IB 
Union Calendar No. 126 
109TH CONGRESS 
1ST SESSION H. R. 1461 
[Report No. 109–171, Part I] 
To reform the regulation of certain housing-related Government-sponsored 
enterprises, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 5, 2005 
Mr. BAKER (for himself, Mr. OXLEY, Mr. RYUN of Kansas, Mr. HENSARLING, 
Mr. JONES of North Carolina, Mr. DAVIS of Kentucky, Mr. FITZPATRICK 
of Pennsylvania, and Mr. SHAYS) introduced the following bill; which was 
referred to the Committee on Financial Services 
JULY 14, 2005 
Reported with an amendment and referred to the Committee on the Judiciary 
for a period ending not later than September 16, 2005 for consideration 
of such provisions of the bill as fall within the jurisdiction of that com-
mittee pursuant to clause 1(l), rule X 
[Strike out all after the enacting clause and insert the part printed in italic] 
SEPTEMBER 16, 2005 
Additional sponsors: Mr. GARRETT of New Jersey, Mr. WOLF, Mr. GILLMOR, 
Mr. FEENEY, Mr. BARRETT of South Carolina, Mr. MCHENRY, Ms. ROS- 
LEHTINEN, Mr. BLUNT, Mr. RYAN of Wisconsin, Mr. MCCOTTER, Mr. 
ADERHOLT, and Mr. SIMMONS 
SEPTEMBER 16, 2005 
Committee on the Judiciary discharged; committed to the Committee of the 
Whole House on the State of the Union and ordered to be printed
[For text of introduced bill, see copy of bill as introduced on April 5, 2005] 
A BILL 
To reform the regulation of certain housing-related 
Government-sponsored enterprises, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Federal Housing Finance Reform Act of 2005’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title and table of contents. 
Sec. 2. Definitions. 
TITLE I—REFORM OF REGULATION OF ENTERPRISES AND 
FEDERAL HOME LOAN BANKS 
Subtitle A—Improvement of Safety and Soundness 
Sec. 101. Establishment of the Federal Housing Finance Agency. 
Sec. 102. Duties and authorities of Director. 
Sec. 103. Housing Finance Oversight Board. 
Sec. 104. Authority to require reports by regulated entities. 
Sec. 105. Disclosure of charitable contributions by enterprises. 
Sec. 106. Assessments. 
Sec. 107. Examiners and accountants. 
Sec. 108. Prohibition and withholding of executive compensation. 
Sec. 109. Reviews of regulated entities. 
Sec. 110. Regulations and orders. 
Sec. 111. Risk-based capital requirements. 
Sec. 112. Minimum and critical capital levels. 
Sec. 113. Review of and authority over enterprise assets and liabilities. 
Sec. 114. Corporate governance of enterprises. 
Sec. 115. Required registration under Securities Exchange Act of 1934. 
Sec. 116. Financial Institutions Examination Council. 
Sec. 117. Guarantee fee study. 
Sec. 118. Conforming amendments.
Subtitle B—Improvement of Mission Supervision 
Sec. 121. Transfer of program and activities approval and housing goal oversight. 
Sec. 122. Review by Director of new programs and activities of enterprises. 
Sec. 123. Conforming loan limits. 
Sec. 124. Annual housing report regarding regulated entities. 
Sec. 125. Revision of housing goals. 
Sec. 126. Duty to serve underserved markets. 
Sec. 127. Monitoring and enforcing compliance with housing goals. 
Sec. 128. Affordable housing fund. 
Sec. 129. Consistency with mission. 
Sec. 130. Enforcement. 
Sec. 131. Conforming amendments. 
Subtitle C—Prompt Corrective Action 
Sec. 141. Capital classifications. 
Sec. 142. Supervisory actions applicable to undercapitalized regulated entities. 
Sec. 143. Supervisory actions applicable to significantly undercapitalized regu-
lated entities. 
Sec. 144. Authority over critically undercapitalized regulated entities. 
Sec. 145. Conforming amendments. 
Subtitle D—Enforcement Actions 
Sec. 161. Cease-and-desist proceedings. 
Sec. 162. Temporary cease-and-desist proceedings. 
Sec. 163. Prejudgment attachment. 
Sec. 164. Enforcement and jurisdiction. 
Sec. 165. Civil money penalties. 
Sec. 166. Removal and prohibition authority. 
Sec. 167. Criminal penalty. 
Sec. 168. Subpoena authority. 
Sec. 169. Conforming amendments. 
Subtitle E—General Provisions 
Sec. 181. Presidentially appointed directors of enterprises. 
