I
103D CONGRESS
1ST SESSION
H. R. 660
To facilitate the providing of loan capital to small business concerns, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 27, 1993
Mr. LAFALCE (for himself, Mr. SMITH of Iowa, Mr. MAZZOLI, and Mr. MANN)
introduced the following bill; which was referred to the Committee on
Small Business
DECEMBER 14, 1993
Additional sponsors: Mr. SKELTON, Mr. WYDEN, Mr. SISISKY, Mr. CONYERS,
Mr. BILBRAY, Mr. MFUME, Mr. FLAKE, Mr. SARPALIUS, Mr. POSHARD,
Mr. MEEHAN, Ms. DANNER, Mr. STRICKLAND, Mr. TUCKER, Mr. KLINK,
Ms. ROYBAL-ALLARD, Mr. HILLIARD, Mr. LANCASTER, Mr. FRANKS of
Connecticut, Mr. DE LUGO, Mr. HUGHES, Mr. HINCHEY, Mr. WILSON,
Mrs. CLAYTON, Mr. HASTINGS, Mr. JEFFERSON, Mr. STUDDS, Mr.
FALEOMAVAEGA, Mr. LEVY, Ms. SLAUGHTER, Mr. OLVER, Ms. KAPTUR,
Mr. WYNN, Mr. TORRES, Mrs. LLOYD, Mr. GOODLING, and Mr. PASTOR
A BILL
To facilitate the providing of loan capital to small business
concerns, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
That this Act may be cited as the ‘‘Small Business Credit
Availability Act of 1993’’.
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SEC. 2. CONGRESSIONAL FINDINGS.
The Congress hereby finds that—
(1) secondary mortgage markets have success-
fully increased the availability and affordability of
long-term residential mortgages through government
sponsored enterprises;
(2) many smaller, innovative businesses could
grow more rapidly, create more jobs, and increase
United States competitiveness in world markets if
additional long-term capital were available to finance
purchases of new plant and equipment;
(3) institutional investors are a major source of
long-term capital for the United States economy, but
such investors are not well equipped to make large
numbers of direct loans to individual business firms;
(4) commercial banks specialize in short-term
business lending and have the facilities and special-
ized expertise to evaluate loan applications and to
originate and service the large number of relatively
small loans required by smaller innovative busi-
nesses; and
(5) a secondary market for industrial mortgages
would link the loan production ability of commercial
lenders with the long-term investment horizons of
pension funds and insurance companies, thereby in-
creasing the efficiency of United States capital mar-
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kets and the amount of long-term capital that is
available to finance purchases of plant and equip-
ment by smaller innovative businesses.
SEC. 3. STATEMENT OF PURPOSE.
It is the purpose of this Act—
(1) to establish a corporation chartered by the
Federal Government as a government sponsored en-
terprise whose function would be to purchase or
guarantee loans and facilitate their packaging into
pools for sale to institutional investors;
(2) to authorize the certification of loan poolers
by the corporation;
(3) to provide for a secondary marketing ar-
rangement for small business loans that meet the
underwriting standards of the Corporation—
(A) to increase the availability of long-term
credit to small businesses at stable interest
rates;
(B) to provide greater liquidity and lending
capacity in extending credit to small businesses;
and
(C) to provide an arrangement for new
lending to facilitate capital market investments
in providing long-term small business funding,
including funds at fixed rates of interest; and
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(4) to enhance the ability of small businesses to
obtain financing by improving the distribution of
mortgage financing, particularly from institutional
investors.
SEC. 4. DEFINITIONS.
For the purpose of this Act:
(1) BOARD.—The term ‘‘Board’’ means—
(A) the interim board of directors estab-
lished in section 6(a), or
(B) the permanent board of directors es-
tablished in section 6(b),
as the case may be.
(2) CERTIFIED POOLER.—The term ‘‘certified
pooler’’ means a secondary marketing loan pooler
that is certified under section 9 of this Act.
(3) CORPORATION.—The term ‘‘Corporation’’
means the Venture Enhancement and Loan Develop-
ment Administration for Smaller Undercapitalized
Enterprises (Velda Sue) established in section 5 of
this Act.
(4) 
GUARANTEE.—The 
term 
‘‘guarantee’’
means the guarantee of timely payment of the prin-
cipal and interest on qualified loans or securities
representing interests in, or obligations backed by,
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pools of such qualified loans in accordance with this
Act.
