II 

112TH CONGRESS 

1ST SESSION S. 1963 

To revoke the charters for the Federal National Mortgage Corporation and 

the Federal Home Loan Mortgage Corporation upon resolution of their 

obligations, to create a new Mortgage Finance Agency for the 

securitization of single family and multifamily mortgages, and for other 

purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 8, 2011 

Mr. ISAKSON introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To revoke the charters for the Federal National Mortgage 

Corporation and the Federal Home Loan Mortgage Corporation upon resolution of their obligations, to create 

a new Mortgage Finance Agency for the securitization 

of single family and multifamily mortgages, 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; FINDINGS. 

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

5 ‘‘Mortgage Finance Act of 2011’’. 

6 (b) FINDINGS.—Congress finds that— 


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1 (1) dependable, transparent, and liquid primary 

2 and secondary markets for high-quality residential 

3 and multifamily mortgages are critical to a safe and 

4 sound housing market; 

5 (2) Congress wishes to terminate the Congres6 sional charters and operations of the Federal Na7 tional Mortgage Association and the Federal Home 

8 Loan Mortgage Corporation, and to wind them down 

9 through an orderly receivership process, without dis10 rupting the housing markets; 

11 (3) taxpayers have expended billions of dollars 

12 on behalf of the Federal National Mortgage Associa13 tion and the Federal Home Loan Mortgage Corpora14 tion during the period of their conservatorship, and 

15 such expenditures should be recouped; 

16 (4) increased participation by the private sector 

17 to provide mortgage market liquidity and credit risk 

18 mitigation is necessary and desirable to reduce de19 pendence on Government guarantees, and to make 

20 remote any future needs for taxpayer assistance; 

21 (5) this Act creates a new transitional facility 

22 to guarantee securitizations of high-quality residen23 tial mortgages, to ensure a sound and stable housing 

24 market; 


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1 (6) multiple layers of private capital and the 

2 creation of an industry-funded Catastrophic Fund 

3 will make future risk to taxpayers highly remote; 

4 and 

5 (7) this Act provides for the privatization of the 

6 transitional facility after 10 years, with proceeds 

7 being paid to the United States Treasury. 

8 SEC. 2. DEFINITIONS. 

9 For purposes of this Act, unless the context otherwise 

10 requires, the following definitions shall apply: 

11 (1) BOARD OF DIRECTORS.—The term ‘‘Board 

12 of Directors’’ means the Board of Directors of the 

13 MFA. 

14 (2) CHARTER.—The term ‘‘charter’’ means— 

15 (A) with respect to the Federal National 

16 Mortgage Association, the Federal National 

17 Mortgage Association Charter Act (12 U.S.C. 

18 1716 et seq.); and 

19 (B) with respect to the Federal Home 

20 Loan Mortgage Corporation, the Federal Home 

21 Loan Mortgage Corporation Act (12 U.S.C. 

22 1451 et seq.). 

23 (3) DIRECTOR.—The term ‘‘Director’’, other 

24 than in the context of the Director of the FHFA, 

25 means the director of the Mortgage Finance Agency. 


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1 (4) ENTERPRISE.—The term ‘‘enterprise’’ 

2 means— 

3 (A) the Federal National Mortgage Asso4 ciation; and 

5 (B) the Federal Home Loan Mortgage 

6 Corporation. 

7 (5) FHFA.—The term ‘‘FHFA’’ means the 

8 Federal Housing Finance Agency. 

9 (6) MORTGAGE FINANCE AGENCY; MFA.—The 

10 terms ‘‘Mortgage Finance Agency’’ and ‘‘MFA’’ 

11 mean the agency established under title II. 

12 (7) MFA CERTIFICATION DATE.—The term 

13 ‘‘MFA certification date’’ means the date on which 

14 the Director certifies that the MFA is operational 

15 and able to perform the guarantee function for 

16 qualified mortgage-backed securities collateralized by 

17 qualified residential mortgages, as provided in this 

18 Act, which date shall be not later than 18 months 

19 after the date of enactment of this Act. 

20 (8) QUALIFIED ISSUER.—The term ‘‘qualified 

21 issuer’’ means a person who originates or purchases, 

22 and services, a qualified residential mortgage or a 

23 qualified multifamily mortgage, and is approved to 

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1 ance with this Act and with the guidelines issued by 

2 the MFA under section 302. 