Sec. 182. Report on portfolio operations, safety and soundness, and mission of en-
terprises. 
Sec. 183. Conforming and technical amendments. 
Sec. 184. Study of alternative secondary market systems. 
Sec. 185. Effective date. 
TITLE II—FEDERAL HOME LOAN BANKS 
Sec. 201. Definitions. 
Sec. 202. Directors. 
Sec. 203. Federal Housing Finance Agency oversight of Federal Home Loan 
Banks. 
Sec. 204. Joint activities of banks. 
Sec. 205. Sharing of information between Federal Home Loan Banks. 
Sec. 206. Reorganization of banks and voluntary merger. 
Sec. 207. Securities and Exchange Commission disclosure. 
Sec. 208. Community financial institution members. 
Sec. 209. Technical and conforming amendments. 
Sec. 210. Study of affordable housing program use for long-term care facilities.
Sec. 211. Effective date. 
TITLE III—TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY 
OF OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, 
FEDERAL HOUSING FINANCE BOARD, AND DEPARTMENT OF 
HOUSING AND URBAN DEVELOPMENT 
Subtitle A—Office of Federal Housing Enterprise Oversight 
Sec. 301. Abolishment of OFHEO. 
Sec. 302. Continuation and coordination of certain regulations. 
Sec. 303. Transfer and rights of employees of OFHEO. 
Sec. 304. Transfer of property and facilities. 
Subtitle B—Federal Housing Finance Board 
Sec. 321. Abolishment of the Federal Housing Finance Board. 
Sec. 322. Continuation and coordination of certain regulations. 
Sec. 323. Transfer and rights of employees of the Federal Housing Finance 
Board. 
Sec. 324. Transfer of property and facilities. 
Subtitle C—Department of Housing and Urban Development 
Sec. 341. Termination of enterprise-related functions. 
Sec. 342. Continuation and coordination of certain regulations. 
Sec. 343. Transfer and rights of employees. 
Sec. 344. Transfer of appropriations, property, and facilities. 
SEC. 2. DEFINITIONS. 
Section 1303 of the Housing and Community Develop-
ment Act of 1992 (12 U.S.C. 4502) is amended— 
(1) in paragraph (7), by striking ‘‘an enter-
prise’’ and inserting ‘‘a regulated entity’’; 
(2) by striking ‘‘the enterprise’’ each place such 
term appears (except in paragraphs (4) and (18)) 
and inserting ‘‘the regulated entity’’; 
(3) in paragraph (5), by striking ‘‘Office of Fed-
eral Housing Enterprise Oversight of the Department 
of Housing and Urban Development’’ and inserting 
‘‘Federal Housing Finance Agency’’;
(4) in each of paragraphs (8), (9), (10), and 
(19), by striking ‘‘Secretary’’ each place that term ap-
pears and inserting ‘‘Director’’; 
(5) in paragraph (13), by inserting ‘‘, with re-
spect to an enterprise,’’ after ‘‘means’’; 
(6) by redesignating paragraphs (16) through 
(19) as paragraphs (20) through (23), respectively; 
(7) by striking paragraphs (14) and (15) and 
inserting the following new paragraphs: 
‘‘(18) REGULATED ENTITY.—The term ‘regulated 
entity’ means— 
‘‘(A) the Federal National Mortgage Asso-
ciation and any affiliate thereof; 
‘‘(B) the Federal Home Loan Mortgage Cor-
poration and any affiliate thereof; and 
‘‘(C) each Federal home loan bank. 
‘‘(19) REGULATED ENTITY-AFFILIATED PARTY.— 
The term ‘regulated entity-affiliated party’ means— 
‘‘(A) any director, officer, employee, or con-
trolling stockholder of, or agent for, a regulated 
entity; 
‘‘(B) any shareholder, affiliate, consultant, 
or joint venture partner of a regulated entity, 
and any other person, as determined by the Di-
rector (by regulation or on a case-by-case basis)
that participates in the conduct of the affairs of 
a regulated entity; 
‘‘(C) any independent contractor for a regu-
lated entity (including any attorney, appraiser, 
or accountant); and 
‘‘(D) any not-for-profit corporation that re-
ceives its principal funding, on an ongoing 
basis, from any regulated entity.’’; 
(8) by redesignating paragraphs (8) through (13) 
as paragraphs (12) through (17), respectively; and 
(9) by inserting after paragraph (7) the fol-
lowing new paragraph: 
‘‘(11) FEDERAL HOME LOAN BANK.—The term 
‘Federal home loan bank’ means a bank established 
under the authority of the Federal Home Loan Bank 
Act.’’; 
(10) by redesignating paragraphs (2) through (7) 
as paragraphs (5) through (10), respectively; and 
(11) by inserting after paragraph (1) the fol-
lowing new paragraphs: 
‘‘(2) AGENCY.—The term ‘Agency’ means the 
Federal Housing Finance Agency. 
