I

107TH CONGRESS

1ST SESSION H. R. 1409

To reform the regulation of certain housing-related Government-sponsored

enterprises, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 4, 2001

Mr. BAKER introduced the following bill; which was referred to the Committee

on Financial Services

A BILL

To reform the regulation of certain housing-related

Government-sponsored enterprises, 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 AND TABLE OF CONTENTS.

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

5 ‘‘Secondary Mortgage Market Enterprises Regulatory Im6 provement Act’’.

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

8 this Act is as follows:

Sec. 1. Short title and table of contents.

TITLE I—REFORM OF REGULATION OF FANNIE MAE AND

FREDDIE MAC
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Subtitle A—Improvement of Supervision

Sec. 101. Transfer of authority to regulate safety and soundness of enterprises

to Board of Governors of Federal Reserve System.

Sec. 102. Duties and authorities of Board.

Sec. 103. Regulations.

Sec. 104. Assessments.

Sec. 105. Termination of general regulatory authority of HUD.

Sec. 106. Approval of Board for new activities.

Sec. 107. Limitation on nonmission-related assets.

Sec. 108. Conforming loan limits.

Sec. 109. Registration of securities.

Sec. 110. Treasury line of credit.

Sec. 111. Public disclosure of information.

Sec. 112. Risk-based capital test for enterprises.

Sec. 113. Minimum and critical capital levels.

Sec. 114. Definitions.

Subtitle B—Prompt Corrective Action

Sec. 131. Capital classifications.

Sec. 132. Supervisory actions applicable to undercapitalized enterprises.

Sec. 133. Supervisory actions applicable to significantly undercapitalized enterprises.

Sec. 134. Receivership.

Subtitle C—Enforcement Actions

Sec. 151. Cease-and-desist proceedings.

Sec. 152. Temporary cease-and-desist proceedings.

Sec. 153. Removal and prohibition authority.

Sec. 154. Enforcement and jurisdiction.

Sec. 155. Civil money penalties.

Sec. 156. Criminal penalty.

Subtitle D—Reporting Regarding Enterprises

Sec. 161. Reporting regarding enterprises.

Subtitle E—General Provisions

Sec. 171. Conforming and technical amendments.

Sec. 172. Effective date.

TITLE II—TRANSFER OF FUNCTIONS, PERSONNEL, AND

PROPERTY

Sec. 201. Abolishment of OFHEO.

Sec. 202. Continuation and coordination of certain regulations.

Sec. 203. Transfer and rights of employees of OFHEO.

Sec. 204. Transfer of property and facilities.
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1 TITLE I—REFORM OF REGULA2 TION OF FANNIE MAE AND

3 FREDDIE MAC

4 Subtitle A—Improvement of

5 Supervision

6 SEC. 101. TRANSFER OF AUTHORITY TO REGULATE SAFETY

7 AND SOUNDNESS OF ENTERPRISES TO

8 BOARD OF GOVERNORS OF FEDERAL RE9 SERVE SYSTEM.

10 Part 1 of subtitle A of title XIII of the Housing and

11 Community Development Act of 1992 is amended by strik12 ing sections 1311 and 1312 (12 U.S.C. 4511, 4512) and

13 inserting the following new section:

14 ‘‘SEC. 1311. SUPERVISION AND REGULATION BY FEDERAL

15 RESERVE BOARD.

16 ‘‘(a) IN GENERAL.—The enterprises shall, to the ex17 tent provided in this title, be subject to the supervision

18 and regulation of the Board of Governors of the Federal

19 Reserve System. The Board shall succeed to the authority

20 of the Director of the Office of Federal Housing Enter21 prise Oversight of the Department of Housing and Urban

22 Development and the general regulatory and any other au23 thority of the Secretary of Housing and Urban Develop24 ment with respect to the enterprises (except as specifically

25 provided otherwise in this Act, the Federal National Mort-
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1 gage Association Charter Act, the Federal Home Loan

2 Mortgage Corporation Act, and any other provision of

3 Federal law).

4 ‘‘(b) DELEGATION OF AUTHORITY.—Pursuant to sec5 tion 11(k) of the Federal Reserve Act, the Board of Gov6 ernors of the Federal Reserve System may carry out any

7 of its responsibilities for ongoing supervision and examina8 tion of the enterprises through one or more of the Federal

9 Reserve banks. The Board may not delegate any rule10 making or policymaking responsibilities.

11 ‘‘(c) SAVINGS PROVISION.—The authority of the

12 Board to take actions under subtitles B and C does not

13 in any way limit the general supervisory and regulatory

14 authority granted to the Board under subsection (a).’’.

15 SEC. 102. DUTIES AND AUTHORITIES OF BOARD.

16 Section 1313 of the Housing and Community Devel17 opment Act of 1992 (12 U.S.C. 4513) is amended to read

18 as follows:

19 ‘‘SEC. 1313. DUTIES AND AUTHORITIES OF BOARD.

20 ‘‘(a) DUTIES.—

21 ‘‘(1) PRINCIPAL DUTIES.—The principal duties

22 under this title of the Board shall be to ensure that

23 the enterprises—

24 ‘‘(A) operate in a financially safe and

25 sound manner;
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1 ‘‘(B) carry out their missions only through

2 activities that are authorized under, and con3 sistent with the purposes of, the provisions of

4 Federal law that charter the enterprises; and

5 ‘‘(C) remain adequately capitalized.

6 ‘‘(2) OTHER DUTIES.—To the extent consistent

7 with paragraph (1), the duty of the Board shall be

8 to exercise general supervisory and regulatory au9 thority over the enterprises, in accordance with this

10 title, the Federal National Mortgage Association

11 Charter Act, the Federal Home Loan Mortgage Cor12 poration Act, and any other provisions of law.

13 ‘‘(b) DELEGATION OF AUTHORITY.—The Board may

14 delegate to officers and employees of the Board any of

15 the functions, powers, and duties of the Board, with re16 spect to supervision and regulation of the enterprises, as

17 the Board considers appropriate.’’.

18 SEC. 103. REGULATIONS.

19 Section 1319G of the Housing and Community De20 velopment Act of 1992 (12 U.S.C. 4526) is amended—

21 (1) by striking subsection (a) and inserting the

22 following new subsection:

23 ‘‘(a) AUTHORITY.—The Board shall issue any regula24 tions and orders necessary to carry out the duties of the

25 Board, with respect to supervision and regulation of the
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1 enterprises, under this title, the Federal National Mort2 gage Association Charter Act, and the Federal Home

3 Loan Mortgage Corporation Act, and to ensure that the

4 purposes of this title and such Acts are accomplished.’’;

5 and

6 (2) in subsection (c), by striking ‘‘Committee on

7 Banking, Finance and Urban Affairs’’ and inserting

8 ‘‘Committee on Financial Services’’.

9 SEC. 104. ASSESSMENTS.

10 Section 1316 of the Housing and Community Devel11 opment Act of 1992 (12 U.S.C. 4516) is amended—

12 (1) by striking subsection (a) and inserting the

13 following new subsection:

14 ‘‘(a) ANNUAL ASSESSMENTS.—The Board shall es15 tablish and collect from the enterprises annual assess16 ments in an amount not exceeding the sum of—

17 ‘‘(1) the amount sufficient to provide for rea18 sonable costs and expenses of the Board, with re19 spect to regulation and supervision of the enter20 prises, including the expenses of any examinations

21 under section 1317; and

22 ‘‘(2) the amount sufficient to provide for rea23 sonable costs and expenses of the Department of

24 Housing and Urban Development in carrying out
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1 section 1325 and subparts B and C of this sub2 title.’’;

3 (2) in subsection (c), by adding at the end the

4 following new sentence: ‘‘The Board may adjust the

5 amounts of any semiannual assessments to be paid

6 pursuant to subsection (b) by the enterprises, as

7 necessary in the discretion of the Board, to ensure

8 that the costs of enforcement activities under sub9 titles B and C for an enterprise are borne only by

10 that enterprise.’’;

11 (3) by striking subsection (e) and inserting the

12 following new subsection:

13 ‘‘(e) PAYMENT TO HUD FOR COSTS RELATING TO

14 HOUSING GOALS.—The Board shall, on a fiscal year basis,

15 transfer from the Federal Housing Enterprises Oversight

16 Fund established under subsection (f) to the Secretary of

17 Housing and Urban Development an amount equal to the

18 amount determined under subsection (a)(2) for such fiscal

19 year.’’;

20 (4) in subsection (f), by striking the last sen21 tence and inserting the following new sentence:

22 ‘‘Notwithstanding any other provision of law, any

23 assessments collected pursuant to this section and

24 any amounts in the Fund shall not be construed to

25 be Government or public funds or appropriated
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1 money, shall not be subject to apportionment for

2 purposes of chapter 15 of title 31, United States

3 Code, or under any other authority, and shall be

4 available without fiscal year limitation for carrying

5 out the supervisory and regulatory responsibilities of

6 the Board with respect to the enterprises, including

7 any necessary administrative and nonadministrative

8 expenses of the Board in carrying out the purposes

9 of this title, the Federal National Mortgage Associa10 tion Charter Act, and the Federal Home Loan Mort11 gage Corporation Act, and for annual payments

12 under subsection (e).’’; and

13 (5) in subsection (g)—

14 (A) by striking paragraphs (1) and (2) and

15 inserting the following new paragraphs:

16 ‘‘(1) FINANCIAL OPERATING PLANS AND FORE17 CASTS.—Before the beginning of each fiscal year—

18 ‘‘(A) the Board shall submit a copy of the

19 financial operating plans and forecasts for the

20 Board, with respect to regulation and super21 vision of the enterprises, to the Director of the

22 Office of Management and Budget; and

23 ‘‘(B) the Secretary of Housing and Urban

24 Development shall submit a copy of the finan25 cial operating plans and forecasts for the De-
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1 partment of Housing and Urban Development,

2 with respect to responsibilities and activities

3 under section 1325 and subtitles B and C of

4 this title, to the Board.

5 ‘‘(2) REPORTS OF OPERATIONS.—As soon as

6 practicable after the end of each fiscal year and each

7 quarter thereof—

8 ‘‘(A) the Board shall submit a copy of the

9 report of the results of the operations of the

10 Board, with respect to regulation and super11 vision of the enterprises, during such period to

12 the Director of the Office of Management and

13 Budget; and

14 ‘‘(B) the Secretary of Housing and Urban

15 Development shall submit a report of the re16 sults of the operations of the Department of

17 Housing and Urban Development, with respect

18 to responsibilities and activities under section

19 1325 and subtitles B and C of this title, to the

20 Board.’’; and

21 (B) in paragraph (3)—

22 (i) by striking ‘‘(A)’’; and

23 (ii) by striking ‘‘, and (B)’’ and in24 serting the following: ‘‘. The annual plans,

25 forecasts, and reports required under para-
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1 graphs (1)(B) and (2)(B) shall be in2 cluded’’.

3 SEC. 105. TERMINATION OF GENERAL REGULATORY AU4 THORITY OF HUD.

5 (a) IN GENERAL.—Part 2 of subtitle A of title XIII

6 of the Housing and Community Development Act of 1992

7 is amended—

8 (1) by striking the heading for the part and the

9 heading for subpart A and inserting the following:

10 ‘‘PART 2—NEW ACTIVITIES, HOUSING

11 INFORMATION, AND HOUSING GOALS

12 ‘‘Subpart A—New Activities and Housing

13 Information’’;

14 and

15 (2) by striking section 1321 (12 U.S.C. 4541).