3 (9) QUALIFIED MORTGAGE-BACKED SECURI4 TIES.—The term ‘‘qualified mortgage-backed securi5 ties’’ means securities collateralized by qualified resi6 dential mortgages or qualified multifamily mort7 gages, as the case may be, issued by a qualified 

8 issuer and guaranteed by the MFA with respect to 

9 the timely payment of principal and interest, all in 

10 accordance with this Act. 

11 (10) QUALIFIED MULTIFAMILY MORTGAGE.— 

12 The term ‘‘qualified multifamily mortgage’’ means a 

13 commercial real estate loan secured by a property 

14 with 5 or more single family units, the primary 

15 source of repayment for which is expected to be de16 rived from the proceeds of the sale, refinancing, or 

17 permanent financing of the property, or rental in18 come generated by the property, that— 

19 (A) has been originated with an initial loan 

20 to value ratio of not more than 75 percent and 

21 with an initial debt service coverage ratio of at 

22 least 1.25; or 

23 (B) with respect to which, the mortgage 

24 lender retains a pro rata vertical slice of credit 


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1 risk in an amount to be determined by the 

2 MFA. 

3 (11) QUALIFIED RESIDENTIAL MORTGAGE.— 

4 The term ‘‘qualified residential mortgage’’ means a 

5 residential real estate loan secured by a property 

6 with 1 to 4 single family units that has been origi7 nated in compliance with the following underwriting 

8 standards and product features: 

9 (A) Documentation and verification of the 

10 financial resources relied upon to qualify the 

11 mortgagor. 

12 (B) Standards with respect to the income 

13 and scheduled debt payments of the mortgagor, 

14 including— 

15 (i) one or more of— 

16 (I) the residual income of the 

17 mortgagor after all monthly obliga18 tions; 

19 (II) the ratio of the housing pay20 ments of the mortgagor to the month21 ly income of the mortgagor; and 

22 (III) the ratio of total monthly 

23 installment payments of the mort24 gagor to the income of the mortgagor; 

25 and 


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1 (ii) mitigation of the potential for pay2 ment shock on adjustable rate mortgages. 

3 (C) Downpayments which shall be equal to 

4 not less than 5 percent of purchase price, 

5 and— 

6 (i) in the case of such mortgages with 

7 downpayments equal to not less than 5 

8 percent but less than 30 percent of the 

9 purchase price, the mortgage is covered by 

10 private mortgage insurance purchased at 

11 the time of origination in an amount suffi12 cient to cover each loan to the equivalent 

13 of not less than a 30 percent downpay14 ment; and 

15 (ii) such mortgage insurance is issued 

16 by an entity that is subject to regulation as 

17 a mortgage guaranty insurer by the State 

18 of domicile of such entity or by the Federal 

19 Insurance Office (which regulation includes 

20 risk-based capital and reserve require21 ments). 

22 (D) Prohibition of or restrictions on the 

23 use of balloon payments, negative amortization, 

24 prepayment penalties, interest-only payments, 


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1 and other features that have been demonstrated 

2 to exhibit a higher risk of borrower default. 

3 (12) SECRETARY.—The term ‘‘Secretary’’ 

4 means the Secretary of the Treasury. 

5 TITLE I—TERMINATION OF 

6 FANNIE MAE AND FREDDIE 

7 MAC CHARTERS 

8 SEC. 101. RECEIVERSHIP OF THE ENTERPRISES. 

9 (a) IRREVOCABLE RECEIVERSHIP.— 

10 (1) IN GENERAL.—Effective on the MFA cer11 tification date, the FHFA is appointed receiver of 

12 the enterprises, and the enterprises shall be placed 

13 into irrevocable receivership by the FHFA, in ac14 cordance with section 1367 of the Federal Housing 

15 Enterprises Financial Safety and Soundness Act of 

16 1992 (12 U.S.C. 4617), except that— 

17 (A) paragraphs (1) through (5) of sub18 section (a) of that section 1367 do not apply 

19 with respect to such appointment; and 

20 (B) prior to the MFA certification date, 

21 the enterprises shall be permitted to engage in 

22 the business of guaranteeing the timely pay23 ment of principal and interest on qualified 

24 mortgage-backed securities and to undertake all 

25 functions necessary to carry out such business, 


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1 to the extent that such guarantees are nec2 essary to provide a dependable, transparent, 

3 and liquid market for high quality mortgages 

4 for securitization. 

