(7) in section 1333 (12 U.S.C. 4563), by strik-
ing subsection (d); 
(8) in section 1334 (12 U.S.C. 4564), by strik-
ing subsection (d); 
(9) by striking sections 1337 and 1338 (12 
U.S.C. 4567, 4562 note); 
(10) in sections 1345(c)(1)(A) and 1346(b) (12 
U.S.C. 4585(c)(1)(A), 4586(b)), by striking ‘‘Sec-
retary’s’’ each place such term appears and inserting 
‘‘Director’s’’; and 
(11) by striking section 1349 (12 U.S.C. 4589). 
Subtitle C—Prompt Corrective 
Action 
SEC. 141. CAPITAL CLASSIFICATIONS. 
(a) IN GENERAL.—Section 1364 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4614) 
is amended— 
(1) in the heading for subsection (a) by striking 
‘‘IN GENERAL’’ and inserting ‘‘ENTERPRISES’’; 
(2) in subsection (c)— 
(A) by striking ‘‘subsection (b)’’ and in-
serting ‘‘subsection (c)’’; 
(B) by striking ‘‘enterprises’’ and inserting 
‘‘regulated entities’’; and 
(C) by striking the last sentence;
(3) by redesignating subsections (c) (as so 
amended by paragraph (2) of this subsection) and 
(d) as subsections (d) and (f), respectively; 
(4) by striking subsection (b) and inserting the 
following new subsections: 
‘‘(b) FEDERAL HOME LOAN BANKS.— 
‘‘(1) ESTABLISHMENT
AND
CRITERIA.—For 
purposes of this subtitle, the Director shall, by regu-
lation— 
‘‘(A) establish the capital classifications 
specified under paragraph (2) for the Federal 
home loan banks; 
‘‘(B) establish criteria for each such cap-
ital classification based on the amount and 
types of capital held by a bank and the risk- 
based, minimum, and critical capital levels for 
the banks and taking due consideration of the 
capital classifications established under sub-
section (a) for the enterprises, with such modi-
fications as the Director determines to be ap-
propriate to reflect the difference in operations 
between the banks and the enterprises; and 
‘‘(C) shall classify the Federal home loan 
banks according to such capital classifications.
‘‘(2) CLASSIFICATIONS.—The capital classifica-
tions specified under this paragraph are— 
‘‘(A) adequately capitalized; 
‘‘(B) undercapitalized; 
‘‘(C) significantly undercapitalized; and 
‘‘(D) critically undercapitalized. 
‘‘(c) DISCRETIONARY CLASSIFICATION.— 
‘‘(1) GROUNDS
FOR
RECLASSIFICATION.—The 
Director may reclassify a regulated entity under 
paragraph (2) if— 
‘‘(A) at any time, the Director determines 
in writing that the regulated entity is engaging 
in conduct that could result in a rapid depletion 
of core or total capital or, in the case of an en-
terprise, that the value of the property subject 
to mortgages held or securitized by the enter-
prise has decreased significantly; 
‘‘(B) after notice and an opportunity for 
hearing, the Director determines that the regu-
lated entity is in an unsafe or unsound condi-
tion; or 
‘‘(C) pursuant to section 1371(b), the Di-
rector deems the regulated entity to be engag-
ing in an unsafe or unsound practice.
‘‘(2) RECLASSIFICATION.—In addition to any 
other action authorized under this title, including 
the reclassification of a regulated entity for any rea-
son not specified in this subsection, if the Director 
takes any action described in paragraph (1) the Di-
rector may classify a regulated entity— 
‘‘(A) as undercapitalized, if the regulated 
entity is otherwise classified as adequately cap-
italized; 
‘‘(B) as significantly undercapitalized, if 
the regulated entity is otherwise classified as 
undercapitalized; and 
‘‘(C) as critically undercapitalized, if the 
regulated entity is otherwise classified as sig-
nificantly undercapitalized.’’; and 
(5) by inserting after subsection (d) (as so re-
designated by paragraph (3) of this subsection), the 
following new subsection: 
‘‘(e) RESTRICTION ON CAPITAL DISTRIBUTIONS.— 
‘‘(1) IN
GENERAL.—A regulated entity shall 
make no capital distribution if, after making the dis-
tribution, the regulated entity would be under-
capitalized. 