(5) INTERIM
BOARD.—The term ‘‘interim
board’’ means the interim board of directors estab-
lished in section 6(a) of this Act.
(6) 
ORIGINATOR.—The 
term 
‘‘originator’’
means any institution, bank, insurance company,
business and industrial development company, sav-
ings and loan association, commercial finance com-
pany, trust company, credit union, small business
lending company or development company licensed
by the Small Business Administration to participate
in financing programs under the Small Business Act
or the Small Business Investment Act of 1958, or
other entity that originates and services loans.
(7) PERMANENT
BOARD.—The term ‘‘perma-
nent board’’ means the permanent board of directors
established in section 6(b) of this Act.
(8) QUALIFIED
LOAN.—The term ‘‘qualified
loan’’ means an extension of credit which—
(A) is secured by a fee-simple or lease hold
mortgage with status as a first lien on real es-
tate located in the United States or which is se-
cured by an unsubordinated lien on any other
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type of property or equipment as the Board
deems appropriate;
(B) is used to finance the acquisition, re-
habilitation, renovation, modernization, refur-
bishing, or improvement of land, facilities,
buildings or equipment used for productive
business activities conducted in the United
States;
(C) is an obligation of a person, corpora-
tion, or partnership that has training or busi-
ness experience that, under criteria established
by the Corporation, is sufficient to ensure a
reasonable likelihood that the loan will be re-
paid according to its terms; and
(D) is an obligation of a small business
concern.
(9) SMALL
BUSINESS
CONCERN.—The term
‘‘Small Business Concern’’ means a concern which is
independently owned and operated and which is not
dominant in its field of operations and which, to-
gether with its affiliates—
(A) qualifies for loans under section 7(a)
of the Small Business Act under standards pro-
mulgated by the Small Business Administra-
tion, or
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(B) does not have net worth in excess of
$18,000,000 and does not have an average net
income, after Federal income taxes, for the pre-
ceding two years in excess of $6,000,000 (aver-
age net income to be computed without benefit
of any carryover loss).
(10) STATE.—The term ‘‘State’’ has the mean-
ing given such term in section 3 of the Small Busi-
ness Act.
SEC. 5. VENTURE ENHANCEMENT AND LOAN DEVELOP-
MENT 
ADMINISTRATION 
FOR 
SMALLER
UNDERCAPITALIZED ENTERPRISES.
(a) ESTABLISHMENT.—There is hereby established a
corporation to be known as the Venture Enhancement and
Loan 
Development 
Administration 
for 
Smaller
Undercapitalized Enterprises, which shall be a federally
chartered instrumentality of the United States.
(b) DUTIES.—The Corporation shall—
(1) in consultation with originators, develop
uniform underwriting, security appraisal, and repay-
ment standards for qualified loans;
(2) determine the eligibility of certified poolers
to contract with the Corporation for the provision of
guarantees for specific mortgage pools; and
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(3) provide guarantees for the timely repayment
of principal and interest on qualified loans and secu-
rities representing interest in, or obligations backed
by, pools of qualified loans.
SEC. 6. BOARD OF DIRECTORS.
(a) INTERIM BOARD.—
(1) NUMBER
AND
APPOINTMENT.—Until the
permanent board of directors established in sub-
section (b) first meets with a quorum of its members
present, the Corporation shall be under the manage-
ment of an interim board of directors composed of
seven members appointed by the President within
ninety days after the effective date of this Act as fol-
lows:
(A) three members appointed from among
persons who are representatives of banks, other
financial institutions or entities, and insurance
companies,
(B) two members appointed from among
persons who are representative of small busi-
ness, one of whom shall be an owner or opera-
tor of a small business,
(C) two members appointed from among
persons who represent the interests of the gen-
eral public and who are not serving, and have
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not served, as a director or officer of any finan-
cial institution or entity.
(2) POLITICAL AFFILIATION.—Not more than
four members of the interim board shall be of the
same political party.
(3) VACANCY.—A vacancy in the interim board
shall be filled in the manner in which the original
appointment was made.
(4) TERMS.—The members of the interim board
shall be appointed for the life of such board.