16 (b) RETENTION OF FAIR HOUSING RESPONSIBIL17 ITIES.—Section 1325 of the Housing and Community De18 velopment Act of 1992 (12 U.S.C. 4545) is amended, in

19 the matter preceding paragraph (1), by inserting ‘‘of

20 Housing and Urban Development’’ after ‘‘The Secretary’’.

21 (c) RETENTION OF AUTHORITY TO ESTABLISH AND

22 ENFORCE HOUSING GOALS.—Part 2 of subtitle A of the

23 Housing and Community Development Act of 1992 is

24 amended—
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1 (1) by inserting ‘‘of Housing and Urban Devel2 opment (in this subpart referred to as the ‘Sec3 retary’)’’ after ‘‘The Secretary’’, each place such

4 term appears in—

5 (A) the first sentence of section 1331(a)

6 (12 U.S.C. 4561(a)); and

7 (B) section 1341(a) (12 U.S.C. 4581(a));

8 (2) in section 1332 (12 U.S.C. 4562), by strik9 ing subsection (d);

10 (3) in section 1333 (12 U.S.C. 4563), by strik11 ing subsection (d);

12 (4) in section 1334 (12 U.S.C. 4564), by strik13 ing subsection (d);

14 (5) in section 1336 (12 U.S.C. 4566)—

15 (A) in subsection (b)(3)(C), by inserting

16 ‘‘the Board,’’ after ‘‘notice to the enterprise,’’;

17 and

18 (B) in subsection (c)(5), by inserting ‘‘,

19 and to the Board,’’ after ‘‘housing plan’’;

20 (6) by striking sections 1337 and 1338 (12

21 U.S.C. 4567, 4562 note);

22 (7) in section 1341(b)(1) (12 U.S.C.

23 4581(b)(1)), by inserting after the period at the end

24 the following new sentence: ‘‘Immediately upon

25 issuing and serving a notice of charges under this
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1 section, the Secretary shall submit a copy of such

2 notice to the Board.’’;

3 (8) in section 1345 (12 U.S.C. 4585)—

4 (A) in subsection (c)(1)(A), by inserting

5 ‘‘and the Board’’ after ‘‘enterprise’’; and

6 (B) in subsection (d), by inserting ‘‘, upon

7 notification to the Board,’’ after ‘‘1343’’; and

8 (9) in section 1346(a) (12 U.S.C. 4586(a)), in

9 the matter preceding paragraph (1), by inserting

10 ‘‘and to the Board’’ after ‘‘the public’’.

11 (d) AUTHORITY OF BOARD OVER DETERMINATIONS

12 BY HUD.—Section 1331 of the Housing and Community

13 Development Act of 1992 (12 U.S.C. 4561) is amended—

14 (1) in the section heading by inserting ‘‘AND

15 AUTHORITY OF BOARD’’ before the period at the

16 end; and

17 (2) by adding at the end the following new sub18 section:

19 ‘‘(d) AUTHORITY OF BOARD.—The Board may review

20 any action of the Secretary of Housing and Urban Devel21 opment made in carrying out the Secretary’s responsibil22 ities under this subtitle as the Board considers necessary

23 to ensure that the enterprises comply with section

24 1313(a)(1).’’.
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1 SEC. 106. APPROVAL OF BOARD FOR NEW ACTIVITIES.

2 (a) IN GENERAL.—Section 1322 of the Housing and

3 Community Development Act of 1992 (12 U.S.C. 4542)

4 is amended to read as follows:

5 ‘‘SEC. 1322. PRIOR APPROVAL AUTHORITY FOR NEW ACTIVI6 TIES.

7 ‘‘(a) AUTHORITY.—The Board shall have the author8 ity to approve all new activities, and to review all ongoing

9 activities, of an enterprise to ensure compliance with the

10 Federal National Mortgage Association Charter Act or the

11 Federal Home Loan Mortgage Corporation Act, as appli12 cable.

13 ‘‘(b) REQUIREMENT FOR PRIOR APPROVAL.—An en14 terprise may not commence any new activity before obtain15 ing the approval of the Board for the new activity, in ac16 cordance with this section.

17 ‘‘(c) STANDARD FOR APPROVAL.—The Board may

18 approve a new activity of an enterprise only if—

19 ‘‘(1) the new activity is authorized—

20 ‘‘(A) with respect to the Federal National

21 Mortgage Association, under the Federal Na22 tional Mortgage Association Charter Act or

23 other Federal law; and

24 ‘‘(B) with respect to the Federal Home

25 Loan Mortgage Corporation, under the Federal
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1 Home Loan Mortgage Corporation Act or other

2 Federal law;

3 ‘‘(2) the Board determines that the enterprise

4 can conduct the new activity in a safe and sound

5 manner; and

6 ‘‘(3) the Board determines that the new activity

7 is in the public interest.

8 ‘‘(d) PROCEDURE FOR APPROVAL.—The Board shall,

9 by regulation, establish procedures for the enterprises to

10 obtain the approval of the Board for purposes of sub11 section (b).’’.

12 (b) DEFINITION OF NEW ACTIVITY.—Paragraph

13 (13) of section 1303 of the Housing and Community De14 velopment Act of 1992 (12 U.S.C. 4502(13)) is amended

15 to read as follows:

16 ‘‘(13) NEW ACTIVITY.—The term ‘new activity’

17 means, with respect to the enterprises, any program,

18 activity, business process, or investment that directly

19 or indirectly provides financing or other services re20 lated to conventional mortgages (including pur21 chasing, servicing, selling, and lending on the secu22 rity of such mortgages) that—

23 ‘‘(A) is significantly different from pro24 grams, activities, business processes, or invest25 ments that (i) have been approved under this
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1 Act, or (ii) were approved or engaged in by an

2 enterprise before the date of the enactment of

3 the Housing and Community Development Act

4 of 1992; or

5 ‘‘(B) represents an expansion, in terms of

6 the dollar volume or number of mortgages or

7 securities involved, of programs above limits ex8 pressly contained in any prior approval.’’.

9 (c) CONFORMING AMENDMENTS.—

10 (1) FANNIE MAE.—Section 302(b)(6) of the

11 Federal National Mortgage Association Charter Act

12 (12 U.S.C. 1717(b)(6)) is amended—

13 (A) by striking ‘‘program’’ and inserting

14 ‘‘activity’’; and

15 (B) by striking ‘‘Secretary’’ and inserting

16 ‘‘Board of Governors of the Federal Reserve

17 System’’.

18 (2) FREDDIE MAC.—Section 305(c) of the Fed19 eral Home Loan Mortgage Corporation Act (12

20 U.S.C. 1454(c)) is amended—

21 (A) by striking ‘‘program’’ and inserting

22 ‘‘activity’’; and

23 (B) by striking ‘‘Secretary’’ and inserting

24 ‘‘Board of Governors of the Federal Reserve

25 System’’.
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1 (3) 1992 ACT.—Section 1369C(a)(4) of the

2 Housing and Community Development Act of 1992

3 (12 U.S.C. 4622(a)(4)) is amended by striking ‘‘pro4 grams’’ and inserting ‘‘activities’’.

5 SEC. 107. LIMITATION ON NONMISSION-RELATED ASSETS.

6 Subtitle B of title XIII of the Housing and Commu7 nity Development Act of 1992 (12 U.S.C. 4611 et seq.)

8 is amended—

9 (1) by striking the subtitle designation and

10 heading and inserting the following:

11 ‘‘Subtitle B—Required Capital Lev12 els for Enterprises, Special En13 forcement Powers, and Limita14 tion on Nonmission-Related As15 sets’’;

16 and

17 (2) by adding at the end the following new sec18 tion:

19 ‘‘SEC. 1369E. LIMITATION ON NONMISSION-RELATED AS20 SETS.

21 ‘‘(a) IN GENERAL.—The Board shall, by regulation,

22 limit the nonmission-related assets that an enterprise may

23 hold at any time. The Board shall define the term ‘non24 mission-related asset’ for purposes of this section.
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1 ‘‘(b) RULE OF CONSTRUCTION.—Subsection (a) may

2 not be construed to authorize an enterprise to engage in

3 any new activity (as such term is defined in section 1303)

4 relating to any nonmission-related asset without obtaining

5 the prior approval of the Board in accordance with section

6 1322.’’.

7 SEC. 108. CONFORMING LOAN LIMITS.

8 (a) FANNIE MAE.—Section 302(b)(2) of the Federal

9 National Mortgage Association Charter Act (12 U.S.C.

10 1717(b)(2)) is amended by striking the 7th and 8th sen11 tences and inserting the following new sentences: ‘‘Such

12 limitations shall not exceed $275,000 for a mortgage se13 cured by a single-family residence, $351,950 for a mort14 gage secured by a 2-family residence, $425,400 for a

15 mortgage secured by a 3-family residence, and $528,700

16 for a mortgage secured by a 4-family residence, except

17 that such maximum limitations shall be adjusted effective

18 January 1 of each year beginning with 2002, subject to

19 the limitations in this paragraph. Each adjustment shall

20 be made by adding to each such amount (as it may have

21 been previously adjusted) a percentage thereof equal to the

22 percentage increase during the 12-month period ending

23 with the previous October in the housing price index main24 tained by the Board of Governors of the Federal Reserve

25 System (pursuant to section 1321 of the Housing and
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1 Community Development Act of 1992 (12 U.S.C. 4541)).

2 If, upon the conclusion of such 12-month period, the level

3 of the housing price index does not exceed the highest level

4 attained by such index upon the conclusion of the previous

5 such 12-month periods, no such adjustment may be made

6 for the January 1 first occurring thereafter.’’.

7 (b) FREDDIE MAC.—Section 305(a)(2) of the Fed8 eral National Mortgage Association Charter Act (12

9 U.S.C. 1454(a)(2)) is amended by striking the 6th and

10 7th sentences and inserting the following new sentences:

11 ‘‘Such limitations shall not exceed $275,000 for a mort12 gage secured by a single-family residence, $351,950 for

13 a mortgage secured by a 2-family residence, $425,400 for

14 a mortgage secured by a 3-family residence, and $528,700

15 for a mortgage secured by a 4-family residence, except

16 that such maximum limitations shall be adjusted effective

17 January 1 of each year beginning with 2002, subject to

18 the limitations in this paragraph. Each adjustment shall

19 be made by adding to each such amount (as it may have

20 been previously adjusted) a percentage thereof equal to the

21 percentage increase during the 12-month period ending

22 with the previous October in the housing price index main23 tained by the Board of Governors of the Federal Reserve

24 System (pursuant to section 1321 of the Housing and

25 Community Development Act of 1992 (12 U.S.C. 4541)).
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1 If, upon the conclusion of such 12-month period, the level

2 of the housing price index does not exceed the highest level

3 attained by such index upon the conclusion of the previous

4 such 12-month periods, no such adjustment may be made

5 for the January 1 first occurring thereafter.’’.

6 (c) HOUSING PRICE INDEX.—Subpart A of part 2 of

7 subtitle A of title XIII of the Housing and Community

8 Development Act of 1992 (as amended by the preceding

9 provisions of this Act) is amended by inserting before sec10 tion 1322 (12 U.S.C. 4542) the following new section:

11 ‘‘SEC. 1321. HOUSING PRICE INDEX.