5 (2) COMMENCEMENT OF LIQUIDATION.—Imme6 diately upon placement of the enterprises into receiv7 ership, the FHFA shall commence liquidation of the 

8 enterprises. 

9 (b) REPEAL OF GSE CHARTERS.— 

10 (1) FANNIE MAE.—The charter of the Federal 

11 National Mortgage Association, is repealed, effective 

12 90 days after the date on which liquidation thereof 

13 is complete, in accordance with this Act. 

14 (2) FREDDIE MAC.—The charter of the Federal 

15 Home Loan Mortgage Corporation, is repealed, ef16 fective 90 days after the date on which liquidation 

17 thereof is complete, in accordance with this Act. 

18 (c) RULE OF CONSTRUCTION.—For purposes of any 

19 provision of Federal law that refers to or relies on a deci20 sion by the Director of the FHFA to place an enterprise 

21 into receivership, such determination shall be deemed to 

22 have been made by operation of the placement of the en23 terprises into receivership under subsection (a). 


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1 SEC. 102. REPAYMENT OF GOVERNMENT ASSISTANCE; 

2 MAXIMIZING RETURN TO TAXPAYERS. 

3 (a) IN GENERAL.—After fully satisfying the out4 standing obligations of the enterprises in a manner con5 sistent with their receivership status, all remaining pro6 ceeds from the operations of the enterprises in receivership 

7 shall be paid by the FHFA to the General Fund of the 

8 United States Treasury in repayment of Government as9 sistance provided in connection with ensuring the solvency 

10 and resolution of the enterprises prior to the date of enact11 ment of this Act. 

12 (b) MAXIMUM RETURN TO TAXPAYER.—The com13 bined assets of the enterprises, including on-balance sheet 

14 portfolios, shall be managed by the FHFA as receiver to 

15 obtain resolutions that maximize the return for the tax16 payer, to the extent that— 

17 (1) such resolutions are consistent with the goal 

18 of supporting a sound, stable, and liquid housing 

19 market; and 

20 (2) such resolutions are consistent with applica21 ble law. 

22 (c) TRANSFER OF PROCEEDS OF PRIVATIZATION AND

23 CATASTROPHIC FUND.—The proceeds from privatization 

24 of the MFA upon termination of its authority in accord25 ance with section 304 shall be deposited into the General 

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1 nation of the authority of the MFA, the Catastrophic 

2 Fund shall be transferred to the General Fund of the 

3 United States Treasury, and the United States Treasury 

4 shall assume responsibility for and honor any remaining 

5 obligations of the MFA, of whatever nature and until such 

6 time as they are extinguished. 

7 SEC. 103. REPORT TO CONGRESS. 

8 Upon the resolution of all valid claims of the enter9 prises, the Director of the FHFA shall submit a report 

10 by the FHFA as receiver of the enterprises to the Com11 mittee on Banking, Housing, and Urban Affairs of the 

12 Senate and the Committee Financial Services of the 

13 House of Representatives, certifying the completion of the 

14 receivership. 

15 TITLE II—MORTGAGE FINANCE 

16 AGENCY 

17 SEC. 201. ESTABLISHMENT OF MFA. 

18 There is established the Mortgage Finance Agency, 

19 which shall be an independent agency of the Federal Gov20 ernment. 

21 SEC. 202. GOVERNANCE. 

22 (a) DIRECTOR.— 

23 (1) IN GENERAL.—The MFA shall be headed, 

24 on a day-to-day basis, by a Director, appointed by 

25 the President, by and with the advice and consent 


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1 of the Senate. Such appointment shall be made not 

2 later than 6 months after the date of enactment of 

3 this Act. 

4 (2) REGULATORY AUTHORITY.—The Director 

5 shall have general regulatory authority over the 

6 MFA, and shall exercise such general regulatory au7 thority as necessary to carry out this Act. 

8 (3) TERM.—The Director shall serve for a term 

9 of 5 years. An individual may serve as Director after 

10 the expiration of the term for which appointed, until 

11 a successor has been appointed and qualified. 

12 (4) VACANCIES.—A vacancy in the office of the 

13 Director shall be filled in the same manner as the 

14 original appointment. 