(5) QUORUM.—Four members of the interim
board shall constitute a quorum.
(6) CHAIRPERSON.—The President shall des-
ignate one of the members of the interim board as
the chairperson of the interim board.
(7) MEETINGS.—The interim board shall meet
at the call of the chairperson or a majority of its
members.
(8) VOTING COMMON STOCK.—
(A) INITIAL
OFFERING.—Upon the ap-
pointment of sufficient members of the interim
board to convene a meeting with a quorum
present, the interim board shall arrange for an
initial offering of common stock and shall take
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whatever other actions are necessary to proceed
with the operations of the Corporation.
(B) PURCHASES.—The voting common
stock shall be offered to originators and to cer-
tified poolers.
(9) TERMINATION.—The interim board shall
terminate when the permanent board of directors es-
tablished in subsection (b) first meets with a
quorum present.
(b) PERMANENT BOARD.—
(1) ESTABLISHMENT.—Immediately after the
date that at least $30,000,000 of common stock of
the Corporation has been purchased and fully paid
for, the Corporation shall arrange for the election
and appointment of a permanent board of directors.
After the termination of the interim board of direc-
tors, the Corporation shall be under the manage-
ment of the permanent board.
(2) COMPOSITION.—The permanent board shall
consist of nine members, of which—
(A) five members shall be elected by hold-
ers of common stock of the Corporation; and
(B) four members shall be appointed by
the President, by and with the advice and con-
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sent of the Senate; of the members so ap-
pointed,—
(i) none shall be, or have been, an
owner, officer or director of any financial
institution or financial entity;
(ii) all shall be representatives of the
general public;
(iii) not more than two shall be mem-
bers of the same political party; and
(iv) at least one shall be experienced
in operating a small business and shall be
a representative of small business.
(3) PRESIDENTIAL
APPOINTEES.—The Presi-
dent shall appoint the members of the permanent
board referred to in paragraph (2)(B) not later than
60 days after the stock sale referred to in paragraph
(1).
(4) VACANCY.—
(A) ELECTED MEMBERS.—Subject to para-
graph (6), a vacancy among the members elect-
ed to the permanent board in the manner de-
scribed in paragraph (2)(A) shall be filled by
the permanent board from among persons eligi-
ble for election to the position for which the
vacancy exists.
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(B) APPOINTED
MEMBERS.—A vacancy
among the members appointed to the perma-
nent board under paragraph (2)(B) shall be
filled in the manner in which the original
appointment was made.
(5) CONTINUATION OF MEMBERSHIP.—If—
(A) any member of the permanent board
who was elected to the permanent board from
among persons who are representatives of origi-
nators ceases to be such a representative, or
(B) any member who was appointed by the
President becomes an owner, officer or director
of any financial institution or entity,
such member may continue as a member for not
longer than a forty five-day period beginning on the
date such member ceases to be such a representa-
tive.
(6) TERMS.—
(A) APPOINTED MEMBERS.—The members
appointed by the President shall serve until
their successors have been appointed and have
qualified. The terms of such members shall be
staggered as follows: one shall serve an initial
term of one year, one an initial term of two
years, one an initial term of three years, and
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one an initial term of four years. All subsequent
appointments shall be for a term of four years
except that any vacancy shall be filled for the
unexpired term of the vacancy. Such members
shall be removed only for cause.
(B) ELECTED
MEMBERS.—The members
elected under paragraph (2)(A) shall each be
elected annually for a term ending on the date
of the next annual meeting of the common
stockholders of the Corporation and shall serve
until their successors are elected and qualified.
(C) VACANCY APPOINTMENT.—Any mem-
ber elected or appointed to fill a vacancy occur-
ring before the expiration of the term for which
the predecessor of the member was appointed
shall be elected or appointed, as the case may
be, only for the remainder of such term.
(D) SERVICE
AFTER
EXPIRATION
OF
TERM.—A number may serve after the expira-
tion of the term of the member until the succes-
sor of the member has taken office.
(7) QUORUM.—Five members of the permanent
board shall constitute a quorum.
(8) NO ADDITIONAL PAY FOR FEDERAL OFFI-
CERS OR EMPLOYEES.—Members of the permanent
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board who are full time officers or employees of the
United States shall receive no additional pay by rea-
son of service on the permanent board.