12 ‘‘The Board shall establish and maintain a method

13 of assessing the national average 1-family house price for

14 use for adjusting the conforming loan limitations of the

15 enterprises (as such term is defined in section 1303 of

16 Federal Housing Enterprises Financial Safety and Sound17 ness Act of 1992). In establishing such method, the Board

18 shall take into consideration the monthly survey of all

19 major lenders conducted by the Federal Housing Finance

20 Board to determine the national average 1-family house

21 price, the House Price Index maintained by the Office of

22 Federal Housing Enterprise Oversight of the Department

23 of Housing and Urban Development before the effective

24 date of the Secondary Mortgage Market Enterprises Reg25 ulatory Improvement Act, any appropriate house price in-
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1 dexes of the Bureau of the Census of the Department of

2 Commerce, and any other indexes or measures that the

3 Board considers appropriate.’’.

4 SEC. 109. REGISTRATION OF SECURITIES.

5 (a) FANNIE MAE.—

6 (1) MORTGAGE-BACKED SECURITIES.—Section

7 304(d) of the Federal National Mortgage Associa8 tion Charter Act (12 U.S.C. 1719(d)) is amended by

9 striking the fourth sentence and inserting the fol10 lowing new sentence: ‘‘Securities issued by the cor11 poration under this subsection shall not be exempt

12 securities within the meaning of the laws adminis13 tered by the Securities and Exchange Commission,

14 but such securities shall not be subject to fees under

15 section 6(b) of the Securities Act of 1933 or under

16 section 13(e) or 14(g) of the Securities Exchange

17 Act of 1934.’’.

18 (2) SUBORDINATE OBLIGATIONS.—Section

19 304(e) of the Federal National Mortgage Association

20 Charter Act (12 U.S.C. 1719(e)) is amended by

21 striking the fourth sentence and inserting the fol22 lowing new sentence: ‘‘Securities issued by the cor23 poration under this subsection shall not be exempt

24 securities within the meaning of the laws adminis25 tered by the Securities and Exchange Commission,
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1 but such securities shall not be subject to fees under

2 section 6(b) of the Securities Act of 1933 or under

3 section 13(e) or 14(g) of the Securities Exchange

4 Act of 1934.’’.

5 (3) SECURITIES.—Section 311 of the Federal

6 National Mortgage Association Charter Act (12

7 U.S.C. 1723c) is amended—

8 (A) in the second sentence, by inserting

9 ‘‘by the Association’’ after ‘‘issued’’; and

10 (B) by adding at the end the following new

11 sentence: ‘‘Any stock, obligations, securities,

12 participations, or other instruments issued by

13 the corporation pursuant to this title shall not

14 be exempt securities within the meaning of the

15 laws administered by the Securities and Ex16 change Commission, but such stock, obligations,

17 securities, participations, or other instruments

18 shall not be subject to fees under section 6(b)

19 of the Securities Act of 1933 or under section

20 13(e) or 14(g) of the Securities Exchange Act

21 of 1934.’’.

22 (b) FREDDIE MAC.—Subsection (g) of section 306 of

23 the Federal Home Loan Mortgage Corporation Act (12

24 U.S.C. 1455(g)) is amended to read as follows:
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1 ‘‘(g) Any securities issued or guaranteed by the Cor2 poration shall not be exempt securities within the meaning

3 of the laws administered by the Securities and Exchange

4 Commission, but such securities shall not be subject to

5 fees under section 6(b) of the Securities Act of 1933 or

6 under section 13(e) or 14(g) of the Securities Exchange

7 Act of 1934.’’.

8 SEC. 110. TREASURY LINE OF CREDIT.

9 (a) FANNIE MAE.—The first sentence of section

10 304(c) of the Federal National Mortgage Association

11 Charter Act (12 U.S.C. 1719(c)) is amended by striking

12 ‘‘The’’ and inserting ‘‘Upon a request by the Board of

13 Governors of the Federal Reserve System, the’’.

14 (b) FREDDIE MAC.—The first sentence of paragraph

15 (1) of section 306(c) of the Federal Home Loan Mortgage

16 Corporation Act (12 U.S.C. 1455(c)(1)) is amended by

17 striking ‘‘The’’ and inserting ‘‘Upon a request by the

18 Board of Governors of the Federal Reserve System, the’’.

19 SEC. 111. PUBLIC DISCLOSURE OF INFORMATION.

20 Section 1314 of the Housing and Community Devel21 opment Act of 1992 (12 U.S.C. 4514) is amended—

22 (1) in the section heading by striking ‘‘BY EN23 TERPRISES’’ and inserting ‘‘AND INFORMATION’’;

24 and
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1 (2) by adding at the end the following new sub2 section:

3 ‘‘(c) PUBLIC DISCLOSURE OF INFORMATION.—The

4 Board shall, by regulation, require each enterprise to dis5 close to the public, on not less than an annual basis, such

6 financial, business, and other information that the Board

7 determines would be in the public interest.’’.

8 SEC. 112. RISK-BASED CAPITAL TEST FOR ENTERPRISES.

9 Section 1361 of the Housing and Community Devel10 opment Act of 1992 (12 U.S.C. 4611) is amended—

11 (1) in subsection (a)(2)(A), by inserting ‘‘or

12 change in such other manner as the Board considers

13 appropriate,’’ after ‘‘subparagraph (C),’’;

14 (2) in subsection (b)(1), by inserting after the

15 period at the end the following: ‘‘Notwithstanding

16 subsection (a), the Board may, in the sole discretion

17 of the Board, make any assumptions that the Board

18 considers appropriate regarding interest rates, home

19 prices, and new business.’’; and

20 (3) in subsection (c)(2), by inserting ‘‘or such

21 other percentage as the Board considers appro22 priate’’ before the period at the end.
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1 SEC. 113. MINIMUM AND CRITICAL CAPITAL LEVELS.

2 (a) MINIMUM CAPITAL LEVEL.—Section 1362 of the

3 Housing and Community Development Act of 1992 (12

4 U.S.C. 4612) is amended—

5 (1) by striking subsection (b);

6 (2) by striking ‘‘(a) IN GENERAL.—’’; and

7 (3) in the matter preceding paragraph (1), by

8 inserting before ‘‘the sum of’’ the following: ‘‘the

9 amount established by the Board, by regulation or

10 order, as such amount may be adjusted from time11 to-time by the Board to achieve the purposes of this

12 title, that is not less than’’.

13 (b) CRITICAL CAPITAL LEVEL.—Section 1363 of the

14 Housing and Community Development Act of 1992 (12

15 U.S.C. 4613) is amended, in the matter preceding para16 graph (1), by inserting before ‘‘the sum of’’ the following:

17 ‘‘the amount established by the Board, by regulation or

18 order, as such amount may be adjusted from time-to-time

19 by the Board to achieve the purposes of this title, that

20 is not less than’’.

21 SEC. 114. DEFINITIONS.

22 Section 1303 of the Housing and Community Devel23 opment Act of 1992 (12 U.S.C. 4502) is amended—

24 (1) in paragraphs (8), (9), (10), and (19), by

25 inserting ‘‘of Housing and Urban Development’’

26 after ‘‘Secretary’’ each place such term appears;
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1 (2) by striking paragraphs (5), (14), and (15);

2 (3) by redesignating paragraphs (7) through

3 (13) (as amended by the preceding provisions of this

4 Act) as paragraphs (8) through (14), respectively;

5 (4) by redesignating paragraphs (16) through

6 (19) as paragraphs (15) through (18), respectively;

7 (5) by inserting after paragraph (6) the fol8 lowing new paragraph:

9 ‘‘(7) ENTERPRISE-AFFILIATED PARTY.—The

10 term ‘enterprise-affiliated party’ means—

11 ‘‘(A) any director, officer, employee, or

12 controlling stockholder of, or agent for, an en13 terprise;

14 ‘‘(B) any shareholder, consultant, joint

15 venture partner, and any other person as deter16 mined by the Board (by regulation or case-by17 case) who participates in the conduct of the af18 fairs of an enterprise; and

19 ‘‘(C) any independent contractor (including

20 any attorney, appraiser, or accountant) who

21 knowingly or recklessly participates in—

22 ‘‘(i) any violation of any law or regu23 lation;

24 ‘‘(ii) any breach of fiduciary duty; or

25 ‘‘(iii) any unsafe or unsound practice,
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1 which caused or is likely to cause more than a

2 minimal financial loss to, or a significant ad3 verse effect on, the enterprise.’’;

4 (6) by redesignating paragraphs (2), (3), (4) as

5 paragraphs (3), (4), and (5), respectively; and

6 (7) by inserting after paragraph (1) the fol7 lowing new paragraph:

8 ‘‘(2) BOARD.—The term ‘Board’ means the

9 Board of Governors of the Federal Reserve Sys10 tem.’’.

11 Subtitle B—Prompt Corrective

12 Action

13 SEC. 131. CAPITAL CLASSIFICATIONS.

14 Section 1364 of the Housing and Community Devel15 opment Act of 1992 (12 U.S.C. 4614) is amended—

16 (1) by striking subsection (b) and inserting the

17 following new subsection:

18 ‘‘(b) DISCRETIONARY CLASSIFICATION.—

19 ‘‘(1) GROUNDS FOR RECLASSIFICATION.—The

20 Board may reclassify an enterprise under paragraph

21 (2) if—

22 ‘‘(A) at any time, the Board determines in

23 writing that an enterprise is engaging in con24 duct not approved by the Board that could re25 sult in a rapid depletion of core capital or that
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1 the value of the property subject to mortgages

2 held or securitized by the enterprise has de3 creased significantly;

4 ‘‘(B) after notice and an opportunity for

5 hearing, the Board determines that an enter6 prise is in an unsafe or unsound condition; or

7 ‘‘(C) pursuant to section 1371(b), the

8 Board deems an enterprise to be engaging in an

9 unsafe or unsound practice.

10 ‘‘(2) RECLASSIFICATION.—In addition to any

11 other action authorized under this title, including

12 the reclassification of an enterprise for any reason

13 not specified in this subsection, if the Board takes

14 any action described in paragraph (1) the Board

15 may classify an enterprise—

16 ‘‘(A) as undercapitalized, if the enterprise

17 is otherwise classified as adequately capitalized;

18 ‘‘(B) as significantly undercapitalized, if

19 the enterprise is otherwise classified as under20 capitalized; and

21 ‘‘(C) as critically undercapitalized, if the

22 enterprise is otherwise classified as significantly

23 undercapitalized.’’;

24 (2) by redesignating subsection (d) as sub25 section (e); and
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1 (3) by inserting after subsection (c) the fol2 lowing new subsection:

3 ‘‘(d) RESTRICTION ON CAPITAL DISTRIBUTIONS.—

4 ‘‘(1) IN GENERAL.—An enterprise shall make

5 no capital distribution if, after making the distribu6 tion, the enterprise would be undercapitalized.

7 ‘‘(2) EXCEPTION.—Notwithstanding paragraph

8 (1), the Board may permit an enterprise to repur9 chase, redeem, retire, or otherwise acquire shares or

10 ownership interests if the repurchase, redemption,

11 retirement, or other acquisition—

12 ‘‘(A) is made in connection with the

13 issuance of additional shares or obligations of

14 the enterprise in at least an equivalent amount;

15 and

16 ‘‘(B) will reduce the financial obligations of

17 the enterprise or otherwise improve the finan18 cial condition of the enterprise.’’.

19 SEC. 132. SUPERVISORY ACTIONS APPLICABLE TO UNDER20 CAPITALIZED ENTERPRISES.

21 (a) EFFECTIVE DATE FOR SUPERVISORY ACTIONS.—

22 Section 1365(c) of the Housing and Community Develop23 ment Act of 1992 (12 U.S.C. 4615(c)) is amended by

24 striking ‘‘1-year’’ and inserting ‘‘6-month’’.
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1 (b) SUPERVISORY ACTIONS.—Section 1365 of the

2 Housing and Community Development Act of 1992 (12

3 U.S.C. 4615) is amended—

4 (1) in subsection (a)—

5 (A) by redesignating paragraphs (1) and

6 (2) as paragraphs (2) and (3), respectively;

7 (B) by inserting before paragraph (2) the

8 following paragraph:

9 ‘‘(1) REQUIRED MONITORING.—The Board

10 shall—

11 ‘‘(A) closely monitor the condition of any

12 undercapitalized enterprise;

13 ‘‘(B) closely monitor compliance with the

14 capital restoration plan, restrictions, and re15 quirements imposed under this section; and

16 ‘‘(C) periodically review the plan, restric17 tions, and requirements applicable to the under18 capitalized enterprise to determine whether the

19 plan, restrictions, and requirements are achiev20 ing the purpose of this section.’’; and

21 (C) by inserting at the end the following

22 new paragraphs:

23 ‘‘(4) RESTRICTION OF ASSET GROWTH.—An

24 undercapitalized enterprise shall not permit its aver25 age total assets during any calendar quarter to ex-
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1 ceed its average total assets during the preceding

2 calendar quarter unless—

3 ‘‘(A) the Board has accepted the enter4 prise’s capital restoration plan;

5 ‘‘(B) any increase in total assets is con6 sistent with the plan; and

7 ‘‘(C) the enterprise’s ratio of tangible eq8 uity to assets increases during the calendar

9 quarter at a rate sufficient to enable the enter10 prise to become adequately capitalized within a

11 reasonable time.