15 (5) COMPENSATION.—The Director shall be 

16 compensated at the rate prescribed for level II of the 

17 Executive Schedule under section 5313 of title 5, 

18 United States Code. 

19 (b) BOARD OF DIRECTORS.— 

20 (1) MEMBERS.—The operations of the MFA 

21 shall be directed by a 5-member board of directors, 

22 including the Director, who shall serve as the chair23 person of the Board of Directors, a Vice Chairman, 

24 who shall be appointed by the President, the Chair25 man of the Securities and Exchange Commission, or 


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1 a designee thereof, the Secretary of the Department 

2 of Housing and Urban Development, or a designee 

3 thereof, and the Chairman of the Board of Gov4 ernors of the Federal Reserve System, or a designee 

5 thereof. 

6 (2) MAJORITY VOTE.—A majority vote of all 

7 members of the Board of Directors is necessary to 

8 resolve all voting issues of the MFA. 

9 (3) MEETINGS.—The Board of Directors shall 

10 meet at the call of the Director, but in no event less 

11 frequently than once in each calendar quarter. 

12 (4) FEDERAL EMPLOYEES.—The members of 

13 the Board of Directors shall serve without additional 

14 pay (or benefits in the nature of compensation) for 

15 service as a member of the Board of Directors. 

16 (5) TRAVEL EXPENSES.—Members of the 

17 Board of Directors shall be entitled to receive travel 

18 expenses, including per diem in lieu of subsistence, 

19 equivalent to those set forth in subchapter I of chap20 ter 57 of title 5, United States Code. 

21 (6) BYLAWS.—The Board of Directors may pre22 scribe, amend, and repeal such bylaws as may be 

23 necessary for carrying out the functions of the 

24 Board of Directors. 


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1 (7) QUORUM.—A majority of the Board of Di2 rectors shall constitute a quorum. 

3 (c) PRIVATIZATION ADVISORY BOARD.— 

4 (1) MEMBERS.—There shall be appointed by 

5 the President a 10-member privatization advisory 

6 board. To the extent practicable, the President shall 

7 seek at all times to have advisory board members 

8 with expertise in— 

9 (A) single family housing finance; 

10 (B) multifamily housing finance; 

11 (C) residential real estate development and 

12 sales; 

13 (D) secondary market structuring and 

14 pricing; 

15 (E) private mortgage insurance; 

16 (F) privatization structuring and execu17 tion; and 

18 (G) macroeconomic policy. 

19 (2) ROLE.—The roles of the advisory board 

20 shall be— 

21 (A) to advise the Board of Directors on the 

22 privatization of the MFA upon termination of 

23 its authority under this Act, including how best 

24 to facilitate a smooth, efficient, and orderly 

25 transition of the guarantee business; 


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1 (B) to review and opine on the status of 

2 the planning for privatization; and 

3 (C) concurrently with the plan and annual 

4 and quarterly reports presented by the MFA to 

5 Congress under section 304(c), to present to 

6 Congress its own independent reports on the 

7 plan for privatization and the status thereof. 

8 (d) INSPECTOR GENERAL.—There shall be within the 

9 MFA an Inspector General, who shall be appointed by the 

10 President in accordance with section 3(a) of the Inspector 

11 General Act of 1978 not later than 6 months after the 

12 date of enactment of this Act. 

13 SEC. 203. FUNDING. 

14 Annual appropriations to the MFA shall be based 

15 upon a budget submitted to Congress by the MFA and 

16 approved by the Board of Directors. In accordance with 

17 section 303(a)(2), amounts appropriated shall be recouped 

18 through collection of the guarantee fee. 

19 SEC. 204. REGULATIONS; REPORTS. 

20 (a) STARTUP.—Not later than 12 months after the 

21 date of the appointment of the Director, the MFA shall 

22 issue such regulations, guidelines, orders, requirements, 

23 and standards as may be required for the establishment 

24 and operation of the MFA. 


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1 (b) REPORT TO CONGRESS.—Not later than 6 

2 months after the date of the appointment of the Director, 

3 the Board of Directors shall provide to Congress a 

4 progress report on the drafting of regulations and other 

5 conditions precedent to the MFA becoming fully oper6 ational. 

7 SEC. 205. APPEARANCES BEFORE CONGRESS. 

8 The Director shall appear before Congress annually 

9 regarding— 

10 (1) the safety and soundness of the MFA and 

11 the Catastrophic Fund, including, beginning one 

12 year after the date on which the MFA becomes oper13 ational, a report by the Inspector General of the 

14 MFA, and a report of an independent actuary, re15 garding the adequacy of guarantee fees, the ade16 quacy of the Catastrophic Fund and the adequacy of 

17 the percentage of the guarantee fee that is being al18 located to the Catastrophic Fund; 

19 (2) any material deficiencies in the conduct of 

20 the operations of the MFA; 

21 (3) the overall operational status of the MFA; 

22 (4) operations, resources, and performance of 

23 the Board of Directors; and 

24 (5) such other relevant matters relating to the 

25 Board of Directors and the MFA. 


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1 SEC. 206. STAFF, EXPERTS, AND CONSULTANTS. 