(9) CHAIRPERSON.—The President shall des-
ignate one of the members of the permanent board
who are appointed by the President as the chair-
person of the permanent board.
(10) MEETINGS.—The permanent board shall
meet at the call of the chairperson or a majority of
its members.
(c) OFFICERS AND STAFF.—The Board may appoint,
employ, fix the pay of, and provide other allowances and
benefits for such officers and employees of the Corporation
as the Board determines to be appropriate.
SEC. 7. POWERS AND DUTIES OF CORPORATION AND
BOARD.
(a) AUTHORITY.—After the Board has been duly con-
stituted, subject to the other provisions of this Act and
other commitments and requirements established pursu-
ant to law, the Corporation may guarantee, on such terms
and conditions as it determines, qualified loans or securi-
ties issued on the security of, or in participation in, pooled
interests in qualified loans, or it may issue securities based
on the security of, or in participation in, pooled interests
in qualified loans as provided in section 10.
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(b) OBLIGATIONS.—
(1) The aggregate amount of obligations of the
Corporation and obligations and securities guaran-
teed by the Corporation outstanding at any one time
shall not exceed thirty times the sum of its capital,
capital surplus, general surplus, reserves, and undis-
tributed earnings, expressly excluding subordinated
obligations, unless, based on amounts needed to as-
sure reasonable safety and soundness of the Cor-
poration and with due consideration of the need for
the Corporation to facilitate the extension of long
term credit to small businesses, the Secretary of the
Treasury establishes a higher or lower ratio.
(2) All obligations issued by the Corporation or
guaranteed by the Corporation shall be approved by
a majority vote of the Board of Directors and shall
be issued at such times and contain such terms and
conditions as the Corporation shall determine, with
approval of the Secretary of the Treasury. The Sec-
retary shall not approve the issuance of any obliga-
tions or guarantees if he determines that the issu-
ance would impair the financial safety or soundness
of the Corporation. In no event shall the Corporation
issue obligations or guarantees if the amount of its
net realized earnings deficit exceeds or thereby
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would exceed the sum of its capital, capital surplus,
general surplus, reserves and undistributed earnings.
(c) DUTIES OF THE BOARD.—The Board shall—
(A) determine the general policies that
shall govern the operations of the Corporation;
(B) select, appoint, and determine the
compensation of qualified persons to fill such
offices as may be provided for in the bylaws of
the Corporation; and
(C) assign to such persons such executive
functions, powers, and duties as may be pre-
scribed by the bylaws of the Corporation or by
the Board.
(d) POWERS OF THE CORPORATION.—The Corpora-
tion shall be a body corporate and shall have the following
powers:
(1) To operate under the direction of its Board.
(2) To issues stock in the manner provided in
section 8.
(3) To adopt, alter, and use a corporate seal,
which shall be judicially noted.
(4) To provide for a president, one or more vice
presidents, secretary, treasurer, and such other offi-
cers, employees, and agents, as may be necessary,
define their duties and compensation levels, all with-
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out regard to title 5, United States Code, and re-
quire surety bonds or make other provisions against
losses occasioned by acts of the persons.
(5) To provide guarantees and issue obligations
in the manner provided under section 10.
(6) To have succession until dissolved by a law
enacted by the Congress.
(7) To prescribe bylaws, through the Board, not
inconsistent with law, that shall provide for—
(A) the classes of the stock of the Corpora-
tion; and
(B) the manner in which—
(i) the stock shall be issued, trans-
ferred, and retired;
(ii) the officers, employees, and agents
of the Corporation are selected;
(iii) the property of the Corporation is
acquired, held, and transferred;
(iv) the commitments are made and
other financial assistance of the Corpora-
tion is provided;
(v) the general business of the Cor-
poration is conducted; and
(vi) the privileges granted by law to
the Corporation are exercised and enjoyed;
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(8) To prescribe such standards as may be nec-
essary to carry out this Act.
(9) To enter into contracts and make payments
with respect to the contracts.
(10) To prescribe and impose fees and charges
for services by and guarantees of the Corporation as
provided in section 12;
(11) To settle, adjust, and compromise, and
with or without consideration or benefit to the Cor-
poration, to release or waive in whole or in part, in
advance or otherwise, any claim, demand or right of,
by, or against the Corporation.