‘‘(3) AUTHORIZING STATUTES.—The term ‘au-
thorizing statutes’ means—
‘‘(A) the Federal National Mortgage Asso-
ciation Charter Act; 
‘‘(B) the Federal Home Loan Mortgage Cor-
poration Act; and 
‘‘(C) the Federal Home Loan Bank Act. 
‘‘(4) BOARD.—The term ‘Board’ means the 
Housing Finance Oversight Board established under 
section 1313B.’’. 
TITLE I—REFORM OF REGULA-
TION OF ENTERPRISES AND 
FEDERAL HOME LOAN BANKS 
Subtitle A—Improvement of Safety 
and Soundness 
SEC. 101. ESTABLISHMENT OF THE FEDERAL HOUSING FI-
NANCE AGENCY. 
(a) IN GENERAL.—The Housing and Community De-
velopment Act of 1992 (12 U.S.C. 4501 et seq.) is amended 
by striking sections 1311 and 1312 and inserting the fol-
lowing: 
‘‘SEC. 1311. ESTABLISHMENT OF THE FEDERAL HOUSING FI-
NANCE AGENCY. 
‘‘(a) ESTABLISHMENT.—There is established the Fed-
eral Housing Finance Agency, which shall be an inde-
pendent agency of the Federal Government.
‘‘(b) GENERAL SUPERVISORY AND REGULATORY AU-
THORITY.— 
‘‘(1) IN GENERAL.—Each regulated entity shall, 
to the extent provided in this title, be subject to the 
supervision and regulation of the Agency. 
‘‘(2) AUTHORITY OVER FANNIE MAE, FREDDIE 
MAC, AND FEDERAL HOME LOAN BANKS.—The Direc-
tor of the Federal Housing Finance Agency shall have 
general supervisory and regulatory authority over 
each regulated entity and shall exercise such general 
regulatory authority, including such duties and au-
thorities set forth under section 1313 of this Act, to 
ensure that the purposes of this Act, the authorizing 
statutes, and any other applicable law are carried 
out. 
‘‘(c) SAVINGS PROVISION.—The authority of the Direc-
tor to take actions under subtitles B and C shall not in 
any way limit the general supervisory and regulatory au-
thority granted to the Director. 
‘‘SEC. 1312. DIRECTOR. 
‘‘(a) ESTABLISHMENT OF POSITION.—There is estab-
lished the position of the Director of the Federal Housing 
Finance Agency, who shall be the head of the Agency. 
‘‘(b) APPOINTMENT; TERM.—
‘‘(1) APPOINTMENT.—The Director shall be ap-
pointed by the President, by and with the advice and 
consent of the Senate, from among individuals who 
are citizens of the United States, have a demonstrated 
understanding of financial management or oversight, 
and have a demonstrated understanding of capital 
markets, including the mortgage securities markets 
and housing finance. 
‘‘(2) TERM AND REMOVAL.—The Director shall 
be appointed for a term of 5 years and may be re-
moved by the President only for cause. 
‘‘(3) VACANCY.—A vacancy in the position of Di-
rector that occurs before the expiration of the term for 
which a Director was appointed shall be filled in the 
manner established under paragraph (1), and the Di-
rector appointed to fill such vacancy shall be ap-
pointed only for the remainder of such term. 
‘‘(4) SERVICE AFTER END OF TERM.—An indi-
vidual may serve as the Director after the expiration 
of the term for which appointed until a successor has 
been appointed. 
‘‘(5) 
TRANSITIONAL
PROVISION.—Notwith-
standing paragraphs (1) and (2), the Director of the 
Office of Federal Housing Enterprise Oversight of the 
Department of Housing and Urban Development shall
serve as the Director until a successor has been ap-
pointed under paragraph (1). 
‘‘(c) DEPUTY DIRECTOR OF THE DIVISION OF ENTER-
PRISE REGULATION.— 
‘‘(1) IN
GENERAL.—The Agency shall have a 
Deputy Director of the Division of Enterprise Regula-
tion, who shall be appointed by the Director from 
among individuals who are citizens of the United 
States, have a demonstrated understanding of finan-
cial management or oversight and of mortgage securi-
ties markets and housing finance. 