12 ‘‘(5) PRIOR APPROVAL OF ACQUISITIONS AND

13 ISSUANCE OF NEW PRODUCTS.—An undercapitalized

14 enterprise shall not, directly or indirectly, acquire

15 any interest in any entity or issue a new product

16 unless—

17 ‘‘(A) the Board has accepted the enter18 prise’s capital restoration plan, the enterprise is

19 implementing the plan, and the Board deter20 mines that the proposed action is consistent

21 with and will further the achievement of the

22 plan; or

23 ‘‘(B) the Board determines that the pro24 posed action will further the purpose of this

25 section.’’; and
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1 (2) in the subsection heading for subsection (b),

2 by striking ‘‘FROM UNDERCAPITALIZED TO SIGNIFI3 CANTLY UNDERCAPITALIZED’’;

4 (3) by redesignating subsection (c) (as amended

5 by subsection (a) of this section) as subsection (d);

6 and

7 (4) by inserting after subsection (b) the fol8 lowing new subsection:

9 ‘‘(c) OTHER DISCRETIONARY SAFEGUARDS.—The

10 Board may take, with respect to an undercapitalized en11 terprise, any of the actions authorized to be taken under

12 section 1366 with respect to a significantly undercapital13 ized enterprise, if the Board determines that such actions

14 are necessary to carry out the purpose of this subtitle.’’.

15 SEC. 133. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFI16 CANTLY UNDERCAPITALIZED ENTERPRISES.

17 Section 1366 of the Housing and Community Devel18 opment Act of 1992 (12 U.S.C. 4616) is amended—

19 (1) in subsection (b)—

20 (A) in the subsection heading, by striking

21 ‘‘DISCRETIONARY SUPERVISORY ACTIONS’’ and

22 inserting ‘‘SPECIFIC ACTIONS’’;

23 (B) in the matter preceding paragraph (1),

24 by striking ‘‘may, at any time, take any’’ and
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1 inserting ‘‘shall carry out this section by taking,

2 at any time, 1 or more’’;

3 (C) by redesignating paragraphs (5) and

4 (6) as paragraphs (6) and (7), respectively;

5 (D) by inserting after paragraph (4) the

6 following new paragraph:

7 ‘‘(5) IMPROVEMENT OF MANAGEMENT.—Take

8 one or more of the following actions:

9 ‘‘(A) NEW ELECTION OF BOARD.—Order a

10 new election for the board of directors of the

11 enterprise.

12 ‘‘(B) DISMISSAL OF DIRECTORS OR EXECU13 TIVE OFFICERS.—Require the enterprise to dis14 miss from office any director or executive offi15 cer who had held office for more than 180 days

16 immediately before the enterprise became

17 undercapitalized. Dismissal under this subpara18 graph shall not be construed to be a removal

19 pursuant to the Board’s enforcement powers

20 provided in section 1377.

21 ‘‘(C) EMPLOY QUALIFIED EXECUTIVE OF22 FICERS.—Require the enterprise to employ

23 qualified executive officers (who, if the Board so

24 specifies, shall be subject to approval by the

25 Board).’’; and
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1 (E) by inserting at the end the following

2 new paragraph:

3 ‘‘(8) OTHER ACTION.—Require the enterprise

4 to take any other action that the Board determines

5 will better carry out the purpose of this section than

6 any of the actions specified in this paragraph.’’;

7 (2) by redesignating subsection (c) as sub8 section (d); and

9 (3) by inserting after subsection (b) the fol10 lowing new subsection:

11 ‘‘(c) RESTRICTION ON COMPENSATION OF EXECU12 TIVE OFFICERS.—An enterprise that is classified as sig13 nificantly undercapitalized may not, without prior written

14 approval by the Board—

15 ‘‘(A) pay any bonus to any executive offi16 cer; or

17 ‘‘(B) provide compensation to any execu18 tive officer at a rate exceeding that officer’s av19 erage rate of compensation (excluding bonuses,

20 stock options, and profit sharing) during the 12

21 calendar months preceding the calendar month

22 in which the enterprise became undercapital23 ized.’’.
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1 SEC. 134. RECEIVERSHIP.

2 Section 1368 of the Housing and Community Devel3 opment Act of 1992 (12 U.S.C. 4618) is amended to read

4 as follows:

5 ‘‘SEC. 1368. APPOINTMENT OF RECEIVERS

6 ‘‘(a) APPOINTMENT.—

7 ‘‘(1) AUTHORITY.—Upon a determination that

8 an enterprise is critically undercapitalized and a de9 termination that the enterprise meets such other

10 conditions for taking action pursuant to this sub11 section as the Board shall by regulation establish,

12 the Board may, notwithstanding section 1367(a)(1),

13 appoint a receiver for the enterprise in accordance

14 with this section and in lieu of appointment of a

15 conservator pursuant to section 1367. If the Board

16 takes action pursuant to this subsection, the Board

17 shall appoint the receiver not later than 30 days

18 after providing notice under paragraph (2) of this

19 subsection.

20 ‘‘(2) NOTICE.—Upon making a determination

21 under paragraph (1) to appoint a receiver for an en22 terprise, the Board shall provide written notice to

23 the enterprise, the Committee on Financial Services

24 of the House of Representatives, and the Committee

25 on Banking, Housing, and Urban Affairs of the

26 Senate—
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1 ‘‘(A) that a receiver will be appointed for

2 the enterprise;

3 ‘‘(B) stating the reasons for the appoint4 ment of the receiver; and

5 ‘‘(C) identifying the person or govern6 mental agency that the Board intends to ap7 point as a receiver.

8 ‘‘(3) QUALIFICATIONS.—The receiver shall be—

9 ‘‘(A) the Board or any other governmental

10 agency; or

11 ‘‘(B) any person that—

12 ‘‘(i) has no claim against, or financial

13 interest in, the enterprise or other basis for

14 a conflict of interest; and

15 ‘‘(ii) has the financial and manage16 ment expertise necessary to carry out the

17 duties under subsection (c).

18 ‘‘(b) JUDICIAL REVIEW.—The provisions of section

19 1369(b) shall apply to the appointment of a receiver pur20 suant to this section to the same extent that such provi21 sions apply to the appointment of a conservator pursuant

22 to this subtitle.

23 ‘‘(c) DUTIES.—A receiver appointed pursuant to this

24 section shall be appointed for the purpose, and shall have

25 the duty, of liquidating or winding up the affairs of the
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1 enterprise, in accordance with such regulations as the

2 Board may issue.

3 ‘‘(d) REPLACEMENT, POWERS, LIABILITY PROTEC4 TION.—The provisions of subsections (c) and (d) of section

5 1369, section 1369A, and section 1369B shall apply to

6 a receiver appointed pursuant to this section to the same

7 extent that such provisions apply to a conservator ap8 pointed pursuant to this subtitle. In addition to any pow9 ers under section 1369A, a receiver appointed pursuant

10 to this section shall have such powers with respect to an

11 enterprise, as the Board may by regulation provide, that

12 the Federal Deposit Insurance Corporation has under sec13 tion 11 of the Federal Deposit Insurance Act (12 U.S.C.

14 1821) with respect to a insured depository institution

15 when acting as a receiver under such section.’’.

16 Subtitle C—Enforcement Actions

17 SEC. 151. CEASE-AND-DESIST PROCEEDINGS.

18 Section 1371 of the Housing and Community Devel19 opment Act of 1992 (12 U.S.C. 4631) is amended—

20 (1) by striking subsections (a) and (b) and in21 serting the following new subsections:

22 ‘‘(a) ISSUANCE FOR UNSAFE OR UNSOUND PRAC23 TICES AND VIOLATIONS OF RULES OR LAWS.—If, in the

24 opinion of the Board, an enterprise or any enterprise-af25 filiated party is engaging or has engaged, or the Board
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1 has reasonable cause to believe that the enterprise or any

2 enterprise-affiliated party is about to engage, in an unsafe

3 or unsound practice in conducting the business of the en4 terprise or is violating or has violated, or the Board has

5 reasonable cause to believe that the enterprise or any en6 terprise-affiliated party is about to violate, a law, rule, or

7 regulation, or any condition imposed in writing by the

8 Board in connection with the granting of any application

9 or other request by the enterprise or any written agree10 ment entered into with the Board, the Board may issue

11 and serve upon the enterprise or such party a notice of

12 charges in respect thereof. The Board may not enforce

13 compliance with any housing goal established under sub14 part B of part 2 of subtitle A of this title, with section

15 1336 or 1337 of this title, with subsection (m) or (n) of

16 section 309 of the Federal National Mortgage Association

17 Charter Act (12 U.S.C. 1723a(m), (n)), or with subsection

18 (e) or (f) of section 307 of the Federal Home Loan Mort19 gage Corporation Act (12 U.S.C. 1456(e), (f)).

20 ‘‘(b) ISSUANCE FOR UNSATISFACTORY RATING.—If

21 an enterprise receives, in its most recent report of exam22 ination, a less-than-satisfactory rating for asset quality,

23 management, earnings, or liquidity, the Board may (if the

24 deficiency is not corrected) deem the enterprise to be en-
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1 gaging in an unsafe or unsound practice for purposes of

2 this subsection.’’; and

3 (2) in subsection (c)(2), by striking ‘‘or direc4 tor’’ and inserting ‘‘director, or enterprise-affiliated

5 party’’.

6 SEC. 152. TEMPORARY CEASE-AND-DESIST PROCEEDINGS.

7 Section 1372 of the Housing and Community Devel8 opment Act of 1992 (12 U.S.C. 4632) is amended—

9 (1) by striking subsection (a) and inserting the

10 following new subsection:

11 ‘‘(a) GROUNDS FOR ISSUANCE.—Whenever the Board

12 determines that the violation or threatened violation or the

13 unsafe or unsound practice or practices specified in the

14 notice of charges served upon the enterprise or any enter15 prise-affiliated party pursuant to section 1371(a), or the

16 continuation thereof, is likely to cause insolvency or sig17 nificant dissipation of assets or earnings of the enterprise,

18 or is likely to weaken the condition of the enterprise prior

19 to the completion of the proceedings conducted pursuant

20 to sections 1371 and 1373, the Board may issue a tem21 porary order requiring the enterprise or such party to

22 cease and desist from any such violation or practice and

23 to take affirmative action to prevent or remedy such insol24 vency, dissipation, condition, or prejudice pending comple-
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1 tion of such proceedings. Such order may include any re2 quirement authorized under subsection 1371(d).’’;

3 (2) in subsection (b), by striking ‘‘or director’’

4 and inserting ‘‘director, or enterprise-affiliated

5 party’’;

6 (3) in subsection (d), striking ‘‘or director’’ and

7 inserting ‘‘director, or enterprise-affiliated party’’;

8 and

9 (4) by striking subsection (e) and in inserting

10 the following new subsection:

11 ‘‘(e) ENFORCEMENT.—In the case of violation or

12 threatened violation of, or failure to obey, a temporary

13 cease-and-desist order issued pursuant to this section, the

14 Board may apply to the United States District Court for

15 the District of Columbia or the United States district

16 court within the jurisdiction of which the headquarters of

17 the enterprise is located, for an injunction to enforce such

18 order, and, if the court determines that there has been

19 such violation or threatened violation or failure to obey,

20 it shall be the duty of the court to issue such injunction.’’.

21 SEC. 153. REMOVAL AND PROHIBITION AUTHORITY.

22 (a) IN GENERAL.—Subtitle C of title XIII of the

23 Housing and Community Development Act of 1992 is

24 amended—
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1 (1) by redesignating sections 1377 through

2 1379B (12 U.S.C. 4637–41) as sections 1379

3 through 1379D, respectively; and

4 (2) by inserting after section 1376 (12 U.S.C.

5 4636) the following new section:

6 ‘‘SEC. 1377. REMOVAL AND PROHIBITION AUTHORITY.