‘‘(2) EXCEPTION.—Notwithstanding paragraph 
(1), the Director may permit a regulated entity, to
the extent appropriate or applicable, to repurchase, 
redeem, retire, or otherwise acquire shares or owner-
ship interests if the repurchase, redemption, retire-
ment, or other acquisition— 
‘‘(A) is made in connection with the 
issuance of additional shares or obligations of 
the regulated entity in at least an equivalent 
amount; and 
‘‘(B) will reduce the financial obligations of 
the regulated entity or otherwise improve the fi-
nancial condition of the entity.’’. 
(b) REGULATIONS.—Not later than the expiration of 
the 120-day period beginning on the effective date under 
section 184, the Director of the Federal Housing Finance 
Agency shall issue regulations to carry out section 1364(b) 
of the Housing and Community Development Act of 1992 
(as added by paragraph (4) of this subsection), relating 
to capital classifications for the Federal home loan banks. 
SEC. 142. SUPERVISORY ACTIONS APPLICABLE TO UNDER-
CAPITALIZED REGULATED ENTITIES. 
Section 1365 of the Housing and Community Devel-
opment Act of 1992 (12 U.S.C. 4615) is amended— 
(1) in the section heading, by striking ‘‘ENTER-
PRISES’’ and inserting ‘‘ENTITIES’’; 
(2) in subsection (a)—
(A) by redesignating paragraphs (1) and 
(2) as paragraphs (2) and (3), respectively; 
(B) by inserting before paragraph (2) the 
following paragraph: 
‘‘(1) REQUIRED
MONITORING.—The Director 
shall— 
‘‘(A) closely monitor the condition of any 
regulated entity that is classified as under-
capitalized; 
‘‘(B) closely monitor compliance with the 
capital restoration plan, restrictions, and re-
quirements imposed under this section; and 
‘‘(C) periodically review the plan, restric-
tions, and requirements applicable to the under-
capitalized regulated entity to determine wheth-
er the plan, restrictions, and requirements are 
achieving the purpose of this section.’’; and 
(C) by inserting at the end the following 
new paragraphs: 
‘‘(4) RESTRICTION OF ASSET GROWTH.—A reg-
ulated entity that is classified as undercapitalized 
shall not permit its average total assets (as such 
term is defined in section 1316(b) during any cal-
endar quarter to exceed its average total assets dur-
ing the preceding calendar quarter unless—
100 
‘‘(A) the Director has accepted the capital 
restoration plan of the regulated entity; 
‘‘(B) any increase in total assets is con-
sistent with the plan; and 
‘‘(C) the ratio of core or total capital to as-
sets for the regulated entity increases during 
the calendar quarter at a rate sufficient to en-
able the entity to become adequately capitalized 
within a reasonable time. 
‘‘(5) PRIOR APPROVAL OF ACQUISITIONS, NEW 
PROGRAMS, AND NEW BUSINESS ACTIVITIES.—A reg-
ulated entity that is classified as undercapitalized 
shall not, directly or indirectly, acquire any interest 
in any entity or engage in any new program or new 
business activity unless— 
‘‘(A) the Director has accepted the capital 
restoration plan of the regulated entity, the en-
tity is implementing the plan, and the Director 
determines that the proposed action is con-
sistent with and will further the achievement of 
the plan; or 
‘‘(B) the Director determines that the pro-
posed action will further the purpose of this 
section.’’;
101 
(3) in the subsection heading for subsection (b), 
by striking ‘‘FROM UNDERCAPITALIZED TO SIGNIFI-
CANTLY UNDERCAPITALIZED’’; and 
(4) by striking subsection (c) and inserting the 
following new subsection: 
‘‘(c) OTHER DISCRETIONARY SAFEGUARDS.—The 
Director may take, with respect to a regulated entity that 
is classified as undercapitalized, any of the actions author-
ized to be taken under section 1366 with respect to a regu-
lated entity that is classified as significantly undercapital-
ized, if the Director determines that such actions are nec-
essary to carry out the purpose of this subtitle.’’. 
SEC. 143. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFI-
CANTLY 
UNDERCAPITALIZED 
REGULATED 
ENTITIES. 
Section 1366 of the Housing and Community Devel-
opment Act of 1992 (12 U.S.C. 4616) is amended— 
(1) in the section heading, by striking ‘‘ENTER-
PRISES’’ and inserting ‘‘ENTITIES’’; 
(2) in subsection (a)(2)(A), by striking ‘‘enter-
prise’’ the last place such term appears; 
(3) in subsection (b)— 
(A) in the subsection heading, by striking 
‘‘DISCRETIONARY SUPERVISORY ACTIONS’’ and 
inserting ‘‘SPECIFIC ACTIONS’’;
102 
(B) in the matter preceding paragraph (1), 
by striking ‘‘may, at any time, take any’’ and 
inserting ‘‘shall carry out this section by taking, 
at any time, one or more’’; 
(C) by redesignating paragraphs (5) and 
(6) as paragraphs (6) and (7), respectively; 
(D) by inserting after paragraph (4) the 
following new paragraph: 
‘‘(5) IMPROVEMENT
OF
MANAGEMENT.—Take 
one or more of the following actions: 
‘‘(A) NEW ELECTION OF BOARD.—Order a 
new election for the board of directors of the 
regulated entity. 