(12) To sue and be sued in its corporate capac-
ity and to complain and defend in any action
brought by or against the Corporation in any State
or Federal court of competent jurisdiction.
(13) To make and perform contracts, agree-
ments, and commitments.
(14) To acquire, hold, lease, mortgage or dis-
pose of, at public or private sale, real and personal
property, purchase or sell any securities and obliga-
tions, and otherwise exercise all the usual incidents
or ownership of property necessary and convenient
to the business of the Corporation.
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(15) To exercise such other incidental powers
as are necessary to carry out the powers, duties, and
functions of the Corporation in accordance with this
Act.
(e) FEDERAL RESERVE BANK AS DEPOSITORIES AND
FISCAL AGENTS.—Notwithstanding any other provision of
law, any depository institution, as defined in section
19(b)(1)(A) of the Federal Reserve Act (12 U.S.C.
461(b)(1)(A)), shall be authorized to make payments to
the Corporation of the capital contributions referred to in
this Act, to receive stock of the Corporation evidencing
such capital contributions, and to dispose of such stock,
subject to the provisions of this Act. It may also act as
a depository for, or as a fiscal agent or custodian of, the
Corporation.
SEC. 8. STOCK ISSUANCE.
(a) VOTING COMMON STOCK.—
(1) ISSUE.—The Corporation shall issue voting
common stock having such par value as may be fixed
by the Board from time to time. Each share of
voting common stock shall be entitled to one vote
with rights of cumulative voting at all elections of di-
rectors.
(2) AUTHORITY
OF
BOARD
TO
ESTABLISH
TERMS AND PROCEDURES.—The Board shall adopt
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(c) DIVIDENDS.—
(1) IN GENERAL.—Such dividends as may be
declared by the Board, in its discretion, shall be paid
by the Corporation to the holders of the voting com-
mon stock of the Corporation pro rata based on the
total number of shares.
(2) RESERVE
REQUIREMENTS.—No dividend
may be declared or paid by the Board under this
section unless the Board determines that adequate
provision has been made for reserves.
(3) DIVIDENDS
PROHIBITED
WHILE
OBLIGA-
TIONS ARE OUTSTANDING.—No dividend may be de-
clared or paid by the Board under this section while
any obligation issued by the Corporation to the Sec-
retary of the Treasury under section 15 remains
outstanding.
(d) NONVOTING COMMON STOCK.—The Corporation
is authorized to issue nonvoting common stock having
such par value as may be determined by the Board from
time to time. Such nonvoting common stock shall be freely
transferable, except that, as to the Corporation, such stock
shall be transferable only on the books of the Corporation.
Such dividends as may be declared by the Board, in the
discretion of the Board, to the holders of voting common
stock shall also be declared by the Corporation to the hold-
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ers of the nonvoting common stock of the Corporation,
subject to paragraphs (2) and (3) of subsection (c).
(e) PREFERRED STOCK.—
(1) AUTHORITY OF BOARD.—The Corporation
is authorized to issue nonvoting preferred stock hav-
ing such par value as may be fixed by the Board
from time to time. Such preferred stock issued shall
be freely transferable, except that, as to the Cor-
poration, such stock shall be transferred only on the
books of the Corporation.
(2) RIGHTS OF PREFERRED STOCK.—Subject to
paragraphs (2) and (3) of subsection (c), the holders
of the preferred stock shall be entitled to such rate
of cumulative dividends, and such holders shall be
subject to such redemption or other conversion pro-
visions, as may be provided for at the time of issu-
ance. No dividends shall be payable on any share of
common stock at any time when any dividend is due
on any share of preferred stock and has not been
paid.
(3) PREFERENCE ON TERMINATION OF BUSI-
NESS.—In the event of any liquidation, dissolution,
or winding up of the business of the Corporation,
the holders of the preferred shares of stock shall be
paid in full at the par value thereof, plus all accrued
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dividends, before the holders of the common shares
receive any payment.
SEC 9. CERTIFICATION OF LOAN POOLERS.
(a) ELIGIBILITY STANDARDS.—
(1) ESTABLISHMENT
REQUIRED.—Within one
hundred and eighty days after the date on which the
permanent board first meets with a quorum present,
the Corporation shall issue standards for the certifi-
cation of loan poolers, including eligibility standards
in accordance with paragraph (2).
