II 

110TH CONGRESS 

2D SESSION S. 3522 

To establish a Federal Board of Certification to enhance the transparency, 

credibility, and stability of financial markets, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 18 (legislative day, SEPTEMBER 17), 2008 

Ms. SNOWE introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To establish a Federal Board of Certification to enhance 

the transparency, credibility, and stability of financial 

markets, 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. 

4 This Act may be cited as the ‘‘Federal Board of Cer5 tification Act of 2008’’. 

6 SEC. 2. PURPOSE. 

7 It is the purpose of this Act to establish a Federal 

8 Board of Certification, which shall certify that the mort9 gages within a security instrument meet the underlying 

10 standards they claim to meet with regards to mortgage 

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1 characteristics including but not limited to: documenta2 tion, loan to value ratios, debt service to income ratios, 

3 and borrower credit standards and geographic concentra4 tion. The purpose of this certification process is to in5 crease the transparency, predictability and reliability of 

6 securitized mortgage products. 

7 SEC. 3. DEFINITIONS. 

8 As used in this Act— 

9 (1) the term ‘‘Board’’ means the Federal Board 

10 of Certification established under this Act; 

11 (2) the term ‘‘mortgage security’’ means an in12 vestment instrument that represents ownership of an 

13 undivided interest in a group of mortgages; 

14 (3) the term ‘‘insured depository institution’’ 

15 has the same meaning as in section 3 of the Federal 

16 Deposit Insurance Act (12 U.S.C. 1803); and 

17 (4) the term ‘‘Federal financial institutions reg18 ulatory agency’’ has the same meaning as in section 

19 1003 of the Federal Financial Institutions Examina20 tion Council Act of 1978 (12 U.S.C. 3302). 

21 SEC. 4. VOLUNTARY PARTICIPATION. 

22 Market participants, including firms that package 

23 mortgage loans into mortgage securities, may elect to have 

24 their mortgage securities evaluated by the Board. 

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1 SEC. 5. STANDARDS. 

2 The Board is authorized to promulgate regulations 

3 establishing enumerated security standards which the 

4 Board shall use to certify mortgage securities. The Board 

5 shall promulgate standards which shall certify that the 

6 mortgages within a security instrument meet the under7 lying standards they claim to meet with regards to docu8 mentation, loan to value ratios, debt service to income ra9 tions and borrower credit standards. The standards should 

10 protect settled investor expectations, and increase the 

11 transparency, predictability and reliability of securitized 

12 mortgage products. 

13 SEC. 6. COMPOSITION. 

14 (a) ESTABLISHMENT; COMPOSITION.—There is es15 tablished the Federal Board of Certification, which shall 

16 consist of— 

17 (1) the Comptroller of the Currency; 

18 (2) the Secretary of Housing and Urban Devel19 opment; 

20 (3) a Governor of the Board of Governors of 

21 the Federal Reserve System designated by the 

22 Chairman of the Board; 

23 (4) the Undersecretary of the Treasury for Do24 mestic Finance; and 

25 (5) the Chairman of the Securities and Ex26 change Commission. 

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1 (b) CHAIRPERSON.—The members of the Board shall 

2 select the first chairperson of the Board. Thereafter the 

3 position of chairperson shall rotate among the members 

4 of the Board. 

5 (c) TERM OF OFFICE.—The term of each chairperson 

6 of the Board shall be 2 years. 

7 (d) DESIGNATION OF OFFICERS AND EMPLOYEES.— 

8 The members of the Board may, from time to time, des9 ignate other officers or employees of their respective agen10 cies to carry out their duties on the Board. 

11 (e) COMPENSATION AND EXPENSES.—Each member 

12 of the Board shall serve without additional compensation, 

13 but shall be entitled to reasonable expenses incurred in 

14 carrying out official duties as such a member. 

15 SEC. 7. EXPENSES. 

16 The costs and expenses of the Board, including the 

17 salaries of its employees, shall be paid for by excise fees 

18 collected from applicants for security certification from the 

19 Board, according to fee scales set by the Board. 

20 SEC. 8. BOARD RESPONSIBILITIES. 

21 (a) ESTABLISHMENT OF PRINCIPLES AND STAND22 ARDS.—The Board shall establish, by rule, uniform prin23 ciples and standards and report forms for the regular ex24 amination of mortgage securities. 

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1 (b) DEVELOPMENT OF UNIFORM REPORTING SYS2 TEM.—The Board shall develop uniform reporting systems 

3 for use by the Board in ascertaining mortgage security 

4 risk. The Board shall assess, and publicly publish, how 

5 it evaluates and certifies the composition of mortgage se6 curities. 