‘‘(B) DISMISSAL OF DIRECTORS OR EXECU-
TIVE OFFICERS.—Require the regulated entity 
to dismiss from office any director or executive 
officer who had held office for more than 180 
days immediately before the entity became 
undercapitalized. Dismissal under this subpara-
graph shall not be construed to be a removal 
pursuant to the Director’s enforcement powers 
provided in section 1377. 
‘‘(C) EMPLOY QUALIFIED EXECUTIVE OF-
FICERS.—Require the regulated entity to em-
ploy qualified executive officers (who, if the Di-
103 
rector so specifies, shall be subject to approval 
by the Director).’’; and 
(E) by inserting at the end the following 
new paragraph: 
‘‘(8) OTHER
ACTION.—Require the regulated 
entity to take any other action that the Director de-
termines will better carry out the purpose of this 
section than any of the actions specified in this 
paragraph.’’; 
(4) by redesignating subsection (c) as sub-
section (d); and 
(5) by inserting after subsection (b) the fol-
lowing new subsection: 
‘‘(c) RESTRICTION ON COMPENSATION OF EXECU-
TIVE OFFICERS.—A regulated entity that is classified as 
significantly undercapitalized may not, without prior writ-
ten approval by the Director— 
‘‘(1) pay any bonus to any executive officer; or 
‘‘(2) provide compensation to any executive offi-
cer at a rate exceeding that officer’s average rate of 
compensation (excluding bonuses, stock options, and 
profit sharing) during the 12 calendar months pre-
ceding the calendar month in which the regulated 
entity became undercapitalized.’’.
104 
SEC. 144. AUTHORITY OVER CRITICALLY UNDERCAPITAL-
IZED REGULATED ENTITIES. 
(a) ENTERPRISES.—Section 1367 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4617) 
is amended to read as follows: 
‘‘SEC. 1367. AUTHORITY OVER CRITICALLY UNDERCAPITAL-
IZED ENTERPRISES. 
‘‘(a) APPOINTMENT OF AGENCY AS CONSERVATOR 
OR RECEIVER.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of Federal law, the Director may establish 
a conservatorship or receivership in the manner pro-
vided under paragraph (2). 
‘‘(2) APPOINTMENT.—The Agency may, at the 
discretion of the Director, be appointed conservator 
or receiver for the purpose of reorganizing, rehabili-
tating, or winding up the affairs of an enterprise 
‘‘(3) 
GROUNDS
FOR
APPOINTMENT.—The 
grounds for appointing a conservator or receiver for 
any enterprise are as follows: 
‘‘(A) ASSETS INSUFFICIENT FOR OBLIGA-
TIONS.—The assets of the enterprise are less 
than the obligations of the enterprise to its 
creditors and others.
105 
‘‘(B) SUBSTANTIAL
DISSIPATION.—Sub-
stantial dissipation of assets or earnings due 
to— 
‘‘(i) any violation of any provision of 
Federal or State law; or 
‘‘(ii) any unsafe or unsound practice. 
‘‘(C) UNSAFE OR UNSOUND CONDITION.— 
An unsafe or unsound condition to transact 
business. 
‘‘(D) CEASE-AND-DESIST
ORDERS.—Any 
willful violation of a cease-and-desist order that 
has become final. 
‘‘(E) CONCEALMENT.—Any concealment of 
the books, papers, records, or assets of the en-
terprise, or any refusal to submit the books, pa-
pers, records, or affairs of the enterprise, for 
inspection to any examiner or to any lawful 
agent of the Director. 
‘‘(F) INABILITY TO MEET OBLIGATIONS.— 
The enterprise is likely to be unable to pay its 
obligations or meet the demands of its creditors 
in the normal course of business. 
‘‘(G) LOSSES.—The enterprise has in-
curred or is likely to incur losses that will de-
plete all or substantially all of its capital, and
106 
there is no reasonable prospect for the enter-
prise to become adequately capitalized (as de-
fined in section 1364(a)(1)). 
