (commonly referred to as the ‘‘Administrative Proce10 dures Act’’). The Director shall work with industry 

11 groups, including servicers, originators, and mort12 gage investors to develop the standards under this 

13 title. 

14 (4) QUALIFIED SECURITY.—For purposes of 

15 this title, the term ‘‘qualified security’’ means a se16 curity that— 

17 (A) is issued in accordance with a standard 

18 form securitization agreement; 

19 (B) is issued by a qualified sponsor; 

20 (C) is collateralized by a class, or multiple 

21 classes, of mortgages established under this 

22 title; and 

23 (D) is not guaranteed, in whole or in part, 

24 by the United States Government. 


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1 (c) STANDARDS FOR SERVICER REPORTING.—The 

2 Director shall develop, adopt, and publish standards for 

3 the reporting obligations of servicers of any mortgage that 

4 serves as collateral for a qualified security. 

5 (d) STANDARDS FOR SERVICING.—The Director shall 

6 develop, adopt, and publish— 

7 (1) servicing standards, including for the modi8 fication, restructuring, or work-out of any mortgage 

9 that serves as collateral for a qualified security; and 

10 (2) a servicer succession plan which may in11 clude provisions for— 

12 (A) a specialty servicer that can replace 

13 the existing servicer if the performance of the 

14 mortgage pool deteriorates to specified levels; 

15 and 

16 (B) a plan to achieve consistency in serv17 icing systems related to systematic note-taking, 

18 consistent mailing addresses, and other points 

19 of contact for borrowers to use, among other 

20 items. 

21 (e) STANDARDS FOR DOCUMENTATION.—The Direc22 tor shall develop, adopt and publish standards for docu23 mentation used to verify the financial resources of a mort24 gagor and to qualify the mortgagor for any mortgage that 

25 may become collateral for any qualified security, including 


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1 the form, content, and method of documentation of any 

2 such mortgage. Such standards shall also address any cus3 todial or delivery obligations related to such documents. 

4 (f) STANDARDS FOR QUALIFIED SPONSORS.— 

5 (1) IN GENERAL.—The Director shall develop, 

6 adopt, and publish standards for a sponsor to qual7 ify as a qualified sponsor. Such standards shall only 

8 include— 

9 (A) the experience and integrity of the 

10 sponsor and its principals, including compliance 

11 history with Federal and State laws; 

12 (B) the adequacy of insurance and fidelity 

13 coverage of the sponsor with respect to errors 

14 and omissions; and 

15 (C) a requirement that the sponsor submit 

16 audited financial statements to the Director, 

17 who shall make such statements publicly avail18 able through the Federal Housing Finance 

19 Agency’s website. 

20 (2) APPLICATION PROCESS.— 

21 (A) IN GENERAL.—The Director shall es22 tablish an application process for the qualifica23 tion of sponsors, in such form and manner and 

24 requiring such information as the Director may 


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1 require, in accordance with standards adopted 

2 under paragraph (1). 

3 (B) APPROVAL.—The Director shall ap4 prove any application made pursuant to sub5 paragraph (A) unless the sponsor does not meet 

6 the standards adopted under paragraph (1). 

7 (C) PUBLICATION.—The Director shall 

8 publish a list of newly qualified sponsors in the 

9 Federal Register and maintain an updated list 

10 of qualified sponsors on the Federal Housing 

11 Finance Agency’s website. 

12 (3) REVIEW AND REVOCATION OF QUALIFIED

13 STATUS.— 

14 (A) IN GENERAL.—The Director may only 

15 review the status of a qualified sponsor if the 

16 Director is notified that a claim has been made 

17 against the sponsor by a trustee with respect to 

18 a violation of a contractual term in a 

19 securitization document of the sponsor. 

20 (B) REVOCATION.— 

21 (i) IN GENERAL.—Subject to subpara22 graph (C), if the Director determines, in a 

23 review pursuant to subparagraph (A), that 

24 a sponsor no longer meets the standards 


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1 for qualification, the Director shall revoke 

2 the sponsor’s qualified status. 

3 (ii) CONSTRUCTION.—The revocation 

4 of a sponsor’s qualified status under this 

5 subparagraph shall— 

6 (I) have no effect on the qualified 

7 status of any security; and 

8 (II) not relieve the sponsor of 

9 any representations, warranties, or re10 purchase obligations related to any 

11 qualified security issued before such 

12 revocation. 