‘‘(2) FUNCTIONS.—The Deputy Director of the 
Division of Enterprise Regulation shall have such 
functions, powers, and duties with respect to the over-
sight of the enterprises as the Director shall prescribe. 
‘‘(d) DEPUTY DIRECTOR OF THE DIVISION OF FED-
ERAL HOME LOAN BANK REGULATION.— 
‘‘(1) IN
GENERAL.—The Agency shall have a 
Deputy Director of the Division of Federal Home 
Loan Bank Regulation, who shall be appointed by the 
Director from among individuals who are citizens of 
the United States, have a demonstrated under-
standing of financial management or oversight and of 
the Federal Home Loan Bank System and housing fi-
nance.
‘‘(2) FUNCTIONS.—The Deputy Director of the 
Division of Federal Home Loan Bank Regulation 
shall have such functions, powers, and duties with re-
spect to the oversight of the Federal home loan banks 
as the Director shall prescribe. 
‘‘(e) DEPUTY DIRECTOR FOR HOUSING.— 
‘‘(1) IN
GENERAL.—The Agency shall have a 
Deputy Director for Housing, who shall be appointed 
by the Director from among individuals who are citi-
zens of the United States, and have a demonstrated 
understanding of the housing markets and housing fi-
nance. 
‘‘(2) FUNCTIONS.—The Deputy Director for 
Housing shall have such functions, powers, and duties 
with respect to the oversight of the housing mission 
and goals of the enterprises, and with respect to over-
sight of the housing mission of the Federal home loan 
banks, as the Director shall prescribe. 
‘‘(f) LIMITATIONS.—The Director and each of the Dep-
uty Directors may not— 
‘‘(1) have any direct or indirect financial inter-
est in any regulated entity or regulated entity-affili-
ated party;
‘‘(2) hold any office, position, or employment in 
any regulated entity or regulated entity-affiliated 
party; or 
‘‘(3) have served as an executive officer or direc-
tor of any regulated entity, or regulated entity-affili-
ated party, at any time during the 3-year period end-
ing on the date of appointment of such individual as 
Director or Deputy Director.’’. 
(b) APPOINTMENT
OF DIRECTOR.—Notwithstanding 
any other provision of law or of this Act, the President may, 
any time after the date of the enactment of this Act, appoint 
an individual to serve as the Director of the Federal Hous-
ing Finance Agency, as such office is established by the 
amendment made by subsection (a). This subsection shall 
take effect on the date of the enactment of this Act. 
SEC. 102. DUTIES AND AUTHORITIES OF DIRECTOR. 
(a) IN GENERAL.—The Housing and Community De-
velopment Act of 1992 (12 U.S.C. 4513) is amended by 
striking section 1313 and inserting the following new sec-
tions: 
‘‘SEC. 1313. DUTIES AND AUTHORITIES OF DIRECTOR. 
‘‘(a) DUTIES.— 
‘‘(1) PRINCIPAL DUTIES.—The principal duties 
of the Director shall be—
‘‘(A) to oversee the operations of each regu-
lated entity; and 
‘‘(B) to ensure that— 
‘‘(i) each regulated entity operates in a 
safe and sound manner, including mainte-
nance of adequate capital and internal con-
trols; 
‘‘(ii) the operations and activities of 
each regulated entity foster liquid, efficient, 
competitive, and resilient national housing 
finance markets that minimize the cost of 
housing finance (including activities relat-
ing to mortgages on housing for low- and 
moderate- income families involving a rea-
sonable economic return that may be less 
than the return earned on other activities); 
‘‘(iii) each regulated entity complies 
with this title and the rules, regulations, 
guidelines, and orders issued under this title 
and the authorizing statutes; and 
‘‘(iv) each regulated entity carries out 
its statutory mission only through activities 
that are consistent with this title and the 
authorizing statutes.
‘‘(2) SCOPE OF AUTHORITY.—The authority of 
the Director shall include the authority— 
‘‘(A) to review and, if warranted based on 
the principal duties described in paragraph (1), 
reject any acquisition or transfer of a controlling 
interest in an enterprise; and 
‘‘(B) to exercise such incidental powers as 
may be necessary or appropriate to fulfill the 
duties and responsibilities of the Director in the 
supervision and regulation of each regulated en-
tity. 
‘‘(b) DELEGATION OF AUTHORITY.—The Director may 
delegate to officers or employees of the Agency, including 
each of the Deputy Directors, any of the functions, powers, 
or duties of the Director, as the Director considers appro-
priate. 