2 (a) COMPENSATION.— 

3 (1) IN GENERAL.—The MFA may appoint and 

4 fix the compensation of such officers, attorneys, 

5 economists, examiners, and other employees as may 

6 be necessary for carrying out its functions. The 

7 MFA shall appoint a Chief Risk Officer not later 

8 than 90 days after the date of the appointment of 

9 the Director. 

10 (2) RATES OF PAY.—Rates of basic pay for all 

11 employees of the MFA may be set and adjusted by 

12 the MFA without regard to the provisions of chapter 

13 51 or subchapter III of chapter 53 of title 5, United 

14 States Code. 

15 (3) PARITY.—The MFA may provide additional 

16 compensation and benefits to employees of the MFA, 

17 if the same type of compensation or benefits are 

18 then being provided by any agency referred to under 

19 section 1206 of the Financial Institutions Reform, 

20 Recovery, and Enforcement Act of 1989 (12 U.S.C. 

21 1833b) or, if not then being provided, could be pro22 vided by such an agency under applicable provisions 

23 of law, rule, or regulation. In setting and adjusting 

24 the total amount of compensation and benefits for 

25 employees, the MFA shall consult with, and seek to 

26 maintain comparability with, the agencies referred to 


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1 under section 1206 of the Financial Institutions Re2 form, Recovery, and Enforcement Act of 1989 (12 

3 U.S.C. 1833b). 

4 (b) DETAIL OF GOVERNMENT EMPLOYEES.—Upon 

5 request of the Director, any Federal Government employee 

6 may be detailed to the MFA or the Board of Directors 

7 without reimbursement, and such detail shall be without 

8 interruption or loss of civil service status or privilege. 

9 (c) EXPERTS AND CONSULTANTS.—The Director 

10 shall procure the services of experts and consultants as 

11 the Director considers necessary or appropriate. 

12 TITLE III—DUTIES AND 

13 RESPONSIBILITIES OF THE MFA 

14 SEC. 301. MFA RESPONSIBILITIES. 

15 The MFA is authorized— 

16 (1) to guarantee securities issued by qualified 

17 issuers and collateralized by pools of qualified resi18 dential mortgages in order to provide a dependable, 

19 transparent, and liquid market for high quality 

20 mortgages for securitization; 

21 (2) to guarantee securities issued by qualified 

22 issuers and collateralized by pools of qualified multi23 family mortgages, in order to provide a dependable, 

24 transparent, and liquid market for high quality mul25 tifamily mortgages for securitization; 


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1 (3) to charge and collect a guarantee fee suffi2 cient to protect the MFA and the United States 

3 Treasury from the risks of guaranteeing the timely 

4 payment of principal and interest on qualified mort5 gage-backed securities; 

6 (4) to establish and maintain a Catastrophic 

7 Fund to minimize the burden on the Federal Gov8 ernment, by setting aside amounts that will be avail9 able solely to pay obligations under the MFA guar10 antee in the event of any future mortgage market 

11 collapse; and 

12 (5) to purchase supplemental insurance cov13 erage, as provided in section 303(d). 

14 SEC. 302. MFA GUARANTEE BUSINESS. 

15 (a) IN GENERAL.—The MFA shall guarantee the 

16 timely payment of principal and interest to holders of 

17 qualified mortgage-backed securities. In the event of a 

18 payment default on a mortgage that collateralizes a quali19 fied mortgage-backed security, the MFA guarantee shall 

20 cover any shortfalls to security holders after giving effect 

21 to proceeds, if any, from liquidation of the property secur22 ing the mortgage and from claims paid pursuant to any 

23 private mortgage insurance coverage (including supple24 mental insurance coverage, if any). The MFA guarantee 

25 of timely payment of principal and interest on qualified 


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1 mortgage-backed securities shall be backed by the full 

2 faith and credit of the United States Government. The 

3 MFA shall charge a fee for such guarantee in accordance 

4 with section 303. 