7 ‘‘(a) AUTHORITY TO ISSUE ORDER.—Whenever the

8 Board determines that—

9 ‘‘(1) any enterprise-affiliated party has, directly

10 or indirectly—

11 ‘‘(A) violated—

12 ‘‘(i) any law or regulation;

13 ‘‘(ii) any cease-and-desist order which

14 has become final;

15 ‘‘(iii) any condition imposed in writing

16 by the Board in connection with the grant

17 of any application or other request by such

18 enterprise; or

19 ‘‘(iv) any written agreement between

20 such enterprise and the Board;

21 ‘‘(B) engaged or participated in any unsafe

22 or unsound practice in connection with any en23 terprise; or
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1 ‘‘(C) committed or engaged in any act,

2 omission, or practice which constitutes a breach

3 of such party’s fiduciary duty;

4 ‘‘(2) by reason of the violation, practice, or

5 breach described in any subparagraph of paragraph

6 (1)—

7 ‘‘(A) such enterprise has suffered or will

8 probably suffer financial loss or other damage;

9 or

10 ‘‘(B) such party has received financial gain

11 or other benefit by reason of such violation,

12 practice, or breach; and

13 ‘‘(3) such violation, practice, or breach—

14 ‘‘(A) involves personal dishonesty on the

15 part of such party; or

16 ‘‘(B) demonstrates willful or continuing

17 disregard by such party for the safety or sound18 ness of such enterprise,

19 the Board may serve upon such party a written notice of

20 the Board’s intention to remove such party from office or

21 to prohibit any further participation by such party, in any

22 manner, in the conduct of the affairs of any enterprise.

23 ‘‘(b) SUSPENSION ORDER.—

24 ‘‘(1) SUSPENSION OR PROHIBITION AUTHOR25 ITY.—If the Board serves written notice under sub-
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1 section (a) to any enterprise-affiliated party of the

2 Board’s intention to issue an order under such sub3 section, the Board may suspend such party from of4 fice or prohibit such party from further participation

5 in any manner in the conduct of the affairs of the

6 enterprise, if the Board—

7 ‘‘(A) determines that such action is nec8 essary for the protection of the enterprise; and

9 ‘‘(B) serves such party with written notice

10 of the suspension order.

11 ‘‘(2) EFFECTIVE PERIOD.—Any suspension

12 order issued under subsection (a)—

13 ‘‘(A) shall become effective upon service;

14 and

15 ‘‘(B) unless a court issues a stay of such

16 order under subsection (g) of this section, shall

17 remain in effect and enforceable until—

18 ‘‘(i) the date the Board dismisses the

19 charges contained in the notice served

20 under subsection (a) with respect to such

21 party; or

22 ‘‘(ii) the effective date of an order

23 issued by the Board to such party under

24 subsection (a).
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1 ‘‘(3) COPY OF ORDER.—If the Board issues a

2 suspension order under subsection (a) to any enter3 prise-affiliated party, the Board shall serve a copy of

4 such order on any enterprise with which such party

5 is affiliated at the time such order is issued.

6 ‘‘(c) NOTICE, HEARING, AND ORDER.—A notice of

7 intention to remove an enterprise-affiliated party from of8 fice or to prohibit such party from participating in the

9 conduct of the affairs of an enterprise shall contain a

10 statement of the facts constituting grounds for such ac11 tion, and shall fix a time and place at which a hearing

12 will be held on such action. Such hearing shall be fixed

13 for a date not earlier than 30 days nor later than 60 days

14 after the date of service of such notice, unless an earlier

15 or a later date is set by the Board at the request of (1)

16 such party, and for good cause shown, or (2) the Attorney

17 General of the United States. Unless such party shall ap18 pear at the hearing in person or by a duly authorized rep19 resentative, such party shall be deemed to have consented

20 to the issuance of an order of such removal or prohibition.

21 In the event of such consent, or if upon the record made

22 at any such hearing the Board shall find that any of the

23 grounds specified in such notice have been established, the

24 Board may issue such orders of suspension or removal

25 from office, or prohibition from participation in the con-
44

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1 duct of the affairs of the enterprise, as it may deem appro2 priate. Any such order shall become effective at the expira3 tion of 30 days after service upon such enterprise and such

4 party (except in the case of an order issued upon consent,

5 which shall become effective at the time specified therein).

6 Such order shall remain effective and enforceable except

7 to such extent as it is stayed, modified, terminated, or set

8 aside by action of the Board or a reviewing court.

9 ‘‘(d) PROHIBITION OF CERTAIN SPECIFIC ACTIVI10 TIES.—Any person subject to an order issued under this

11 section shall not—

12 ‘‘(1) participate in any manner in the conduct

13 of the affairs of any enterprise;

14 ‘‘(2) solicit, procure, transfer, attempt to trans15 fer, vote, or attempt to vote any proxy, consent, or

16 authorization with respect to any voting rights in

17 any enterprise;

18 ‘‘(3) violate any voting agreement previously

19 approved by the Board; or

20 ‘‘(4) vote for a director, or serve or act as an

21 enterprise-affiliated party.

22 ‘‘(e) INDUSTRY-WIDE PROHIBITION.—

23 ‘‘(1) IN GENERAL.—Except as provided in sub24 paragraph (2), any person who, pursuant to an

25 order issued under subsection (h), has been removed
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1 or suspended from office in an enterprise or prohib2 ited from participating in the conduct of the affairs

3 of an enterprise may not, while such order is in ef4 fect, continue or commence to hold any office in, or

5 participate in any manner in the conduct of the af6 fairs of any enterprise.

7 ‘‘(2) EXCEPTION IF BOARD PROVIDES WRITTEN

8 CONSENT.—If, on or after the date an order is

9 issued under this section which removes or suspends

10 from office any enterprise-affiliated party or pro11 hibits such party from participating in the conduct

12 of the affairs of an enterprise, such party receives

13 the written consent of the Board, the order shall, to

14 the extent of such consent, cease to apply to such

15 party with respect to the enterprise described in the

16 written consent. If the Board grants such a written

17 consent, it shall publicly disclose such consent.

18 ‘‘(3) VIOLATION OF PARAGRAPH (1) TREATED

19 AS VIOLATION OF ORDER.—Any violation of para20 graph (1) by any person who is subject to an order

21 described in such subsection shall be treated as a

22 violation of the order.

23 ‘‘(f) APPLICABILITY.—This section shall only apply

24 to a person who is an individual, unless the Board specifi-
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1 cally finds that it should apply to a corporation, firm, or

2 other business enterprise.

3 ‘‘(g) STAY OF SUSPENSION AND PROHIBITION OF

4 ENTERPRISE-AFFILIATED PARTY.—Within 10 days after

5 any enterprise-affiliated party has been suspended from

6 office and/or prohibited from participation in the conduct

7 of the affairs of an enterprise under this section, such

8 party may apply to the United States District Court for

9 the District of Columbia, or the United States district

10 court for the judicial district in which the headquarters

11 of the enterprise is located, for a stay of such suspension

12 and/or prohibition pending the completion of the adminis13 trative proceedings pursuant to the notice served upon

14 such party under this section, and such court shall have

15 jurisdiction to stay such suspension and/or prohibition.

16 ‘‘(h) SUSPENSION OR REMOVAL OF ENTERPRISE-AF17 FILIATED PARTY CHARGED WITH FELONY.—

18 ‘‘(1) SUSPENSION OR PROHIBITION.—

19 ‘‘(A) IN GENERAL.—Whenever any enter20 prise-affiliated party is charged in any informa21 tion, indictment, or complaint, with the commis22 sion of or participation in a crime involving dis23 honesty or breach of trust which is punishable

24 by imprisonment for a term exceeding one year

25 under State or Federal law, the Board may, if
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1 continued service or participation by such party

2 may pose a threat to the enterprise or impair

3 public confidence in the enterprise, by written

4 notice served upon such party, suspend such

5 party from office or prohibit such party from

6 further participation in any manner in the con7 duct of the affairs of any enterprise.

8 ‘‘(B) PROVISIONS APPLICABLE TO NO9 TICE.—

10 ‘‘(i) COPY.—A copy of any notice

11 under paragraph (1)(A) shall also be

12 served upon the enterprise.

13 ‘‘(ii) EFFECTIVE PERIOD.—A suspen14 sion or prohibition under subparagraph (A)

15 shall remain in effect until the informa16 tion, indictment, or complaint referred to

17 in such subparagraph is finally disposed of

18 or until terminated by the Board.

19 ‘‘(2) REMOVAL OR PROHIBITION.—

20 ‘‘(A) IN GENERAL.—If a judgment of con21 viction or an agreement to enter a pretrial di22 version or other similar program is entered

23 against an enterprise-affiliated party in connec24 tion with a crime described in paragraph

25 (1)(A), at such time as such judgment is not
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1 subject to further appellate review, the Board

2 may, if continued service or participation by

3 such party may pose a threat to the enterprise

4 or impair public confidence in the enterprise,

5 issue and serve upon such party an order re6 moving such party from office or prohibiting

7 such party from further participation in any

8 manner in the conduct of the affairs of the en9 terprise without the prior written consent of the

10 Board.

11 ‘‘(B) PROVISIONS APPLICABLE TO

12 ORDER.—

13 ‘‘(i) COPY.—A copy of any order

14 under paragraph (2)(A) shall also be

15 served upon the enterprise, whereupon the

16 enterprise-affiliated party who is subject to

17 the order (if a director or an officer) shall

18 cease to be a director or officer of such en19 terprise.

20 ‘‘(ii) EFFECT OF ACQUITTAL.—A find21 ing of not guilty or other disposition of the

22 charge shall not preclude the Board from

23 instituting proceedings after such finding

24 or disposition to remove such party from

25 office or to prohibit further participation in
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1 enterprise affairs pursuant to subsections

2 (a), (d), or (e) of this section.

3 ‘‘(iii) EFFECTIVE PERIOD.—Any no4 tice of suspension or order of removal

5 issued under this subsection shall remain

6 effective and outstanding until the comple7 tion of any hearing or appeal authorized

8 under paragraph (4) unless terminated by

9 the Board.

10 ‘‘(3) AUTHORITY OF REMAINING BOARD MEM11 BERS.—If at any time, because of the suspension of

12 one or more directors pursuant to this section, there

13 shall be on the board of directors of an enterprise

14 less than a quorum of directors not so suspended, all

15 powers and functions vested in or exercisable by

16 such board shall vest in and be exercisable by the di17 rector or directors on the board not so suspended,

18 until such time as there shall be a quorum of the

19 board of directors. In the event all of the directors

20 of an enterprise are suspended pursuant to this sec21 tion, the Board shall appoint persons to serve tem22 porarily as directors in their place and stead pending

23 the termination of such suspensions, or until such

24 time as those who have been suspended, cease to be
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1 directors of the enterprise and their respective suc2 cessors take office.

3 ‘‘(4) HEARING REGARDING CONTINUED PAR4 TICIPATION.—Within 30 days from service of any

5 notice of suspension or order of removal issued pur6 suant to paragraph (1) or (2) of this subsection, the

7 enterprise-affiliated party concerned may request in

8 writing an opportunity to appear before the Board

9 to show that the continued service to or participation

10 in the conduct of the affairs of the enterprise by

11 such party does not, or is not likely to, pose a threat

12 to the interests of the enterprise or threaten to im13 pair public confidence in the enterprise. Upon re14 ceipt of any such request, the Board shall fix a time

15 (not more than 30 days after receipt of such re16 quest, unless extended at the request of such party)

17 and place at which such party may appear, person18 ally or through counsel, before one or more members

19 of the Board designated employees of the Board to

20 submit written materials (or, at the discretion of the

21 Board, oral testimony) and oral argument. Within

22 60 days of such hearing, the Board shall notify such

23 party whether the suspension or prohibition from

24 participation in any manner in the conduct of the af25 fairs of the enterprise will be continued, terminated,
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1 or otherwise modified, or whether the order remov2 ing such party from office or prohibiting such party

3 from further participation in any manner in the con4 duct of the affairs of the enterprise will be rescinded

5 or otherwise modified. Such notification shall con6 tain a statement of the basis for the Board’s deci7 sion, if adverse to such party. The Board is author8 ized to prescribe such rules as may be necessary to

9 effectuate the purposes of this subsection.