7 (c) AFFECT ON FEDERAL REGULATORY AGENCY RE8 SEARCH AND DEVELOPMENT OF NEW FINANCIAL INSTI9 TUTIONS SUPERVISORY AGENCIES.—Nothing in this Act 

10 shall be construed to limit or discourage Federal regu11 latory agency research and development of new financial 

12 institutions supervisory methods and tools, nor to preclude 

13 the field testing of any innovation devised by any Federal 

14 regulatory agency. 

15 (d) ANNUAL REPORT.—Not later than April 1 of 

16 each year, the Board shall prepare and submit to Congress 

17 an annual report covering its activities during the pre18 ceding year. 

19 (e) REPORTING SCHEDULE.—The Board shall deter20 mine whether it wants to evaluate mortgage securities at 

21 issuance, on a regular basis, or upon request. 

22 SEC. 9. BOARD AUTHORITY. 

23 (a) AUTHORITY OF CHAIRPERSON.—The chairperson 

24 of the Board is authorized to carry out and to delegate 

25 the authority to carry out the internal administration of 

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1 the Board, including the appointment and supervision of 

2 employees and the distribution of business among mem3 bers, employees, and administrative units. 

4 (b) USE OF PERSONNEL, SERVICES, AND FACILITIES

5 OF FEDERAL FINANCIAL INSTITUTIONS REGULATORY

6 AGENCIES, AND FEDERAL RESERVE BANKS.—In addition 

7 to any other authority conferred upon it by this Act, in 

8 carrying out its functions under this Act, the Board may 

9 utilize, with their consent and to the extent practical, the 

10 personnel, services, and facilities of the Federal financial 

11 institutions regulatory agencies, and Federal Reserve 

12 banks, with or without reimbursement therefor. 

13 (c) COMPENSATION, AUTHORITY, AND DUTIES OF

14 OFFICERS AND EMPLOYEES; EXPERTS AND CONSULT15 ANTS.—The Board may— 

16 (1) subject to the provisions of title 5, United 

17 States Code, relating to the competitive service, clas18 sification, and General Schedule pay rates, appoint 

19 and fix the compensation of such officers and em20 ployees as are necessary to carry out the provisions 

21 of this Act, and to prescribe the authority and duties 

22 of such officers and employees; and 

23 (2) obtain the services of such experts and con24 sultants as are necessary to carry out this Act. 

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1 SEC. 10. BOARD ACCESS TO INFORMATION. 

2 For the purpose of carrying out this Act, the Board 

3 shall have access to all books, accounts, records, reports, 

4 files, memorandums, papers, things, and property belong5 ing to or in use by Federal financial institutions regulatory 

6 agencies, including reports of examination of financial in7 stitutions, their holding companies, or mortgage lending 

8 entities from whatever source, together with work papers 

9 and correspondence files related to such reports, whether 

10 or not a part of the report, and all without any deletions. 

11 SEC. 11. REGULATORY REVIEW. 

12 (a) IN GENERAL.—Not less frequently than once 

13 every 10 years, the Board shall conduct a review of all 

14 regulations prescribed by the Board, in order to identify 

15 outdated or otherwise unnecessary regulatory require16 ments imposed on insured depository institutions. 

17 (b) PROCESS.—In conducting the review under sub18 section (a), the Board shall— 

19 (1) categorize the regulations described in sub20 section (a) by type; and 

21 (2) at regular intervals, provide notice and so22 licit public comment on a particular category or cat23 egories of regulations, requesting commentators to 

24 identify areas of the regulations that are outdated, 

25 unnecessary, or unduly burdensome. 

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1 (c) COMPLETE REVIEW.—The Board shall ensure 

2 that the notice and comment period described in sub3 section (b)(2) is conducted with respect to all regulations 

4 described in subsection (a), not less frequently than once 

5 every 10 years. 

6 (d) REGULATORY RESPONSE.—The Board shall— 

7 (1) publish in the Federal Register a summary 

8 of the comments received under this section, identi9 fying significant issues raised and providing com10 ment on such issues; and 

11 (2) eliminate unnecessary regulations to the ex12 tent that such action is appropriate. 

13 (e) REPORT TO CONGRESS.—Not later than 30 days 

14 after carrying out subsection (d)(1) of this section, the 

15 Board shall submit to the Congress a report, which shall 

16 include a summary of any significant issues raised by pub17 lic comments received by the Board under this section and 

18 the relative merits of such issues. 

19 SEC. 12. LIABILITY. 

20 Any publication, transmission, or webpage containing 

21 an advertisement for or invitation to buy a mortgage secu22 rity shall include the following notice, in conspicuous type: 

23 ‘‘Certification by the Federal Board of Certification can 

24 in no way be considered a guarantee of the mortgage secu25 rity. Certification is merely a judgment by the Federal 

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1 Board of Certification of the degree of risk offered by the 

2 security in question. The Federal Board of Certification 

3 is not liable for any actions taken in reliance on such judg4 ment of risk.’’. 

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