5 (b) QUALIFIED RESIDENTIAL MORTGAGES AND

6 QUALIFIED MULTIFAMILY MORTGAGES.—The MFA shall 

7 issue guidelines consistent with this Act specifying the 

8 terms and conditions of mortgages that satisfy— 

9 (1) the definition of a qualified residential 

10 mortgage, not later than 6 months after the date of 

11 confirmation of the Director; and 

12 (2) the definition of a qualified multifamily 

13 mortgage, not later than 1 year after the date of 

14 confirmation of the Director. 

15 (c) GUIDELINES.— 

16 (1) IN GENERAL.—Not later than 12 months 

17 after the date of confirmation of the Director, the 

18 MFA shall issue guidelines designed to oversee the 

19 financial condition and origination and servicing 

20 standards of qualified issuers and servicers of quali21 fied residential mortgages and qualified multifamily 

22 mortgages that collateralize qualified mortgage23 backed securities. 

24 (2) INCLUSIONS.—Guidelines issued under this 

25 subsection shall— 


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1 (A) include specific financial and oper2 ational standards for such qualified issuers and 

3 such servicers; and 

4 (B) ensure— 

5 (i) broad participation in the issuance 

6 of qualified mortgage-backed securities by 

7 community banks, credit unions, national 

8 banks and State-licensed mortgage lenders; 

9 (ii) that qualified issuers bear the risk 

10 of noncompliance with representations and 

11 warranties made in connection with the 

12 issuance of qualified mortgage-backed se13 curities; and 

14 (iii) that qualified issuers have the fi15 nancial resources to support any obliga16 tions arising from any violations of rep17 resentations and warranties made in con18 nection with the issuance of qualified mort19 gage-backed securities. 

20 (d) LIMITATIONS.— 

21 (1) QUALIFIED RESIDENTIAL MORTGAGE LOAN

22 LIMITS.—The MFA shall set loan limits for qualified 

23 residential mortgages that secure qualified mort24 gage-backed securities. Such loan limits shall be cal25 culated and set annually, on a by-county basis, at an 


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1 amount equal to not more than 150 percent of the 

2 area median home price for the preceding year, and 

3 not less than the national median home price for 

4 such year, in each case calculated using home price 

5 data compiled by FHFA or, if FHFA no longer 

6 compiles such data, by the MFA. In no event shall 

7 the loan limits in effect under this section in any 

8 county be lower than amounts applicable to single 

9 family mortgages insured by the Federal Housing 

10 Administration in such county. 

11 (2) QUALIFIED MULTIFAMILY MORTGAGE LOAN

12 LIMITS.—The MFA, in consultation with the Board 

13 of Directors, shall consider setting loan limits for 

14 qualified multifamily mortgages that secure qualified 

15 mortgage-backed securities, if such limits would fos16 ter competition between the MFA and private 

17 issuers in advance of the privatization of the MFA. 

18 (3) PROHIBITION ON INVESTMENT PORT19 FOLIO.—The MFA shall not invest in mortgage20 backed securities or otherwise maintain an invest21 ment portfolio, other than to the extent necessary 

22 for the MFA to carry out its responsibilities as guar23 antor of qualified mortgage-backed securities. 


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1 SEC. 303. GUARANTEE FEES; CATASTROPHIC FUND; SUP2 PLEMENTAL INSURANCE. 

3 (a) GUARANTEE FEES.— 

4 (1) GUARANTEE FEES.—The MFA shall charge 

5 a guarantee fee under this section in connection with 

6 any guarantee issued by the MFA of timely payment 

7 of principal and interest on the qualified mortgage8 backed securities. At all times, the guarantee fee 

9 shall be set at an equal amount for all qualified 

10 issuers. The amount of the guarantee fee shall be 

11 adjusted periodically, as necessary to fulfill the pur12 poses described in paragraph (2). 

13 (2) PURPOSES.—The purposes of the guarantee 

14 fees are— 

15 (A) to fund the operations of the MFA; 

16 (B) to capitalize the Catastrophic Fund; 

17 (C) to cover any losses; and 

18 (D) to purchase supplemental insurance 

19 coverage, as provided in subsection (d). 

20 (3) APPROVAL.—The Board of Directors shall 

21 approve the amount of guarantee fees and any ad22 justments thereto, and shall determine the percent23 age of the guarantee fees, if any, that will be allo24 cated to the Catastrophic Fund in accordance with 

25 subsection (b). Such percentage may be adjusted by 

26 the Board of Directors semiannually, as necessary to 


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1 ensure that the Catastrophic Fund is adequately 

2 capitalized. 