10 ‘‘(i) HEARINGS AND JUDICIAL REVIEW.—

11 ‘‘(1) VENUE AND PROCEDURE.—Any hearing

12 provided for in this section shall be held in the Dis13 trict of Columbia or in the Federal judicial district

14 in which the headquarters of the enterprise is lo15 cated, unless the party afforded the hearing consents

16 to another place, and shall be conducted in accord17 ance with the provisions of chapter 5 of title 5,

18 United States Code. After such hearing, and within

19 90 days after the Board has notified the parties that

20 the case has been submitted to it for final decision,

21 it shall render its decision (which shall include find22 ings of fact upon which its decision is predicated)

23 and shall issue and serve upon each party to the

24 proceeding an order or orders consistent with the

25 provisions of this section. Judicial review of any
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1 such order shall be exclusively as provided in this

2 subsection. Unless a petition for review is timely

3 filed in a court of appeals of the United States, as

4 provided in paragraph (2), and thereafter until the

5 record in the proceeding has been filed as so pro6 vided, the Board may at any time, upon such notice

7 and in such manner as it shall deem proper, modify,

8 terminate, or set aside any such order. Upon such

9 filing of the record, the Board may modify, termi10 nate, or set aside any such order with permission of

11 the court.

12 ‘‘(2) REVIEW OF ORDER.—Any party to any

13 proceeding under paragraph (1) may obtain a review

14 of any order served pursuant to paragraph (1)

15 (other than an order issued with the consent of the

16 enterprise or the enterprise-affiliated party con17 cerned, or an order issued under subsection (h) of

18 this section) by the filing in the United States Court

19 of Appeals for the District of Columbia Circuit or

20 court of appeals of the United States for the circuit

21 in which the headquarters of the enterprise is lo22 cated, within 30 days after the date of service of

23 such order, a written petition praying that the order

24 of the Board be modified, terminated, or set aside.

25 A copy of such petition shall be forthwith trans-
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1 mitted by the clerk of the court to the Board, and

2 thereupon the Board shall file in the court the

3 record in the proceeding, as provided in section 2112

4 of title 28, United States Code. Upon the filing of

5 such petition, such court shall have jurisdiction,

6 which upon the filing of the record shall (except as

7 provided in the last sentence of paragraph (1)) be

8 exclusive, to affirm, modify, terminate, or set aside,

9 in whole or in part, the order of the Board. Review

10 of such proceedings shall be had as provided in

11 chapter 7 of title 5, United States Code. The judg12 ment and decree of the court shall be final, except

13 that the same shall be subject to review by the Su14 preme Court upon certiorari, as provided in section

15 1254 of title 28, United States Code.

16 ‘‘(3) PROCEEDINGS NOT TREATED AS STAY.—

17 The commencement of proceedings for judicial re18 view under paragraph (2) shall not, unless specifi19 cally ordered by the court, operate as a stay of any

20 order issued by the Board.’’.

21 (b) CONFORMING AMENDMENT.—Section 1317(f) of

22 the Housing and Community Development Act of 1992

23 (12 U.S.C. 4517(f)) is amended by striking ‘‘section

24 1379B’’ and inserting ‘‘section 1379D’’.
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1 SEC. 154. ENFORCEMENT AND JURISDICTION.

2 Section 1375 of the Housing and Community Devel3 opment Act of 1992 (12 U.S.C. 4635) is amended—

4 (1) by striking subsection (a) and inserting the

5 following new subsection:

6 ‘‘(a) ENFORCEMENT.—The Board may in its discre7 tion apply to the United States District Court for the Dis8 trict of Columbia, or the United States district court with9 in the jurisdiction of which the headquarters of the enter10 prise is located, for the enforcement of any effective and

11 outstanding notice or order issued under this subtitle or

12 subtitle B, or request that the Attorney General of the

13 United States bring such an action. Such court shall have

14 jurisdiction and power to order and require compliance

15 with such notice or order.’’; and

16 (2) in subsection (b), by striking ‘‘or 1376’’ and

17 inserting ‘‘1376, or 1377’’

18 SEC. 155. CIVIL MONEY PENALTIES.

19 Section 1376 of the Housing and Community Devel20 opment Act of 1992 (12 U.S.C. 4636) is amended—

21 (1) in subsection (a), in the matter preceding

22 paragraph (1), by striking ‘‘or any executive officer

23 or’’ and inserting ‘‘any executive officer of an enter24 prise, any enterprise-affiliated party, or any’’;

25 (2) by striking subsection (b) and inserting the

26 following new subsection:
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1 ‘‘(b) AMOUNT OF PENALTY.—

2 ‘‘(1) FIRST TIER.—Any enterprise which, or

3 any enterprise-affiliated party who—

4 ‘‘(A) violates any provision of this title, the

5 Federal National Mortgage Association Charter

6 Act (12 U.S.C. 1716 et seq.), the Federal

7 Home Loan Mortgage Corporation Act (12

8 U.S.C. 1451 et seq.), or any order, condition,

9 rule, or regulation under any such title or Act,

10 except that the Board may not enforce compli11 ance with any housing goal established under

12 subpart B of part 2 of subtitle A of this title,

13 with section 1336 or 1337 of this title, with

14 subsection (m) or (n) of section 309 of the Fed15 eral National Mortgage Association Charter Act

16 (12 U.S.C. 1723a(m), (n)), or with subsection

17 (e) or (f) of section 307 of the Federal Home

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

19 1456(e), (f));

20 ‘‘(B) violates any final or temporary order

21 or notice issued pursuant to this title;

22 ‘‘(C) violates any condition imposed in

23 writing by the Board in connection with the

24 grant of any application or other request by

25 such enterprise;
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1 ‘‘(D) violates any written agreement be2 tween the enterprise and the Board; or

3 ‘‘(E) engages in any conduct the Board de4 termines to be an unsafe or unsound practice,

5 shall forfeit and pay a civil penalty of not more than

6 $5,000 for each day during which such violation con7 tinues.

8 ‘‘(2) SECOND TIER.—Notwithstanding para9 graph (1)—

10 ‘‘(A) if an enterprise, or an enterprise-af11 filiated party—

12 ‘‘(i) commits any violation described

13 in any subparagraph of paragraph (1);

14 ‘‘(ii) recklessly engages in an unsafe

15 or unsound practice in conducting the af16 fairs of such enterprise; or

17 ‘‘(iii) breaches any fiduciary duty

18 which violation, practice, or breach; and

19 ‘‘(B) the violation, practice, or breach—

20 ‘‘(i) is part of a pattern of mis21 conduct;

22 ‘‘(ii) causes or is likely to cause more

23 than a minimal loss to such enterprise; or

24 ‘‘(iii) results in pecuniary gain or

25 other benefit to such party,
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1 the enterprise or enterprise-affiliated party shall for2 feit and pay a civil penalty of not more than

3 $25,000 for each day during which such violation,

4 practice, or breach continues.

5 ‘‘(3) THIRD TIER.—Notwithstanding para6 graphs (1) and (2), any enterprise which, or any en7 terprise-affiliated party who—

8 ‘‘(A) knowingly—

9 ‘‘(i) commits any violation described

10 in any subparagraph of paragraph (1);

11 ‘‘(ii) engages in any unsafe or un12 sound practice in conducting the affairs of

13 such enterprise; or

14 ‘‘(iii) breaches any fiduciary duty; and

15 ‘‘(B) knowingly or recklessly causes a sub16 stantial loss to such enterprise or a substantial

17 pecuniary gain or other benefit to such party by

18 reason of such violation, practice, or breach,

19 shall forfeit and pay a civil penalty in an amount not

20 to exceed the applicable maximum amount deter21 mined under paragraph (4) for each day during

22 which such violation, practice, or breach continues.

23 ‘‘(4) MAXIMUM AMOUNTS OF PENALTIES FOR

24 ANY VIOLATION DESCRIBED IN PARAGRAPH (3).—

25 The maximum daily amount of any civil penalty
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1 which may be assessed pursuant to paragraph (3)

2 for any violation, practice, or breach described in

3 such paragraph is—

4 ‘‘(A) in the case of any person other than

5 an enterprise, an amount not to exceed

6 $1,000,000; and

7 ‘‘(B) in the case of any enterprise,

8 $1,000,000.’’; and

9 (3) in subsection (d)—

10 (A) by striking ‘‘or director’’ each place

11 such term appears and inserting ‘‘director, or

12 enterprise-affiliated party’’;

13 (B) by striking ‘‘request the Attorney Gen14 eral of the United States to’’;

15 (C) by inserting ‘‘, or the United States

16 district court within the jurisdiction of which

17 the headquarters of the enterprise is located,’’

18 after ‘‘District of Columbia’’; and

19 (D) by striking ‘‘, or may, under the direc20 tion and control of the Attorney General, bring

21 such an action’’.

22 SEC. 156. CRIMINAL PENALTY.

23 Subtitle C of title XIII of the Housing and Commu24 nity Development Act of 1992 (12 U.S.C. 4631 et seq.)

25 is amended by inserting after section 1377 (as added by
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1 the preceding provisions of this Act) the following new sec2 tion:

3 ‘‘SEC. 1378. CRIMINAL PENALTY.

4 ‘‘Whoever, being subject to an order in effect under

5 section 1377, without the prior written approval of the

6 Board, knowingly participates, directly or indirectly, in

7 any manner (including by engaging in an activity specifi8 cally prohibited in such an order) in the conduct of the

9 affairs of any enterprise shall, notwithstanding section

10 3571 of title 18, be fined not more than $1,000,000, im11 prisoned for not more than 5 years, or both.’’.

12 Subtitle D—Reporting Regarding

13 Enterprises

14 SEC. 161. REPORTING REGARDING ENTERPRISES.

15 Part 3 of subtitle A of the Housing and Community

16 Development Act of 1992 is amended—

17 (1) by striking sections 1351, 1352, and 1353

18 (Public Law 102–550; 106 Stat. 3969), except the

19 provisions of law amended by such sections repealed

20 shall not be affected by such repeal; and

21 (2) by striking sections 1354, 1355, and 1356

22 (12 U.S.C. 4601–3) and inserting the following new

23 section:
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1 ‘‘SEC. 1351. REPORTS REGARDING ENTERPRISE ISSUES

2 AND ACTIVITIES.

3 ‘‘(a) INSURED DEPOSITORY INSTITUTION HOLDINGS

4 OF ENTERPRISE DEBT AND MORTGAGE-BACKED SECURI5 TIES.—Not later than 180 days after the date of the en6 actment of the Secondary Mortgage Market Enterprises

7 Regulatory Improvement Act, the Secretary of the Treas8 ury shall submit a report to the Congress regarding—

9 ‘‘(1) the extent to which obligations issued or

10 guaranteed by the enterprises (including mortgage11 backed securities) are held by federally insured de12 pository institutions, including such extent by type

13 of institution and such extent relative to the institu14 tions’ capital;

15 ‘‘(2) the extent to which the unlimited holdings

16 by federally insured depository institutions of the ob17 ligations of the enterprises could produce systemic

18 risk issues, particularly for the safety and soundness

19 of the banking system in the United States, in the

20 event of default or failure by an enterprise; and

21 ‘‘(3) the effects on the enterprises, the banking

22 industry, and mortgage markets, if prudent limits on

23 the holdings of enterprise obligations were placed on

24 federally insured depository institutions.

25 ‘‘(b) PORTFOLIO OPERATIONS, RISK MANAGEMENT,

26 AND MISSION.—Not later than one year after the date of
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1 the enactment of the Secondary Mortgage Market Enter2 prises Regulatory Improvement Act, the Board shall sub3 mit a report to the Congress—

4 ‘‘(1) describing the holdings of the enterprises

5 in retained mortgages and repurchased mortgage6 backed securities and the use of derivatives for hedg7 ing purposes;

8 ‘‘(2) describing the extent of such holdings rel9 ative to other assets and the risk implications of

10 such holdings;

11 ‘‘(3) containing an analysis of such holdings for

12 safety and soundness and/or mission compliance pur13 poses; and

14 ‘‘(4) containing an assessment of whether such

15 holdings and other assets of the enterprises fulfill

16 the mission purposes of the enterprises under the

17 Federal National Mortgage Association Charter Act

18 and the Federal Home Loan Mortgage Corporation

19 Act.

20 The Board shall consult with the Comptroller General of

21 the United States in preparing the report under this sub22 section and in conducting any research, analyses, and as23 sessments for the report.