(2) MINIMUM REQUIREMENTS.—To be eligible
to be certified under the standards referred to in
paragraph (1), a loan pooler shall—
(A) meet or exceed capital standards estab-
lished by the Board;
(B) have as one of his purposes, the sale
or resale of securities representing interests in,
or obligations backed by, pools of qualified
loans that have been guaranteed by the Cor-
poration;
(C) demonstrate managerial ability with
respect to loan underwriting, servicing, and
marketing that is acceptable to the Corporation;
(D) adopt appropriate loan underwriting,
appraisal, and servicing standards and proce-
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dures that meet or exceed the standards estab-
lished by the Board;
(E) for purposes of enabling the Corpora-
tion to examine the pooler, agree to allow offi-
cers or employees of the Corporation to have
access to all books, accounts, financial records,
reports, files, and all other papers, things, or
property, of any type whatsoever, belonging to
or used by such pooler that are necessary to fa-
cilitate an examination of his operations in con-
nection with securities, and the pools of quali-
fied loans that back securities, for which the
Corporation has provided guarantees; and
(F) adopt appropriate minimum standards
and procedures relating to loan administration
and disclosure to borrowers concerning the
terms and rights applicable to loans for which
a guarantee is provided, in conformity with uni-
form standards established by the Corporation.
(b) CERTIFICATION BY CORPORATION.—Within one
hundred and twenty days after receiving an application for
certification under this section, the Corporation shall cer-
tify the pooler if the applicant meets the standards estab-
lished by the Corporation under subsection (a).
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(c) MAXIMUM TIME PERIOD FOR CERTIFICATION.—
Any certification by the Corporation shall be effective for
a period determined by the Corporation, but not to exceed
five years.
(d) REVOCATION.—
(1) IN GENERAL.—After notice and an oppor-
tunity for a hearing, the Corporation may revoke the
certification of a pooler if the Corporation deter-
mines that such pooler no longer meets the stand-
ards referred to in subsection (a).
(2) EFFECT OF REVOCATION.—Revocation of a
certification shall not affect any pool guarantee that
has been issued by the Corporation.
SEC. 10. GUARANTEES AND OTHER OBLIGATIONS.
(a) GUARANTEE AUTHORIZED.—
(1) IN GENERAL.—Subject to the requirements
of this section and on such other terms and condi-
tions as the Corporation shall consider appropriate,
the Corporation shall guarantee the timely payment
of not to exceed 80 per centum of principal and in-
terest on qualified loans and 100 per centum of the
securities issued by a certified pooler that represent
the guaranteed portion of interests in, or obligations
backed by, any pool of qualified loans held by such
certified pooler.
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(2) DEFAULT.—If the issuer is unable to make
any payment of principal or interest on any qualified
loan, or security for which a guarantee has been pro-
vided by the Corporation under paragraph (1), sub-
ject to the provisions of subsection (b) the Corpora-
tion shall make such payment as and when due in
cash, and on such payment shall be subrogated fully
to the rights satisfied by such payment.
(3) POWER OF CORPORATION.—Notwithstand-
ing any other provision of law, the Corporation is
empowered, in connection with any guarantee under
this subsection, whether before or after any default,
to provide by contract with the issuer for the extin-
guishment, on default by the issuer, of any redemp-
tion, equitable, legal, or other right, title, or interest
of the issuer in any mortgage or mortgages con-
stituting the security for the loan or pool against
which the guaranteed securities are issued. In the
event of default and pursuant to the terms of the
contract, the mortgages that constitute such security
or pool shall, proportionate to the current ownership
interests in the amount of the loans originally re-
tained by the originators, become the absolute prop-
erty of the Corporation subject only to the
unsatisfied rights of the holders of the securities.
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(b) STANDARDS REQUIRING DIVERSIFIED POOLS.—
(1) IN GENERAL.—To reduce the risks incurred
by the Corporation in providing guarantees under
this section and to further the purposes of this Act,
the Board shall establish standards governing the
composition of each pool (in connection with which
such guarantees are provided) over the period during
which the commitment to provide guarantees is ef-
fective.