‘‘(H) VIOLATIONS OF LAW.—Any violation 
of any law or regulation, or any unsafe or un-
sound practice or condition that is likely to— 
‘‘(i) cause insolvency or substantial 
dissipation of assets or earnings; or 
‘‘(ii) weaken the condition of the en-
terprise. 
‘‘(I) CONSENT.—The enterprise, by resolu-
tion of its board of directors or its shareholders 
or members, consents to the appointment. 
‘‘(J) UNDERCAPITALIZATION.—The enter-
prise is undercapitalized or significantly under-
capitalized (as defined in section 1364(a)(3)), 
and— 
‘‘(i) has no reasonable prospect of be-
coming adequately capitalized; 
‘‘(ii) fails to become adequately cap-
italized, as required by— 
‘‘(I) section 1365(a)(1) with re-
spect to an undercapitalized enter-
prise; or
107 
‘‘(II) section 1366(a)(1) with re-
spect to a significantly undercapital-
ized enterprise; 
‘‘(iii) fails to submit a capital restora-
tion plan acceptable to the Agency within 
the time prescribed under section 1369C; 
or 
‘‘(iv) materially fails to implement a 
capital restoration plan submitted and ac-
cepted under section 1369C. 
‘‘(K) CRITICAL UNDERCAPITALIZATION.— 
The enterprise is critically undercapitalized, as 
defined in section 1364(a)(4). 
‘‘(L) MONEY LAUNDERING.—The Attorney 
General notifies the Director in writing that the 
enterprise has been found guilty of a criminal 
offense under section 1956 or 1957 of title 18, 
United States Code, or section 5322 or 5324 of 
title 31, United States Code. 
‘‘(4) JUDICIAL REVIEW.— 
‘‘(A) IN GENERAL.—If the Agency is ap-
pointed conservator or receiver under this sec-
tion, the enterprise may, within 30 days of such 
appointment, bring an action in the United 
States District Court for the judicial district in
108 
which the home office of such enterprise is lo-
cated, or in the United States District Court 
for the District of Columbia, for an order re-
quiring the Agency to remove itself as conser-
vator or receiver. 
‘‘(B) REVIEW.—Upon the filing of an ac-
tion under subparagraph (A), the court shall, 
upon the merits, dismiss such action or direct 
the Agency to remove itself as such conservator 
or receiver. 
‘‘(5) DIRECTORS
NOT
LIABLE
FOR
ACQUI-
ESCING IN APPOINTMENT OF CONSERVATOR OR RE-
CEIVER.—The members of the board of directors of 
an enterprise shall not be liable to the shareholders 
or creditors of the enterprise for acquiescing in or 
consenting in good faith to the appointment of the 
Agency as conservator or receiver for that enter-
prise. 
‘‘(6) AGENCY
NOT
SUBJECT
TO
ANY
OTHER 
FEDERAL AGENCY.—When acting as conservator or 
receiver, the Agency shall not be subject to the di-
rection or supervision of any other agency of the 
United States or any State in the exercise of the 
rights, powers, and privileges of the Agency.
109 
‘‘(b) POWERS AND DUTIES OF THE AGENCY AS CON-
SERVATOR OR RECEIVER.— 
‘‘(1) RULEMAKING AUTHORITY OF THE AGEN-
CY.—The Agency may prescribe such regulations as 
the Agency determines to be appropriate regarding 
the conduct of conservatorships or receiverships. 
‘‘(2) GENERAL POWERS.— 
‘‘(A) SUCCESSOR
TO
ENTERPRISE.—The 
Agency shall, as conservator or receiver, and by 
operation of law, immediately succeed to— 
‘‘(i) all rights, titles, powers, and 
privileges of the enterprise, and of any 
stockholder, officer, or director of such en-
terprise with respect to the enterprise and 
the assets of the enterprise; and 
‘‘(ii) title to the books, records, and 
assets of any other legal custodian of such 
enterprise. 
‘‘(B) OPERATE
THE
ENTERPRISE.—The 
Agency may, as conservator or receiver— 
‘‘(i) take over the assets of and oper-
ate the enterprise with all the powers of 
the shareholders, the directors, and the of-
ficers of the enterprise and conduct all 
business of the enterprise;
110 
‘‘(ii) collect all obligations and money 
due the enterprise; 
‘‘(iii) perform all functions of the en-
terprise in the name of the enterprise 
which are consistent with the appointment 
as conservator or receiver; and 
‘‘(iv) preserve and conserve the assets 
and property of such enterprise. 