24 ‘‘(c) DEBT ISSUANCES.—Not later than 270 days

25 after the date of the enactment of the Secondary Mortgage
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1 Market Enterprises Regulatory Improvement Act, the Sec2 retary of the Treasury shall submit a report to the Con3 gress regarding—

4 ‘‘(1) the extent of outstanding obligations of the

5 enterprises and the rate of growth of such obliga6 tions; and

7 ‘‘(2) an analysis of whether debt issuances

8 should be limited or reduced if an enterprise is not

9 operating in a safe and sound manner and/or not

10 complying with its mission, or if an enterprise fails

11 to maintain a certain credit rating and/or debt rat12 ing.

13 ‘‘(d) TREASURY LINE OF CREDIT.—Not later than

14 one year after the date of the enactment of the Secondary

15 Mortgage Market Enterprises Regulatory Improvement

16 Act, the Secretary of the Treasury shall submit a report

17 to the Congress regarding the purposes of the authority

18 of the Secretary of the Treasury to purchase the debt obli19 gations of the enterprises. The report shall assess the de20 sirability of limiting such authority in certain cir21 cumstances or eliminating such authority.

22 ‘‘(e) VOLUNTARY AGREEMENT.—The Board shall

23 submit a report to the Congress annually, on fiscal year

24 basis, regarding the progress in implementing the commit25 ments announced by the enterprises on October 19, 2000,
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1 regarding capitalization, disclosure, and market discipline,

2 namely—

3 ‘‘(1) to issue subordinated debt;

4 ‘‘(2) to obtain and disclose an annual credit

5 rating;

6 ‘‘(3) to disclose interest rate risk;

7 ‘‘(4) to disclose credit risk;

8 ‘‘(5) to maintain greater liquidity; and

9 ‘‘(6) to perform and disclose an interim risk10 based capital stress test.

11 The report shall determine whether the intended purposes

12 of this agreement, particularly to reduce systemic risk,

13 have been achieved, whether changes should be made to

14 the agreement, and whether any action should be taken

15 to ensure compliance with the agreement by the enter16 prises. Each report under this subsection for a fiscal year

17 shall be submitted not later than the December 31 first

18 occurring after the conclusion of such fiscal year.

19 ‘‘(f) RECOMMENDATIONS.—Each report submitted

20 pursuant to this section shall include specific recommenda21 tions of appropriate policies, limitations, regulations, legis22 lation, or other actions to deal appropriately and effec23 tively with the issues addressed by such report.’’.
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1 Subtitle E—General Provisions

2 SEC. 171. CONFORMING AND TECHNICAL AMENDMENTS.

3 (a) AMENDMENTS TO 1992 ACT.—Title XIII of the

4 Housing and Community Development Act of 1992 (12

5 U.S.C. 4501 et seq.), as amended by the preceding provi6 sions of this Act, is further amended—

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

8 (A) in subsection (a)—

9 (i) in the subsection heading, by strik10 ing ‘‘OFFICE PERSONNEL’’ and inserting

11 ‘‘IN GENERAL’’;

12 (ii) by striking ‘‘The’’ and inserting

13 ‘‘Subject to title II of the Secondary Mort14 gage Market Enterprises Regulatory Im15 provement Act, the’’; and

16 (iii) by striking ‘‘Director and the Of17 fice. Officers’’ and inserting ‘‘Board, with

18 respect to regulation and supervision of the

19 enterprises. Such officers’’;

20 (B) in subsection (b)—

21 (i) by striking ‘‘the Board of Gov22 ernors of the Federal Reserve System,’’

23 and

24 (ii) by inserting ‘‘, and with com25 pensation of other officers and employees
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1 of the Board of Governors of the Federal

2 Reserve System’’ before the period at the

3 end;

4 (C) in subsection (c), by inserting ‘‘, with

5 respect to regulation and supervision of the en6 terprises’’ before the first comma;

7 (D) in subsection (d), by striking ‘‘Office’’

8 and inserting ‘‘Secretary pursuant to subpart B

9 of part 2 of this subtitle, subsections (m) and

10 (n) of section 309 of the Federal National

11 Mortgage Association Charter Act, and sub12 sections (e) and (f) of section 307 of the Fed13 eral Home Loan Mortgage Corporation Act;

14 (E) in subsection (e), by inserting ‘‘, with

15 respect to regulation and supervision of the en16 terprises’’ before the period at the end; and

17 (F) by striking subsection (f);

18 (2) in section 1317(c) (12 U.S.C. 4517(c)), by

19 striking ‘‘the Board of Governors of the Federal Re20 serve System,’’;

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

22 (A) by striking ‘‘(a) IN GENERAL.—’’; and

23 (B) by striking subsection (b);

24 (4) in section 1319C (12 U.S.C. 4522)—
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1 (A) in subsection (a)(1), by inserting

2 ‘‘under this title’’ after ‘‘redressed’’; and

3 (B) in subsection (b), by inserting ‘‘under

4 this title’’ after ‘‘issued’’;

5 (5) in section 1319D (12 U.S.C. 4523), by in6 serting ‘‘to conduct duties relating to the regulation

7 and supervision of the enterprises’’ before the second

8 comma;

9 (6) in section 1319E (12 U.S.C. 4524)—

10 (A) by inserting ‘‘relating to regulation

11 and supervision of the enterprises’’ before ‘‘in

12 accordance with’’; and

13 (B) by inserting ‘‘in functions relating to

14 the regulation and supervision of the enter15 prises’’ before ‘‘shall be made available’’;

16 (7) in section 1319F (12 U.S.C. 4525), by

17 striking ‘‘Code’’ and all that follows through ‘‘agen18 cies’’ and inserting ‘‘Code, the Board, to the extent

19 only of its functions, activities, and employees in20 volved in the regulation and supervision of the enter21 prises, shall be considered an agency’’;

22 (8) in the section heading for section 1328, by

23 striking ‘‘SECRETARY’’ and inserting ‘‘BOARD OF

24 GOVERNORS’’;

25 (9) in section 1361 (12 U.S.C. 4611)—
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1 (A) in subsection (e)—

2 (i) in paragraph (1), by striking the

3 first sentence and inserting the following

4 new sentence: ‘‘The Board shall establish

5 the risk-based capital test under this sec6 tion by regulation.’’; and

7 (ii) in paragraph (2), by striking ‘‘in8 dividual other than the Director to apply

9 the test in the same manner as the Direc10 tor’’ and inserting ‘‘individual (who is not

11 a member of the Board) to apply the test

12 in the same manner as the Board’’; and

13 (B) in subsection (f), by striking ‘‘the Sec14 retary, the Board of Governors of the Federal

15 Reserve System’’; and

16 (10) in section 1364(c) (12 U.S.C. 4614(c)), by

17 striking the last sentence;

18 (11) in section 1367(a)(2) (12 U.S.C.

19 4617(a)(2)), by striking ‘‘with the written concur20 rence of the Secretary of the Treasury,’’;

21 (12) in section 1369A (12 U.S.C. 4620)—

22 (A) in the subsection heading for sub23 section (c) by striking ‘‘DIRECTOR’’ and insert24 ing ‘‘BOARD’’; and
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1 (B) in subsection (i), by inserting ‘‘having

2 duties relating to regulation and supervision of

3 the enterprises’’ before the period at the end;

4 (13) in the section heading for section 1369D

5 (12 U.S.C. 4623), by striking ‘‘DIRECTOR’’ and in6 serting ‘‘BOARD’’;

7 (14) in the subsection heading for subsection

8 (e) of section 1376 (12 U.S.C. 4636(e)), by striking

9 ‘‘DIRECTOR’’ and inserting ‘‘BOARD’’;

10 (15) by striking section 1383;

11 (16) by striking ‘‘Director’’ each place such

12 term appears (except the second place such term ap13 pears in each of paragraphs (1) and (2) of section

14 1316(g), the third place such term appears in sec15 tion 1317(c), in section 1361(a)(3)(C), and the sec16 ond and third places such term appears in sub17 section (f) of section 1361) and inserting ‘‘Board’’;

18 (17) by striking ‘‘Director’s’’ each place such

19 term appears and inserting ‘‘Board’s’’;

20 (18) by striking ‘‘Office’’ each place such term

21 appears (except each place such term appears in sec22 tion 1315(b), in section 1316(g)(1), the second place

23 such term appears in section 1316(g)(2), in section

24 1317(c), in section 1334(d)(3), in section
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1 1361(a)(3)(C), and each place such term appears in

2 section 1361(f)) and inserting ‘‘Board’’;

3 (19) by striking ‘‘Committee on Banking, Fi4 nance and Urban Affairs’’ and inserting ‘‘Committee

5 on Financial Services’’ each place such term appears

6 in sections 1319B, 1319G(c), 1328(a),

7 1336(b)(3)(C), 1337, and 1369(a)(3); and

8 (20) by striking ‘‘Secretary’’ and inserting

9 ‘‘Board’’ each place such term appears in —

10 (A) part 1 of subtitle A;

11 (B) subpart A of part 2 of subtitle A (ex12 cept in sections 1324 and 1325);

13 (C) subtitle B (except in section

14 1361(d)(1)); and

15 (D) subtitle C.

16 (b) AMENDMENTS TO FANNIE MAE CHARTER ACT.—

17 The Federal National Mortgage Association Charter Act

18 (12 U.S.C. 1716 et seq.) is amended—

19 (1) by striking ‘‘Director of the Office of Fed20 eral Housing Enterprise Oversight of the Depart21 ment of Housing and Urban Development’’ each

22 place such term appears, and inserting ‘‘Board of

23 Governors of the Federal Reserve System’’, in—

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

25 1718(c)(2));
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1 (B) section 309(d)(3)(B) (12 U.S.C.

2 1723a(d)(3)(B)); and

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

4 (2) in section 309 (12 U.S.C. 1723a)—

5 (A) in the second sentence of subsection

6 (d)(3)(B), by striking ‘‘Director’’ each place

7 such term appears and inserting ‘‘Board of

8 Governors’’;

9 (B) in subsection (k)—

10 (i) in paragraph (1), by striking ‘‘Di11 rector shall’’ and inserting ‘‘Board of Gov12 ernors shall’’; and

13 (ii) in paragraphs (2) and (3), by

14 striking ‘‘Director’’ each place such term

15 appears and inserting ‘‘Board of Governors

16 of the Federal Reserve System’’; and

17 (C) in subsection (l)(2), by striking ‘‘Di18 rector’’ and inserting ‘‘Board of Governors of

19 the Federal Reserve System’’; and

20 (3) in section 309(n)—

21 (A) in paragraph (1), by inserting ‘‘the

22 Board of Governors of the Federal Reserve Sys23 tem,’’ after ‘‘House of Representatives,’’; and
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1 (B) in paragraph (3)(B), by striking ‘‘Sec2 retary’’ and inserting ‘‘Board of Governors of

3 the Federal Reserve System’’.

4 (c) AMENDMENTS TO FREDDIE MAC ACT.—The Fed5 eral Home Loan Mortgage Corporation Act is amended—

6 (1) by striking ‘‘Director of the Office of Fed7 eral Housing Enterprise Oversight of the Depart8 ment of Housing and Urban Development’’ each

9 place such term appears, and inserting ‘‘Board of

10 Governors of the Federal Reserve System’’, in—

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

12 1452(b)(2));

13 (B) section 303(h)(2) (12 U.S.C.

14 1452(h)(2)); and

15 (C) section 307(c)(1) (12 U.S.C.