3 (b) CREATION OF CATASTROPHIC FUND.— 

4 (1) ESTABLISHMENT.—There is established in 

5 the Treasury of the United States a fund to be 

6 known as the ‘‘Catastrophic Fund’’, which the MFA 

7 shall— 

8 (A) maintain and administer; and 

9 (B) use to carry out its insurance and 

10 guarantee functions, in the manner provided by 

11 this Act; and 

12 (C) invest in accordance with subsection 

13 (c). 

14 (2) DEPOSITS.—The Catastrophic Fund shall 

15 be credited with— 

16 (A) the amount of guarantee fees, if any, 

17 that the Board of Directors determines should 

18 be allocated to the Catastrophic Fund to pro19 tect against catastrophic losses; 

20 (B) any amounts earned on investments of 

21 the Catastrophic Fund, other than as needed in 

22 connection with the routine operation of the 

23 guarantee business; and 


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1 (C) such other amounts as may otherwise 

2 be credited to the Catastrophic Fund by the 

3 Board of Directors. 

4 (3) USES.—The Catastrophic Fund shall be 

5 solely available to the MFA for use by the MFA to 

6 satisfy obligations under its guarantee in accordance 

7 with this Act. Amounts remaining in the Cata8 strophic Fund following the repayment of all quali9 fied mortgage-backed securities shall be distributed 

10 to the United States Treasury in accordance with 

11 section 102(c). 

12 (c) ACTUARIAL REVIEW.—Beginning one year after 

13 the date on which the MFA becomes fully operational, and 

14 each year thereafter, the Board of Directors shall commis15 sion an independent actuarial study to determine the ade16 quacy of the guarantee fees and of the capitalization of 

17 the Catastrophic Fund, the results of which study shall 

18 be made available to the public by the Board of Directors. 

19 The Board of Directors shall rely on such study to deter20 mine the amount of the guarantee fee that shall be 

21 charged and the percentage of the guarantee fees that 

22 shall be allocated to the Catastrophic Fund. 

23 (d) INVESTMENTS.— 

24 (1) AUTHORITY.—Amounts in the Catastrophic 

25 Fund that are not otherwise employed shall be inVerDate Mar 15 2010 03:07 Dec 10, 2011 Jkt 019200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\S1963.IS S1963

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1 vested in obligations of the United States or in obli2 gations guaranteed as to principal and interest by 

3 the United States. 

4 (2) LIMITATION.—The MFA shall not sell or 

5 purchase any obligations described in paragraph (1) 

6 for its own account, at any one time aggregating in 

7 excess of $1,000,000, without the approval of the 

8 Secretary of the Treasury. The Secretary may ap9 prove a transaction or class of transactions subject 

10 to the provisions of this paragraph under such con11 ditions as the Secretary may determine. 

12 (e) SUPPLEMENTAL COVERAGE.— 

13 (1) IN GENERAL.—The MFA may use a portion 

14 of the guarantee fee to purchase supplemental insur15 ance coverage on offerings of qualified mortgage16 backed securities. The guarantee fee shall be set in 

17 an amount that is sufficient to cover the cost of such 

18 supplemental insurance, in addition to the other pur19 poses set forth in subsection (a)(2). The supple20 mental insurance shall insure against losses, if any, 

21 after giving effect to the primary, first loss mortgage 

22 insurance coverage on mortgages collateralizing the 

23 mortgage-backed securities. 

24 (2) REDUCED EXPOSURE.—The supplemental 

25 insurance shall be structured to further reduce the 


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1 exposure of the United States Government to losses 

2 arising under its guarantee on qualified mortgage3 backed securities that are covered by supplemental 

4 insurance. Separate insurance coverage shall be pro5 vided for each new offering of qualified mortgage6 backed securities. 

7 (3) PURCHASE OF SUPPLEMENTAL COVERAGE

8 REQUIRED.— 

9 (A) IN GENERAL.—Not later than 1 year 

10 after the MFA certification date, the Board of 

11 Directors shall issue guidelines to determine 

12 whether supplemental coverage— 

13 (i) is being offered on commercially 

14 reasonable terms; and 

15 (ii) is reasonably likely to mitigate the 

16 risk that the MFA will have to make any 

17 payment pursuant to its guarantee. 