(2) MINIMUM
CRITERIA
FOR
LOAN
POOLS.—
The standards established by the Board pursuant to
paragraph (1) for pools of qualified loans shall, at
a minimum—
(A) require that any pool of loans, if fea-
sible based upon the size of the pool—
(i) include security interests that are
distributed geographically; and
(ii) vary in terms of amounts of prin-
cipal;
(B) prohibit the inclusion in any such pool
of—
(i) any loan the principal amount of
which exceeds 5 per centum of the aggre-
gate amount of principal of all loans in
such pool; and
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(ii) two or more loans to related bor-
rowers; and
(C) require that each pool consist of not
less than twenty loans.
(c) OTHER RESPONSIBILITIES OF AND LIMITATIONS
ON POOLERS.—As a condition for providing any guaran-
tees under this section for securities issued by a certified
pooler that represent interests in, or obligations backed
by, any pool of qualified loans, the Corporation shall re-
quire such pooler to agree to comply with the following
requirements:
(1) DEFAULT RESOLUTION.—The pooler shall
act in accordance with the standards of a prudent
institutional lender to resolve defaults.
(2) SUBROGATION
OF
UNITED
STATES
AND
CORPORATION TO INTERESTS OF POOLER.—The pro-
ceeds of any collateral, judgments, settlements, or
guarantees received by the pooler with respect to any
loan in such pool shall be applied, after payment of
costs of collection—
(A) first, to reduce the amount of any
principal outstanding on any obligation of the
Corporation that was purchased by the Sec-
retary of the Treasury under section 15 to the
extent the proceeds of such obligation were used
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to pay claims for guarantees in connection with
such securities; and
(B) second, to reimburse the Corporation
for any such guarantee payments.
(3) SERVICING.—The originator of any loan in
such pool shall be permitted, at his option, to retain
the right to service the loan.
(4) COMPLIANCE
WITH
DIVERSIFIED
POOL
STANDARDS.—The pooler shall comply with the
standards adopted by the Board under subsection
(b) in establishing and maintaining the pool.
(5) MINORITY PARTICIPATION IN PUBLIC OF-
FERINGS.—The pooler shall take such steps as may
be necessary to ensure that minority owned or con-
trolled investment banking firms, underwriters, and
bond counsels throughout the United States have an
opportunity to participate to a significant degree in
any public offering of securities.
(d) ADDITIONAL AUTHORITY OF THE BOARD.—To
ensure the liquidity of securities for which guarantees have
been provided under this section, the Board shall adopt
appropriate standards regarding—
(1) the characteristics of any pool of qualified
loans serving as collateral for such securities;
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(2) registration requirements (if any) with re-
spect to such securities; and
(3) transfer requirements.
(e) In addition to the guarantees authorized herein,
the Corporation may purchase 80 per centum of the prin-
cipal amount of qualified loans. If it makes such pur-
chases, it shall promptly issue an equivalent amount of
securities which are based on the security of, or in partici-
pation in, pooled interests in the purchased portion of the
qualified loans.
SEC. 11. STANDARDS FOR QUALIFIED LOANS.
(a) STANDARDS.—Not later than one hundred and
eighty days after the appointment and election of the
Board, the Corporation, in consultation with originators,
shall establish uniform underwriting, security appraisal,
and repayment standards for qualified loans. In establish-
ing standards for qualified loans, the Corporation shall
limit eligibility, so far as practicable, to loans that are
deemed by the Board to be of such quality so as to meet,
substantially and generally, the purchase standards im-
posed by private institutional investors.
(b) MINIMUM CRITERIA.—To further the purpose of
this Act to provide a new source of long-term fixed rate
financing to assist small businesses, the standards estab-
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lished by the Board pursuant to subsection (a) shall, at
a minimum—
(1) set the maximum principal amount of any
loan which the Corporation will purchase or guaran-
tee;
(2) limit the maximum term of the loan to thir-
ty years in the case of land or facilities or to ten
years in the case of equipment, but in no event
longer than the useful life of the property;
(3) require that the principal amount of the
loan will be fully amortized over the life of the loan;
(4) provide that no loan shall have a loan-to-
value ratio in excess of 90 per centum;
(5) require each borrower to demonstrate suffi-
cient cashflow to adequately service the loan;
(6) contain sufficient documentation standards;
and
(7) contain adequate standards to protect the
integrity of the appraisal process with respect to any
loan.