13 (C) GRACE PERIOD.—The Director shall 

14 issue regulations that permit a qualified spon15 sor who no longer meets the standards for qual16 ification to have a grace period during which 

17 the sponsor can work to meet such standards 

18 without losing the sponsor’s qualified status. 

19 (D) PUBLICATION.—The Director shall 

20 publish a list of sponsors who lost their quali21 fied status in the Federal Register and main22 tain an updated list of such sponsors on the 

23 Federal Housing Finance Agency’s website. 

24 (g) STANDARDS FOR TRUSTEES.— 


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1 (1) IN GENERAL.—There shall at all times be 

2 one or more trustee for each pool of mortgages that 

3 acts as collateral for a qualified security. 

4 (2) RULEMAKING.—The Director shall issue 

5 regulations regarding the qualifications of trustees 

6 under paragraph (1) that shall, to the extent prac7 ticable, be the same as the qualification provisions 

8 applicable to trustees under section 310(a) of the 

9 Trust Indenture Act of 1934 (15 U.S.C. 77jjj(a)). 

10 (3) CONFLICTS OF INTEREST.—The Director 

11 shall issue conflict of interest regulations that apply 

12 to a qualified trustee. Such regulations shall, to the 

13 extent practicable, be the same as those conflict of 

14 interest provisions applicable to an indenture trustee 

15 under section 310(b) of the Trust Indenture Act of 

16 1934 (15 U.S.C. 77jjj(b)). 

17 (4) REPORTING OF CLAIMS.—Any time a trust18 ee brings a claim against a qualified sponsor on be19 half of investors with respect to a standard form 

20 securitization agreement, the trustee shall notify the 

21 Director of such claim. 

22 (5) PROTECTION OF INVESTOR RIGHTS.—For 

23 the purpose of protecting investor rights, each trust24 ee shall— 


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1 (A) maintain a list of all investors (bene2 ficial owners) in a qualified security; 

3 (B) update such list from time to time; 

4 (C) not make such list available to inves5 tors (beneficial owners); and 

6 (D) act as a means to communicate infor7 mation about the qualified security to investors 

8 (beneficial owners) and act as a means for in9 vestors (beneficial owners) to communicate with 

10 each other. 

11 (6) NO LIABILITY FOR CERTAIN COMMUNICA12 TIONS.—A trustee shall not be liable for the content 

13 of any information provided to the trustee by an in14 vestor (beneficial owner) that the trustee commu15 nicates to another investor (beneficial owner). 

16 (7) INVESTOR (BENEFICIAL OWNER) NOTIFICA17 TION OF TRUSTEE.—A person who becomes an in18 vestor (beneficial owner) in a qualified security shall 

19 promptly notify the trustee of such security of the 

20 change in ownership. 

21 (h) INDEPENDENT THIRD PARTY.—If the majority 

22 of investors in a pool of qualified securities choose to hire 

23 an independent third party to act on behalf of the best 

24 interests of the investors (beneficial owners), such party 

25 shall— 


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1 (1) be granted access to the loan documents for 

2 the mortgage loans backing such security and all 

3 servicing reports the servicer provides to investors 

4 (beneficial owners) or the trustee; 

5 (2) be granted access to the list of investors 

6 (beneficial owners) maintained by the trustee, on the 

7 condition that the independent third party will not 

8 make the list available to the investors (beneficial 

9 owners); and 

10 (3) have the right, on behalf of the investors 

11 (beneficial owners), to inform the trustee of such se12 curities of any breach of the securitization agree13 ment identified by the third party. 

14 (i) TIMING; AUTHORITY TO REVISE STANDARDS.— 

15 (1) TIMING.—The Director shall develop, adopt, 

16 and publish the standards required under this title, 

17 not later than the expiration of the 12-month period 

18 beginning upon the date of the enactment of this 

19 title. 

20 (2) AUTHORITY TO REVISE.— 

21 (A) IN GENERAL.—The Director may re22 view, revise and, if revised, re-publish any 

23 standard form securitization agreement or other 

24 standard required to be developed under this 

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1 vision to be necessary or appropriate to satisfy 

2 the goals of this title. 

3 (B) APPLICATION OF REVISIONS.—Any re4 vision made pursuant to subparagraph (A) shall 

5 only apply to securitizations made after the 

6 date of such revision. 

7 (j) MANDATORY ARBITRATION.— 

8 (1) IN GENERAL.—All disputes between an 

9 owner of a qualified security and the qualified spon10 sor of such security relating to representations and 

11 warranties shall be subject to mandatory arbitration 

12 procedures established by the Director, in accord13 ance with current market practices. 