18 (B) COVERAGE REQUIRED.—Beginning not 

19 later than 3 years after the MFA certification 

20 date, the MFA shall purchase supplemental cov21 erage for each offering of qualified mortgage22 backed securities if the MFA determines that 

23 the supplemental coverage meets the guidelines 

24 issued by the Board of Directors under sub25 paragraph (A). 


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1 (4) AUTHORITY TO PURCHASE SUPPLEMENTAL

2 COVERAGE.—The MFA shall be authorized to pur3 chase supplemental coverage from any mortgage in4 surance company authorized to provide mortgage in5 surance on a qualified residential mortgage, or from 

6 any other licensed insurance company with com7 parable regulatory oversight, capital, and reserve re8 quirements. 

9 SEC. 304. NO LIMIT ON PRIVATE SECTOR INVOLVEMENT; 

10 TERMINATION OF AUTHORITY. 

11 (a) PRIVATE ENTITIES ENCOURAGED.—Nothing in 

12 this Act may be construed as preventing the private sector 

13 from securitizing qualified residential mortgages, qualified 

14 multifamily mortgages, or other non-qualified residential 

15 single family or multifamily mortgages. Robust competi16 tion between the MFA and private issuers shall be encour17 aged to facilitate the soonest possible privatization of the 

18 MFA. 

19 (b) TERMINATION OF AUTHORITY.—The authority 

20 granted to the MFA under this Act shall expire 10 years 

21 after the date of enactment of this Act, and the MFA shall 

22 be terminated on that date. The MFA, in consultation 

23 with the Board of Directors, shall begin planning for such 

24 termination during the third year following the date of en25 actment of this Act. 


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1 (c) PERIODIC REPORTS ON PRIVATIZATION.— 

2 (1) INITIAL REPORT.—During the 5th year fol3 lowing the date of enactment of this Act, the MFA 

4 shall present to Congress a detailed plan for privat5 ization of the MFA upon termination of its authority 

6 in accordance with subsection (b). 

7 (2) REGULAR REPORTS.—To ensure the trans8 fer to privatization, the MFA shall report to Con9 gress on the implementation of the detailed plan for 

10 privatization submitted under paragraph (1)— 

11 (A) annually through the 7th year fol12 lowing the date of enactment of this Act; and 

13 (B) quarterly, beginning in the 8th year 

14 following the date of enactment of this Act. 

15 TITLE IV—CONFORMING 

16 AMENDMENTS 

17 SEC. 401. AMENDMENTS TO DODD-FRANK ACT. 

18 Section 15G of the Securities Exchange Act of 1934 

19 (15 U.S.C. 78o–11) is amended— 

20 (1) in subsection (a)— 

21 (A) by redesignating paragraphs (3) and 

22 (4) as paragraphs (4) and (5), respectively; and 

23 (B) by inserting after paragraph (2) the 

24 following: 


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1 ‘‘(3) the term ‘qualified residential mortgage’ 

2 has the same meaning as in section 2 of the Mort3 gage Finance Act of 2011;’’; and 

4 (2) by adding at the end the following: 

5 ‘‘(j) EXEMPTION FOR QUALIFIED MORTGAGE6 BACKED SECURITIES.—Qualified mortgage-backed securi7 ties, as defined in section 2 of the Mortgage Finance Act 

8 of 2011, and any other securitizations of qualified residen9 tial mortgages, shall be exempt from the risk retention 

10 provisions of subsection (c)(1)(B)(i).’’. 

11 SEC. 402. FEDERAL HOUSING ENTERPRISES FINANCIAL 

12 SAFETY AND SOUNDNESS ACT OF 1992. 

13 (a) DEFINITIONS.—Section 1303(20) of the Federal 

14 Housing Enterprises Financial Safety and Soundness Act 

15 of 1992 (12 U.S.C. 4502(20)) is amended by striking 

16 ‘‘means—’’ and all that follows through ‘‘(C) any’’ and 

17 inserting ‘‘means any’’. 

18 (b) TRANSFER OF FUNCTIONS.—All functions of the 

19 FHFA with respect to the enterprises, as that term is de20 fined in section 1303 of the Federal Housing Enterprises 

21 Financial Safety and Soundness Act of 1992, other than 

22 any function related to receivership of the enterprises, are 

23 transferred to the MFA, effective 90 days after the date 


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1 on which liquidation of the enterprises is complete, in ac2 cordance with this Act. 

Æ 


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