Housing Finance Restructuring Act of 2016

To ensure the sufficient capitalization of Fannie Mae and Freddie Mac and prevent any further bailout of such enterprises by the Federal Government, and for other purposes. 1. Short title This Act may be cited as the Housing Finance Restructuring Act of 2016 2. Repayment of liquidation preference (a) Repayment and redemption Not later than the expiration of the 60-day period beginning on the date of the enactment of this Act, the Secretary of the Treasury shall modify the Senior Preferred Stock Purchase Agreement for each enterprise to provide as follows: (1) Deemed repayment in full Effective on the date of the date of the enactment of this Act, the liquidation preference on the Variable Liquidation Preference Senior Preferred Stocks of each enterprise is reduced to zero. (2) Redemption of variable liquidation preference senior preferred stock Pursuant to paragraph (1), the Variable Liquidation Preference Senior Preferred Stock of each enterprise shall be redeemed upon the date of the modification of the Senior Preferred Stock Purchase Agreement required under this subsection and, upon and after such redemption— (A) shares of such Variable Liquidation Preference Senior Preferred Stock of each enterprise shall no longer be deemed to be outstanding and all rights of the holders thereof, as such holders, shall cease; (B) shares of redeemed Variable Liquidation Preference Senior Preferred Stock of each enterprise shall no longer have the status of authorized, issued, or outstanding shares; (C) the Senior Preferred Stock Purchase Agreement for each enterprise shall be terminated, except that sections 2.1 and 2.2 of such Agreement, as modified by the Second Amendment to the Senior Preferred Stock Purchase Agreement for the enterprise (dated December 24, 2009), shall remain in force and effect; and (D) the Department of the Treasury shall retain any dividend payments made by an enterprise to the Department of the Treasury before the date of the enactment of this Act. (b) No resumption of periodic commitment fee The Department of the Treasury shall not require the enterprises to pay a periodic commitment fee, as described in section 3.2 of the Senior Preferred Stock Purchase Agreements. (c) Exercise of warrants for common stock Notwithstanding subsection (a)(2)(C) of this section, upon the enactment of this Act, the Department of the Treasury shall exercise the warrants for the purchase of common stock of the enterprises provided to the Department under the Senior Preferred Stock Purchase Agreements. 3. Rebuilding of enterprise retained capital (a) Applicability Notwithstanding any other provision of law or any provision of the Senior Preferred Stock Purchase Agreement for an enterprise, the provisions of this section shall apply to each enterprise, including during the term of any conservatorship of an enterprise pursuant to section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4617 (b) Use of net income for capital reserves At any time that an enterprise is not fully capitalized (as such term is defined in subsection (c)(3))— (1) section 1337 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 42 U.S.C. 4567 (2) the Director shall require that, in each fiscal year, the net income of each enterprise, as determined by the Director, for such fiscal year shall be retained and maintained by the enterprise as retained capital reserves. (c) Full capitalization (1) Allocation to Housing Trust Fund and Capital Magnet Fund At any time that an enterprise is fully capitalized, as determined by the Director, subsection (b) shall not apply to the enterprise and section 1337 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 shall apply to the enterprise. (2) Dividends An enterprise may not, unless the enterprise is fully capitalized, declare or pay any dividend (whether common or preferred) with respect to any equity interests of the enterprise. (3) Definition For purposes of this subsection, the term fully capitalized 12 U.S.C. 4502 (d) Capital restoration plan (1) Requirement Not later than the expiration of the 45-day period beginning on the date of the enactment of this Act, the Director shall prepare and submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a capital restoration plan for each enterprise that complies with section 1369C(a) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4622(a) (2) Annual updates After submission of a capital restoration plan for an enterprise pursuant to paragraph (1), during any period that an enterprise remains not fully capitalized (as such term is defined in subsection (c)(3)), the Director shall update the plan for such enterprise on an annual basis and submit such updated plan to the Committees referred to in paragraph (1), together with a report describing any progress made toward restoring the capital of the enterprise during the preceding 1-year period. (3) Public availability The Director shall make publicly available each capital restoration plan prepared pursuant to paragraph (1) and each updated plan prepared pursuant to paragraph (2). (e) Termination of conservatorships The Director shall terminate the conservatorship of an enterprise under section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4617 (f) Regulations Not later than the expiration of the 180-day period beginning on the date of the enactment of this Act, the Director shall issue regulations necessary to carry out this section and the amendments made by this section. 4. Private right of action (a) In general Any individual or entity adversely affected or aggrieved by action or inaction on the part of the Director or the Secretary of the Treasury in violation of this Act or title XIII of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4501 et seq. (b) Equitable relief In any action under this section, the court may award appropriate equitable relief, including temporary, preliminary, or permanent injunctive relief. (c) Costs In any action under this section, the court shall award the costs of litigation, including reasonable attorney and expert witness fees, to any prevailing or substantially prevailing plaintiff. (d) Jurisdiction The district courts of the United States shall have jurisdiction over proceedings commenced pursuant to this section and shall exercise the same without regard to whether the party aggrieved shall have exhausted any administrative or other remedies that may be provided for by law. 5. Definitions For purposes of this Act, the following definitions shall apply: (1) Director The term Director 12 U.S.C. 4617 (2) Enterprise The term enterprise 12 U.S.C. 4502 (3) Net income The term net income (4) Risk-weighted The term risk-weighted 12 U.S.C. 1831n (5) Senior preferred stock purchase agreement The term Senior Preferred Stock Purchase Agreement

Summary: Housing Finance Restructuring Act of 2016 This bill directs the Department of the Treasury to modify the Senior Preferred Stock Purchase Agreement for each of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (enterprises) to: reduce to zero (deem as repaid in full) the liquidation preference on the Variable Liquidation Preference Senior Preferred Stocks of each enterprise; require redemption of the Variable Liquidation Preference Senior Preferred Stock of each enterprise upon a specified date, deeming it no longer outstanding and terminating all rights of the stockholders. Treasury shall exercise the warrants for the purchase of common stock of the enterprises under the Senior Preferred Stock Purchase Agreements. At any time an enterprise is not fully capitalized, the Federal Housing Finance Agency (FHFA) shall require that the net income (after deduction of all associated expenses) of each enterprise for the fiscal year be retained as capital reserves, and not be allocated to fund the Housing Trust Fund or the Capital Magnet Fund for affordable housing. The FHFA shall: report a capital restoration plan for each enterprise, and terminate the conservatorship of an enterprise when it attains an amount of capital equal to or exceeding 5% of its risk-weighted assets. Any individual or entity adversely affected or aggrieved by action or inaction on the part of the FHFA or Treasury in violation of this bill or the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 may commence a civil action in a U.S. district court for prospective injunctive relief against the FHFA or Treasury, as appropriate.