14 (2) SELECTION OF ARBITRATOR.—Investors 

15 (beneficial owners) and sponsors subject to a dispute 

16 described under paragraph (1) shall have the right 

17 to agree on an independent arbitrator. If the parties 

18 cannot agree on an independent arbitrator, the Di19 rector shall select an independent arbitrator for the 

20 parties. 

21 (3) REPORTING DUTY OF ARBITRATOR.— 

22 (A) UPON COMMENCEMENT.—The arbi23 trator shall provide the Federal Housing Fi24 nance Agency with notice upon the commence25 ment of any arbitration under this subsection. 


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1 (B) UPON CONCLUSION.—Upon the con2 clusion of any arbitration under this subsection, 

3 the arbitrator shall provide the Federal Hous4 ing Finance Agency with— 

5 (i) the decision reached by the arbi6 trator; and 

7 (ii) the basis for the arbitrator’s deci8 sion, including any evidence or testimony 

9 received during the arbitration process. 

10 (k) DISCLOSURE OF INFORMATION.— 

11 (1) IN GENERAL.— 

12 (A) IN GENERAL.—Not later than 6 

13 months after the date of the enactment of this 

14 Act, the Director shall, by rule— 

15 (i) require sponsors of qualified secu16 rities to disclose all pertinent information 

17 relating to the residential mortgage loans 

18 that comprise such securities, including in19 formation set forth in the underwriting 

20 standards established under subsection (a); 

21 and 

22 (ii) allow for the trading of qualified 

23 securities under this title in a forward 

24 market. 


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1 (B) PRIVACY PROTECTIONS.—In pre2 scribing the rules required under this para3 graph, the Director shall take into consideration 

4 issues of consumer privacy and all statutes, 

5 rules, and regulations related to privacy of con6 sumer credit information and personally identi7 fiable information. Such rules shall expressly 

8 prohibit the identification of specific borrowers. 

9 (2) CONSULTATION.—In issuing any rules or 

10 regulations under this subsection, the Director shall 

11 consult with the Securities and Exchange Commis12 sion. 

13 SEC. 102. REPEAL OF CREDIT RISK RETENTION PROVI14 SIONS. 

15 (a) IN GENERAL.—Section 15G of the Securities Ex16 change Act of 1934 (15 U.S.C. 78o–11) is repealed and 

17 any regulations promulgated under such section shall have 

18 no force or effect. 

19 (b) CONFORMING AMENDMENT.—Section 27B of the 

20 Securities Act of 1933 is amended by striking subsection 

21 (d). 

22 (c) PROHIBITION.—The Office of the Comptroller of 

23 the Currency, the Board of Governors of the Federal Re24 serve System, the Federal Deposit Insurance Corporation, 

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1 curities and Exchange Commission shall not issue any rule 

2 or regulation to require risk retention, any premium cap3 ture cash reserve account, or any similar mechanism, un4 less directly authorized by an Act of Congress. 

5 SEC. 103. EXEMPTION FROM REGISTRATION OF CERTAIN 

6 SECURITIES CONFORMING TO STANDARD 

7 SECURITIZATION AGREEMENTS. 

8 Section 3(a) of the Securities Act of 1933 (15 U.S.C. 

9 77c(a)) is amended by adding at the end the following: 

10 ‘‘(14) Any qualified security, as such term is 

11 defined under section 101(b)(4) of the Private Mort12 gage Market Investment Act.’’. 

13 SEC. 104. JUDICIAL REVIEW. 

14 (a) IN GENERAL.—Orders of the Federal Housing 

15 Finance Agency under this title shall be subject to review 

16 in the same manner, upon the same conditions, and to 

17 the same extent, as provided in section 9 of the Securities 

18 Act of 1933, with respect to orders of the Securities and 

19 Exchange Commission under such title. 

20 (b) JURISDICTION.—Jurisdiction of offenses and vio21 lations under, and jurisdiction and venue of suits and ac22 tions brought to enforce any liability or duty created by, 

23 this Act, or any rules or regulations or orders prescribed 

24 under the authority thereof, shall be as provided in section 

25 22(a) of the Securities Act of 1933. 


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1 SEC. 105. LIABILITY FOR MISLEADING STATEMENTS. 