16 1456(c)(1));

17 (2) in the second sentence of section 303(h)(2)

18 (12 U.S.C. 1452(h)(2)), by striking ‘‘Director’’ each

19 place such term appears and inserting ‘‘Board of

20 Governors’’;

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

22 (A) by striking ‘‘section 1316(c)’’ and in23 serting ‘‘section 306(c)’’; and

24 (B) by striking ‘‘section 106’’ and insert25 ing ‘‘section 1316’’; and
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1 (4) in section 307 (12 U.S.C. 1456)—

2 (A) in subsection (c)(1), by striking ‘‘Di3 rector shall’’ and inserting ‘‘Board of Governors

4 shall’’;

5 (B) in subsection (c), in paragraphs (2)

6 and (3), by striking ‘‘Director’’ each place such

7 term appears and inserting ‘‘Board of Gov8 ernors of the Federal Reserve System’’;

9 (C) in subsection (d)(2), by striking ‘‘Di10 rector’’ and inserting ‘‘Board of Governors of

11 the Federal Reserve System’’; and

12 (D) in subsection (f)—

13 (i) in paragraph (1), by inserting ‘‘the

14 Board of Governors of the Federal Reserve

15 System,’’ after ‘‘House of Representa16 tives,’’;

17 (ii) in paragraph (3)(B), by striking

18 ‘‘Secretary’’ and inserting ‘‘Board of Gov19 ernors of the Federal Reserve System’’.

20 (d) AMENDMENT TO TITLE 18, UNITED STATES

21 CODE.—Section 1905 of title 18, United States Code, is

22 amended by striking ‘‘Office of Federal Housing Enter23 prise Oversight’’ and inserting ‘‘Board of Governors of the

24 Federal Reserve System in its capacity under title XIII
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1 of the Housing and Community Development Act of

2 1992’’.

3 (e) AMENDMENTS TO FLOOD DISASTER PROTECTION

4 ACT OF 1973.—Section 102(f)(3)(A) of the Flood Dis5 aster Protection Act of 1973 (42 U.S.C. 4012a(f)(3)(A))

6 is amended—

7 (1) by striking ‘‘Director of the Office of Fed8 eral Housing Enterprise Oversight of the Depart9 ment of Housing and Urban Development’’ and in10 serting ‘‘Board of Governors of the Federal Reserve

11 System’’; and

12 (2) by striking ‘‘Director of such Office’’ and

13 inserting ‘‘Board’’.

14 (f) AMENDMENT TO DEPARTMENT OF HOUSING AND

15 URBAN DEVELOPMENT ACT.—Section 5 of the Depart16 ment of Housing and Urban Development Act (42 U.S.C.

17 3534) is amended by striking subsection (d).

18 (g) AMENDMENTS TO TITLE 5, UNITED STATES

19 CODE.—

20 (1) EXECUTIVE SCHEDULE PAY RATE.—Section

21 5315 of title 5, United States Code, is amended by

22 striking the item relating to the Director of the Of23 fice of Federal Housing Enterprise Oversight, De24 partment of Housing and Urban Development.
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1 (2) DEFINITION OF AGENCY.—Section

2 3132(a)(1)(D) of title 5, United States Code, is

3 amended by striking ‘‘the Office of Federal Housing

4 Enterprise Oversight of the Department of Housing

5 and Urban Development’’ and inserting ‘‘the Board

6 of Governors of the Federal Reserve System, to the

7 extent of the duties of such Board relating to regula8 tion and supervision of the Federal National Mort9 gage Association and the Federal Home Loan Mort10 gage Corporation’’.

11 SEC. 172. EFFECTIVE DATE.

12 Except as specifically provided otherwise in this title,

13 the amendments made by this title shall take effect on,

14 and shall apply beginning on, the expiration of the 1-year

15 period beginning on the date of the enactment of this Act.

16 TITLE II—TRANSFER OF FUNC17 TIONS, PERSONNEL, AND

18 PROPERTY

19 SEC. 201. ABOLISHMENT OF OFHEO.

20 (a) IN GENERAL.—Effective at the end of the 1-year

21 period beginning on the date of the enactment of this Act,

22 the Office of Federal Housing Enterprise Oversight of the

23 Department of Housing and Urban Development and the

24 positions of the Director and Deputy Director of such Of25 fice are abolished.
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1 (b) DISPOSITION OF AFFAIRS.—During the 1-year

2 period beginning on the date of the enactment of this Act,

3 the Director of the Office of Federal Housing Enterprise

4 Oversight shall, solely for the purpose of winding up the

5 affairs of the Office of Federal Housing Enterprise

6 Oversight—

7 (1) manage the employees of such Office and

8 provide for the payment of the compensation and

9 benefits of any such employee which accrue before

10 the effective date of the transfer of such employee

11 pursuant to section 203; and

12 (2) may take any other action necessary for the

13 purpose of winding up the affairs of the Office.

14 (c) STATUS OF EMPLOYEES BEFORE TRANSFER.—

15 The amendments made by title I and the abolishment of

16 the Office of Federal Housing Enterprise Oversight under

17 subsection (a) of this section may not be construed to af18 fect the status of any employee of such Office as employ19 ees of an agency of the United States for purposes of any

20 other provision of law before the effective date of the

21 transfer of any such employee pursuant to section 203.

22 (d) USE OF PROPERTY AND SERVICES.—

23 (1) PROPERTY.—The Chairman of the Board of

24 Governors of the Federal Reserve System may use

25 the property of the Office of Federal Housing Enter-
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1 prise Oversight to perform functions which have

2 been transferred to the Board of Governors of the

3 Federal Reserve System for such time as is reason4 able to facilitate the orderly transfer of functions

5 transferred pursuant to any other provision of this

6 Act or any amendment made by this Act to any

7 other provision of law.

8 (2) AGENCY SERVICES.—Any agency, depart9 ment, or other instrumentality of the United States,

10 and any successor to any such agency, department,

11 or instrumentality, which was providing supporting

12 services to the Office of Federal Housing Enterprise

13 Oversight before the expiration of the period under

14 subsection (a) in connection with functions that are

15 transferred to the Board of Governors of the Fed16 eral Reserve System shall—

17 (A) continue to provide such services, on a

18 reimbursable basis, until the transfer of such

19 functions is complete; and

20 (B) consult with any such agency to co21 ordinate and facilitate a prompt and reasonable

22 transition.

23 (e) SAVINGS PROVISIONS.—

24 (1) EXISTING RIGHTS, DUTIES, AND OBLIGA25 TIONS NOT AFFECTED.—Subsection (a) shall not af-
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1 fect the validity of any right, duty, or obligation of

2 the United States, the Director of the Office of Fed3 eral Housing Enterprise Oversight, or any other per4 son, which—

5 (A) arises under or pursuant to the title

6 XIII of the Housing and Community Develop7 ment Act of 1992, the Federal National Mort8 gage Association Charter Act, the Federal

9 Home Loan Mortgage Corporation Act, or any

10 other provision of law applicable with respect to

11 such Office; and

12 (B) existed on the day before the abolish13 ment under subsection (a) of this section.

14 (2) CONTINUATION OF SUITS.—No action or

15 other proceeding commenced by or against the Di16 rector of the Office of Federal Housing Enterprise

17 Oversight shall abate by reason of the enactment of

18 this Act, except that the Board of Governors of the

19 Federal Reserve System shall be substituted for the

20 Director as a party to any such action or pro21 ceeding.

22 SEC. 202. CONTINUATION AND COORDINATION OF CERTAIN

23 REGULATIONS.

24 All regulations, orders, determinations, and resolu25 tions that—
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1 (1) were issued, made, prescribed, or allowed to

2 become effective by—

3 (A) the Office of Federal Housing Enter4 prise Oversight;

5 (B) the Secretary of Housing and Urban

6 Development and that relate to the Secretary’s

7 authority under—

8 (i) title XIII of the Housing and Com9 munity Development Act of 1992;

10 (ii) under the Federal National Mort11 gage Association Charter Act, with respect

12 to the Federal National Mortgage Associa13 tion; or

14 (iii) the Federal Home Loan Mort15 gage Corporation Act; or

16 (C) a court of competent jurisdiction and

17 that relate to functions transferred by this Act;

18 and

19 (2) are in effect on the date of the abolishment

20 under section 201(a) of this Act,

21 shall remain in effect according to the terms of such regu22 lations, orders, determinations, and resolutions and shall

23 be enforceable by or against the Board of Governors of

24 the Federal Reserve System until modified, terminated,

25 set aside, or superseded in accordance with applicable law
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1 by such Board, any court of competent jurisdiction, or op2 eration of law.

3 SEC. 203. TRANSFER AND RIGHTS OF EMPLOYEES OF

4 OFHEO.

5 (a) TRANSFER.—Each employee of the Office of Fed6 eral Housing Enterprise Oversight shall be transferred to

7 the Board of Governors of the Federal Reserve System

8 for employment no later than the date of the abolishment

9 under section 201(a) of this Act and such transfer shall

10 be deemed a transfer of function for the purpose of section

11 3503 of title 5, United States Code.

12 (b) GUARANTEED POSITIONS.—Each employee trans13 ferred under subsection (a) shall be guaranteed a position

14 with the same status, tenure, grade, and pay as that held

15 on the day immediately preceding the transfer. Each such

16 employee holding a permanent position shall not be invol17 untarily separated or reduced in grade or compensation

18 for 18 months after the date of transfer, except for cause

19 or, if the employee is a temporary employee, separated in

20 accordance with the terms of the appointment.

21 (c) APPOINTMENT AUTHORITY FOR EXCEPTED AND

22 SENIOR EXECUTIVE SERVICE EMPLOYEES.—

23 (1) IN GENERAL.—In the case of employees oc24 cupying positions in the excepted service or the Sen25 ior Executive Service, any appointment authority es-
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1 tablished pursuant to law or regulations of the Of2 fice of Personnel Management for filling such posi3 tions shall be transferred, subject to paragraph (2).

4 (2) DECLINE OF TRANSFER.—The Board of

5 Governors of the Federal Reserve System may de6 cline a transfer of authority under paragraph (1)

7 (and the employees appointed pursuant thereto) to

8 the extent that such authority relates to positions

9 excepted from the competitive service because of

10 their confidential, policy-making, policy-determining,

11 or policy-advocating character, and noncareer posi12 tions in the Senior Executive Service (within the

13 meaning of section 3132(a)(7) of title 5, United

14 States Code).

15 (d) REORGANIZATION.—If the Board of Governors of

16 the Federal Reserve System determines, after the end of

17 the 1-year period beginning on the date the transfer of

18 functions to the Board is completed, that a reorganization

19 of the combined work force is required, that reorganization

20 shall be deemed a major reorganization for purposes of

21 affording affected employees retirement under section

22 8336(d)(2) or 8414(b)(1)(B) of title 5, United States

23 Code.

24 (e) EMPLOYEE BENEFIT PROGRAMS.—Any employee

25 accepting employment with the Board of Governors of the
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1 Federal Reserve System as a result of such transfer may

2 retain for 18 months after the date such transfer occurs

3 membership in any employee benefit program of the Board

4 of Governors of the Federal Reserve System or the Office

5 of Federal Housing Enterprise Oversight, as applicable,

6 including insurance, to which such employee belongs on

7 the date of the abolishment under section 201(a) if—

8 (1) the employee does not elect to give up the

9 benefit or membership in the program; and

10 (2) the benefit or program is continued by the

11 Board of Governors of the Federal Reserve System.

12 The difference in the costs between the benefits which

13 would have been provided by such agency and those pro14 vided by this section shall be paid by the Board of Gov15 ernors of the Federal Reserve System. If any employee

16 elects to give up membership in a health insurance pro17 gram or the health insurance program is not continued

18 by such Board, the employee shall be permitted to select

19 an alternate Federal health insurance program within 30

20 days of such election or notice, without regard to any other

21 regularly scheduled open season.

22 (f) SENIOR EXECUTIVE SERVICE EMPLOYEES.—A

23 transferring employee in the Senior Executive Service

24 shall be placed in a comparable position at the agency or

25 entity to which such employee is transferred.
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1 (g) NOTICE OF POSITIONS.—Transferring employees

2 shall receive notice of their position assignments not later

3 than 120 days after the effective date of their transfer.

4 SEC. 204. TRANSFER OF PROPERTY AND FACILITIES.

5 Upon the abolishment under section 201(a), all prop6 erty of the Office of Federal Housing Enterprise Oversight

7 shall transfer to the Board of Governors of the Federal

8 Reserve System.

Æ