‘‘(c) LITIGATION AUTHORITY.— 
‘‘(1) IN GENERAL.—In enforcing any provision 
of this title, any regulation or order prescribed under 
this title, or any other provision of law, rule, regula-
tion, or order, or in any other action, suit, or pro-
ceeding to which the Director is a party or in which 
the Director is interested, and in the administration 
of conservatorships and receiverships, the Director
may act in the Director’s own name and through the 
Director’s own attorneys. 
‘‘(2) SUBJECT
TO
SUIT.—Except as otherwise 
provided by law, the Director shall be subject to suit 
(other than suits on claims for money damages) by a 
regulated entity or director or officer thereof with re-
spect to any matter under this title or any other ap-
plicable provision of law, rule, order, or regulation 
under this title, in the United States district court for 
the judicial district in which the regulated entity has 
its principal place of business, or in the United 
States District Court for the District of Columbia, 
and the Director may be served with process in the 
manner prescribed by the Federal Rules of Civil Pro-
cedure. 
‘‘SEC. 1313A. PRUDENTIAL MANAGEMENT AND OPERATIONS 
STANDARDS. 
‘‘(a) STANDARDS.—The Director shall establish stand-
ards, by regulation, guideline, or order, for each regulated 
entity relating to— 
‘‘(1) adequacy of internal controls and informa-
tion systems taking into account the nature and scale 
of business operations; 
‘‘(2) independence and adequacy of internal 
audit systems;
‘‘(3) management of credit and counterparty 
risk, including systems to identify concentrations of 
credit risk and prudential limits to restrict exposure 
of the regulated entity to a single counterparty or 
groups of related counterparties; 
‘‘(4) management of interest rate risk exposure; 
‘‘(5) management of market risk, including 
standards that provide for systems that accurately 
measure, monitor, and control market risks and, as 
warranted, that establish limitations on market risk; 
‘‘(6) adequacy and maintenance of liquidity and 
reserves; 
‘‘(7) management of any asset and investment 
portfolio; 
‘‘(8) investments and acquisitions by a regulated 
entity, to ensure that they are consistent with the 
purposes of this Act and the authorizing statutes; 
‘‘(9) maintenance of adequate records, in accord-
ance with consistent accounting policies and practices 
that enable the Director to evaluate the financial con-
dition of the regulated entity; 
‘‘(10) issuance of subordinated debt by that par-
ticular regulated entity, as the Director considers nec-
essary;
‘‘(11) overall risk management processes, includ-
ing adequacy of oversight by senior management and 
the board of directors and of processes and policies to 
identify, measure, monitor, and control material 
risks, including reputational risks, and for adequate, 
well-tested business resumption plans for all major 
systems with remote site facilities to protect against 
disruptive events; and 
‘‘(12) such other operational and management 
standards as the Director determines to be appro-
priate. 
‘‘(b) FAILURE TO MEET STANDARDS.— 
‘‘(1) PLAN REQUIREMENT.— 
‘‘(A) IN GENERAL.—If the Director deter-
mines that a regulated entity fails to meet any 
standard established under subsection (a)— 
‘‘(i) if such standard is established by 
regulation, the Director shall require the 
regulated entity to submit an acceptable 
plan to the Director within the time allowed 
under subparagraph (C); and 
‘‘(ii) if such standard is established by 
guideline, the Director may require the reg-
ulated entity to submit a plan described in 
clause (i).
‘‘(B) CONTENTS.—Any plan required under 
subparagraph (A) shall specify the actions that 
the regulated entity will take to correct the defi-
ciency. If the regulated entity is undercapital-
ized, the plan may be a part of the capital res-
toration plan for the regulated entity under sec-
tion 1369C. 
‘‘(C) DEADLINES FOR SUBMISSION AND RE-
VIEW.—The Director shall by regulation establish 
deadlines that— 
‘‘(i) provide the regulated entities with 
reasonable time to submit plans required 
under subparagraph (A), and generally re-
quire a regulated entity to submit a plan 
not later than 30 days after the Director de-
termines that the entity fails to meet any 
standard established under subsection (a); 
and 
‘‘(ii) require the Director to act on 
plans expeditiously, and generally not later 
than 30 days after the plan is submitted. 
‘‘(2) REQUIRED ORDER UPON FAILURE TO SUB-
MIT OR IMPLEMENT PLAN.—If a regulated entity fails 
to submit an acceptable plan within the time allowed 
under paragraph (1)(C), or fails in any material re-