2 (a) IN GENERAL.—Any person who shall make or 

3 cause to be made any statement in any application, report, 

4 or document filed with the Federal Housing Finance 

5 Agency pursuant to any provisions of this title, or any 

6 rule, regulation, or order thereunder, which statement was 

7 at the time and in the light of the circumstances under 

8 which it was made false or misleading with respect to any 

9 material fact, or who shall omit to state any material fact 

10 required to be stated therein or necessary to make the 

11 statements therein not misleading, shall be liable to any 

12 person (not knowing that such statement was false or mis13 leading or of such omission) who, in reliance upon such 

14 statement or omission, shall have purchased or sold a se15 curity issued under the indenture to which such applica16 tion, report, or document relates, for damages caused by 

17 such reliance, unless the person sued shall prove that he 

18 acted in good faith and had no knowledge that such state19 ment was false or misleading or of such omission. A per20 son seeking to enforce such liability may sue at law or 

21 in equity in any court of competent jurisdiction. In any 

22 such suit the court may, in its discretion, require an un23 dertaking for the payment of the costs of such suit and 

24 assess reasonable costs, including reasonable attorneys’ 

25 fees, against either party litigant, having due regard to 

26 the merits and good faith of the suit or defense. No action 


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1 shall be maintained to enforce any liability created under 

2 this section unless brought within one year after the dis3 covery of the facts constituting the cause of action and 

4 within three years after such cause of action accrued. 

5 (b) RIGHTS AND REMEDIES UNDER OTHER LAW.— 

6 The rights and remedies provided by this title shall be in 

7 addition to any and all other rights and remedies that may 

8 exist under the Securities Act of 1933 or the Securities 

9 Exchange Act of 1934 or otherwise at law or in equity; 

10 but no person permitted to maintain a suit for damages 

11 under the provisions of this title shall recover, through sat12 isfaction of judgment in one or more actions, a total 

13 amount in excess of his actual damages on account of the 

14 act complained of. 

15 SEC. 106. UNLAWFUL REPRESENTATION. 

16 It shall be unlawful for any person in offering, selling, 

17 or issuing any security pursuant to this title to represent 

18 or imply in any manner whatsoever that any action or fail19 ure to act by the Federal Housing Finance Agency in the 

20 administration of this title means that the Federal Hous21 ing Finance Agency has in any way passed upon the mer22 its of, or given approval to, any trustee, indenture, or secu23 rity, or any transaction or transactions therein, or that 

24 any such action or failure to act with regard to any state25 ment or report filed with or examined by the Federal 


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1 Housing Finance Agency pursuant to this title or any rule, 

2 regulation, or order thereunder, has the effect of a finding 

3 by the Federal Housing Finance Agency that such state4 ment or report is true and accurate on its face or that 

5 it is not false or misleading. 

6 SEC. 107. PENALTIES. 

7 Any person who willfully violates any provision of this 

8 title or any rule, regulation, or order thereunder, or any 

9 person who willfully, in any application, report, or docu10 ment filed or required to be filed under the provisions of 

11 this title or any rule, regulation, or order thereunder, 

12 makes any untrue statement of a material fact or omits 

13 to state any material fact required to be stated therein 

14 or necessary to make the statements therein not mis15 leading, shall be subject to the penalties set forth under 

16 section 325 of the Trust Indenture Act of 1934 (15 U.S.C. 

17 77yyy). 

18 SEC. 108. CONTRARY STIPULATIONS VOID. 

19 Any condition, stipulation, or provision binding any 

20 person to waive compliance with any provision of this title 

21 or with any rule, regulation, or order thereunder shall be 

22 void. 


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1 TITLE II—TRANSPARENCY 

2 SEC. 201. REQUIREMENTS FOR THE DISCLOSURE OF LOAN3 LEVEL INFORMATION TO INVESTORS, RATING 

4 AGENCIES, AND REGULATORS. 

5 (a) RULES.—Not later than 6 months after the date 

6 of the enactment of this title, the Securities and Exchange 

7 Commission shall, by rule, require sponsors of residential 

8 mortgage-backed securities to disclose all pertinent infor9 mation relating to the residential mortgage loans that 

10 comprise such securities, including information regarding 

11 the income and credit score of borrowers, the loan to value 

12 ratios, the remaining term to maturity of the loans, and 

13 require loan-level data to be updated on a monthly basis. 

14 Such rules shall apply to residential mortgage-backed se15 curities that— 

16 (1) are registered pursuant to section 6 of the 

17 Securities Act of 1933 (15 U.S.C. 77f); and 

18 (2) are offered or sold in reliance on Regulation 

19 D (17 CFR 230.506) and Rule 144A (17 CFR 

20 230.144A) of the Commission. 