(c) CONGRESSIONAL REVIEW.—No standard pre-
scribed under this section shall take effect before the later
of—
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(1) the end of a period consisting of thirty leg-
islative days and beginning on the date such stand-
ards are submitted to the Congress; or
(2) the end of a period consisting of ninety cal-
endar days and beginning on such date the stand-
ards are submitted.
(e) 
NONDISCRIMINATION
REQUIREMENT.—The
standards established under subsection (a) shall not dis-
criminate against small originators or small mortgage
loans that are at least $50,000.
SEC. 12. FUNDING FOR GUARANTEE RESERVES OF COR-
PORATION.
(a) GUARANTEE FEES.—
(1) LOAN FEE.—At the time a guarantee is is-
sued for a qualified loan by the Corporation or at
the time the Corporation purchases a loan pursuant
to section 10(e), the Corporation shall assess the
originator a fee of not more than 2 per centum of
the initial principal amount of the loan.
(2) POOLER FEE.—At the time a guarantee is
issued for securities issued by a qualified pooler, the
Corporation shall assess such pooler an additional
fee of not more than one-half of 1 per centum of the
principal amount of the loans then constituting the
pool if the originator has already paid the fee for
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guarantee of a qualified loan as provided in para-
graph (1). If the pool includes any loan on which the
originator has not paid a guarantee fee, the Cor-
poration shall assess the pooler a fee of not more
than 21⁄2 per centum of the principal amount of any
such loan.
(3) DETERMINATION
OF
AMOUNT.—The Cor-
poration shall establish such fees based on the
amount of risk incurred by the Corporation in pro-
viding the financial assistance or guarantees with re-
spect to which such fee is assessed, as determined by
the Corporation. Fees assessed under paragraphs (1)
or (2) shall be established on an actuarially sound
basis, but not to exceed the per centums specified.
(b) ANNUAL REVIEW BY GAO.—The Comptroller
General of the United States shall annually review, and
submit to the Congress a report regarding, the actuarial
soundness and reasonableness of the fees established and
amounts collected by the Corporation under this sub-
section.
(c) CORPORATION RESERVE AGAINST GUARANTEE
LOSSES REQUIRED.—
(1) IN GENERAL.—So much of the fees assessed
under this section as the Board determines to be
necessary shall be set aside by the Corporation in a
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segregated account as a reserve against losses aris-
ing out of the guarantee activities of the Corpora-
tion.
(2) EXHAUSTION
OF
RESERVE
REQUIRED.—
The Corporation may not issue obligations to the
Secretary of the Treasury under section 15 in order
to meet the obligations of the Corporation with re-
spect to any guarantees or securities issued provided
under this Act until the reserve established under
paragraph (1) has been exhausted.
(d) FEES TO COVER ADMINISTRATIVE COSTS AU-
THORIZED.—The Corporation may impose charges or fees
in reasonable amounts in connection with the administra-
tion of its activities under this Act to recover its costs for
performing such administration.
SEC. 13. SUPERVISION, EXAMINATION, AND REPORT OF
CONDITION.
(a) REGULATION.—
(1) AUTHORITY.—The Secretary of the Treas-
ury (hereinafter in this section referred to as the
Secretary) is authorized and directed to examine the
financial condition of the Corporation and its activi-
ties. The Secretary shall have general regulatory
power over the Corporation to insure that the pur-
poses of this Act are accomplished, especially with
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respect to the Corporation’s safety and soundness
and the safe and sound performance of the Corpora-
tion’s powers, functions and duties.
(2) CONSIDERATIONS.—In exercising its au-
thority pursuant to this section, the Secretary shall
consider—
(A) the purposes for which the Corporation
was created;
(B) the practices appropriate to the con-
duct of secondary markets in loans; and
(C) the reduced levels of risk associated
with appropriately structured secondary market
transactions.
(b) EXAMINATIONS AND AUDITS.—
(1) IN GENERAL.—The financial transactions of
the Corporation shall be examined by examiners of
the Secretary in accordance with the principles and
procedures applicable to commercial corporate trans-
actions under such rules and regulations as may be
prescribed by the Secretary.
(2) 
FREQUENCY.—The 
examinations 
shall
occur at such times as the Secretary may determine,
but in no event less than once each year.
(3) ACCESS.—The examiners shall—