21 (b) PRIVACY PROTECTIONS.—In prescribing the rules 

22 required under subsection (a), the Commission shall take 

23 into consideration issues of consumer privacy and all stat24 utes, rules, and regulations related to privacy of consumer 

25 credit information and personally identifiable information. 


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1 Such rules shall expressly prohibit the identification of 

2 specific borrowers. 

3 (c) RULES NOT APPLICABLE TO QUALIFIED SECURI4 TIES.—The rules prescribed under subsection (a) shall not 

5 apply to any qualified security, as such term is defined 

6 under section 101(b)(4). 

7 SEC. 202. MANDATORY PERIOD FOR REVIEW OF LOAN8 LEVEL INFORMATION PRIOR TO INVEST9 MENT. 

10 Not later than 6 months after the date of the enact11 ment of this title, the Securities and Exchange Commis12 sion shall revise its rules and regulations to require spon13 sors of asset-backed securities under section 5 of the Secu14 rities Act of 1933 (15 U.S.C. 77e) to file a preliminary 

15 prospectus containing all material terms of the transaction 

16 at least 5 days before investors make an investment deci17 sion. 

18 SEC. 203. DISSEMINATION OF PRICING INFORMATION OF 

19 ASSET-BACKED SECURITIES. 

20 Not later than 6 months after the date of the enact21 ment of this title, the Securities and Exchange Commis22 sion shall, by rule, require the dissemination of trans23 action, volume, and pricing information of trades in asset24 backed securities. Such rules shall require the dissemina25 tion of such information, with exceptions as may be preVerDate Mar 15 2010 02:57 Dec 20, 2011 Jkt 019200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\H3644.IH H3644

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1 scribed by the Commission in the public interest, while 

2 taking into consideration the effect of such dissemination 

3 on market liquidity, through the Financial Industry Regu4 latory Authority’s fixed income transparency facility, re5 ferred to as Trade Reporting and Compliance Engine 

6 (TRACE), or through a similar vehicle. 

7 SEC. 204. ALPHANUMERIC IDENTIFICATION OF RESIDEN8 TIAL MORTGAGE LOANS IN ASSET-BACKED 

9 SECURITIES. 

10 Not later than 6 months after the date of the enact11 ment of this title, the Securities and Exchange Commis12 sion shall, by rule, require that each mortgage loan com13 prising a residential mortgage-backed security be assigned 

14 and carry with it a unique alphanumeric code that identi15 fies the loan in order to facilitate ascertaining relevant in16 formation about the loan. 

17 TITLE III—ENSURING THE RULE 

18 OF LAW 

19 SEC. 301. ENSURE RULE OF LAW AND LEGAL CERTAINTY. 

20 (a) JUNIOR MORTGAGE OR LIEN.—With respect to 

21 the dwelling of a borrower that serves as security for a 

22 securitized senior mortgage loan, if the borrower enters 

23 into any credit transaction that would result in the cre24 ation of a new mortgage or other lien on such dwelling 

25 where the loan-to-value ratio of such credit transaction 


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1 amount is 80 percent or more, the servicer of the senior 

2 mortgage loan shall have the right to charge the borrower 

3 an additional monthly fee in an amount sufficient to offset 

4 the increased risk to repayment of such loan because of 

5 the creation of the new mortgage or other lien. 

6 (b) NOTICE OF JUNIOR MORTGAGE OR LIEN.—With 

7 respect to the dwelling of a borrower that serves as secu8 rity for a securitized senior mortgage loan, if the borrower 

9 enters into any credit transaction that would result in the 

10 creation of a new mortgage or other lien on such dwelling, 

11 the creditor of such new mortgage or other lien shall notify 

12 the servicer of the senior mortgage loan of the existence 

13 of the new mortgage or other lien. 

14 (c) PREVENTION OF FORCED PRINCIPAL WRITE15 DOWNS.—With respect to a securitized mortgage loan, no 

16 Federal department or agency, including the Board of 

17 Governors of the Federal Reserve System and the Bureau 

18 of Consumer Financial Protection, may require a reduc19 tion in the principal amount owed on such mortgage loan. 

20 SEC. 302. LIMITATION ON MORTGAGES HELD BY LOAN 

21 SERVICERS. 

22 (a) LIMITATION.—Neither the servicer of a residen23 tial mortgage loan, nor any affiliate of such servicer, may 

24 own, or hold any interest in, any other residential mort25 gage loan that is secured by a mortgage, deed of trust, 


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1 or other equivalent consensual security interest on the 

2 same dwelling or residential real property that is subject 

3 to the mortgage, deed of trust, or other security interest 

4 that secures the residential mortgage loan serviced by the 

5 servicer. 

6 (b) DEFINITIONS.—For purposes of this section, the 

7 following definitions shall apply: 

8 (1) AFFILIATE.—The term ‘‘affiliate’’ means, 

9 with respect to a servicer, any person or entity that 

10 controls, is controlled by, or is under common con11 trol with such servicer, as the Director shall pre12 scribe by regulation. 

13 (2) RESIDENTIAL MORTGAGE LOAN.—The term 

14 ‘‘residential mortgage loan’’ means any consumer 

15 credit transaction that is secured by a mortgage, 

16 deed of trust, or other equivalent consensual security 

17 interest on a dwelling or on residential real property 

18 that includes a dwelling, other than a consumer 

19 credit transaction under an open end credit plan or 

20 an extension of credit relating to a plan described in 

21 section 101(53D) of title 11, United States Code. 

22 (3) SERVICER.—The term ‘‘servicer’’ has the 

23 meaning provided in section 129A of the Truth in 

24 Lending Act, except that such term includes a per25 son who makes or holds a residential mortgage loan 


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1 (including a pool of residential mortgage loans) if 

2 such person also services the loan. 

3 (c) INTERESTS.—For purposes of subsection (a), 

4 ownership of, or holding an interest in a residential mort5 gage loan includes ownership of, or holding an interest 

6 in— 

7 (1) a pool of residential mortgage loans that 

8 contains such residential mortgage loan; or 

9 (2) any security based on or backed by a pool 

10 of residential mortgage loans that contains such res11 idential mortgage loan. 

12 (d) EFFECTIVE DATE.—This section shall apply— 

13 (1) with respect to the servicer (or affiliate of 

14 the servicer) of a residential mortgage loan that is 

15 originated after the date of the enactment of this 

16 Act, on such date of enactment; and 

17 (2) with respect to the servicer (or affiliate of 

18 the servicer) of a residential mortgage loan that is 

19 originated on or before the date of the enactment of 

20 this Act, upon the expiration of the 12-month period 

21 beginning upon such date of enactment. 

22 SEC. 303. CLARIFICATION OF QUALIFIED MORTGAGE EX23 CEPTION. 

24 Subsection (b) of section 129C of the Truth in Lend25 ing Act is amended— 


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1 (1) in the heading of such subsection, by strik2 ing ‘‘PRESUMPTION OF ABILITY TO REPAY’’ and in3 serting ‘‘EXCEPTION FOR QUALIFIED MORTGAGES’’; 

4 (2) by amending paragraph (1) to read as fol5 lows: 

6 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

7 apply to a residential mortgage loan that is a quali8 fied mortgage.’’; and 

9 (3) in paragraph (3), by amending subpara10 graph (B) to read as follows: 

11 ‘‘(B) LOAN DEFINITION.—The following 

12 agencies shall, in consultation with the Bureau, 

13 prescribe rules defining the types of loans they 

14 insure, guarantee, or administer, as the case 

15 may be, that are qualified mortgages for pur16 poses of paragraph (2)(A): 

17 ‘‘(i) The Department of Housing and 

18 Urban Development, with regard to mort19 gages insured under the National Housing 

20 Act (12 U.S.C. 1707 et seq.). 

21 ‘‘(ii) The Department of Veterans Af22 fairs, with regard to a loan made or guar23 anteed by the Secretary of Veterans Af24 fairs. 


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1 ‘‘(iii) The Department of Agriculture, 

2 with regards to loans guaranteed by the 

3 Secretary of Agriculture pursuant to sec4 tion 502(h) of the Housing Act of 1949 

5 (42 U.S.C. 1472(h)). 

6 ‘‘(iv) The Rural Housing Service, with 

7 regards to loans insured by the Rural 

8 Housing Service.’’. 

9 SEC. 304. FDIC SAFE HARBOR. 

10 If a pool of mortgages meets the standards set forth 

11 by the Federal Housing Finance Agency pursuant to title 

12 I and is securitized in accordance with the standards set 

13 forth under title I, then the Federal Deposit Insurance 

14 Corporation safe harbor rule under section 360.6 of title 

15 12, Code of Federal Regulations, shall apply to the pool 

16 of mortgages. 

17 SEC. 305. EFFECTIVE DATE. 

18 Except as otherwise specifically provided, this title 

19 and the amendments made by this title shall take effect 

20 on the date of the enactment of this Act. 

Æ 


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