‘‘(C) FUNCTIONS
OF
OFFICERS, DIREC-
TORS, AND
SHAREHOLDERS
OF
AN
ENTER-
PRISE.—The Agency may, by regulation or 
order, provide for the exercise of any function 
by any stockholder, director, or officer of any 
enterprise for which the Agency has been 
named conservator or receiver. 
‘‘(D) POWERS
AS
CONSERVATOR.—The 
Agency may, as conservator, take such action 
as may be— 
‘‘(i) necessary to put the enterprise in 
a sound and solvent condition; and 
‘‘(ii) appropriate to carry on the busi-
ness of the enterprise and preserve and 
conserve the assets and property of the en-
terprise.
111 
‘‘(E) 
ADDITIONAL
POWERS
AS
RE-
CEIVER.—The Agency may, as receiver, place 
the enterprise in liquidation and proceed to re-
alize upon the assets of the enterprise, having 
due regard to the conditions of the housing fi-
nance market. 
‘‘(F) ORGANIZATION
OF
NEW
ENTER-
PRISES.—The Agency may, as receiver, orga-
nize a successor enterprise that will operate 
pursuant to subsection (i). 
‘‘(G) TRANSFER OF ASSETS AND LIABIL-
ITIES.—The Agency may, as conservator or re-
ceiver, transfer any asset or liability of the en-
terprise in default without any approval, assign-
ment, or consent with respect to such transfer. 
‘‘(H) PAYMENT OF VALID OBLIGATIONS.— 
The Agency, as conservator or receiver, shall, to 
the extent of proceeds realized from the per-
formance of contracts or sale of the assets of an 
enterprise, pay all valid obligations of the enter-
prise in accordance with the prescriptions and 
limitations of this section. 
‘‘(I) SUBPOENA AUTHORITY.— 
‘‘(i) IN GENERAL.—
112 
‘‘(I) IN GENERAL.—The Agency 
may, as conservator or receiver, and 
for purposes of carrying out any 
power, authority, or duty with respect 
to an enterprise (including deter-
mining any claim against the enter-
prise and determining and realizing 
upon any asset of any person in the 
course of collecting money due the en-
terprise), exercise any power estab-
lished under section 1348. 
‘‘(II) APPLICABILITY OF LAW.— 
The provisions of section 1348 shall 
apply with respect to the exercise of 
any power exercised under this sub-
paragraph in the same manner as 
such provisions apply under that sec-
tion. 
‘‘(ii) AUTHORITY
OF
DIRECTOR.—A 
subpoena or subpoena duces tecum may be 
issued under clause (i) only by, or with the 
written approval of, the Director, or the 
designee of the Director. 
‘‘(iii) RULE OF CONSTRUCTION.—This 
subsection shall not be construed to limit
113 
any rights that the Agency, in any capac-
ity, might otherwise have under section 
1317 or 1379B. 
‘‘(J) INCIDENTAL
POWERS.—The Agency 
may, as conservator or receiver— 
‘‘(i) exercise all powers and authori-
ties specifically granted to conservators or 
receivers, respectively, under this section, 
and such incidental powers as shall be nec-
essary to carry out such powers; and 
‘‘(ii) take any action authorized by 
this section, which the Agency determines 
is in the best interests of the enterprise or 
the Agency. 
‘‘(3) AUTHORITY OF RECEIVER TO DETERMINE 
CLAIMS.— 
‘‘(A) IN GENERAL.—The Agency may, as 
receiver, determine claims in accordance with 
the requirements of this subsection and any 
regulations prescribed under paragraph (4). 
‘‘(B) NOTICE
REQUIREMENTS.—The re-
ceiver, in any case involving the liquidation or 
winding up of the affairs of a closed enterprise, 
shall—
114 
‘‘(i) promptly publish a notice to the 
creditors of the enterprise to present their 
claims, together with proof, to the receiver 
by a date specified in the notice which 
shall be not less than 90 days after the 
publication of such notice; and 
‘‘(ii) republish such notice approxi-
mately 1 month and 2 months, respec-
tively, after the publication under clause 
(i). 
‘‘(C) MAILING
REQUIRED.—The receiver 
shall mail a notice similar to the notice pub-
lished under subparagraph (B)(i) at the time of 
such publication to any creditor shown on the 
books of the enterprise— 
‘‘(i) at the last address of the creditor 
appearing in such books; or 
‘‘(ii) upon discovery of the name and 
address of a claimant not appearing on the 
books of the enterprise within 30 days 
after the discovery of such name and ad-
dress. 
‘‘(4) RULEMAKING
AUTHORITY
RELATING
TO 
DETERMINATION OF CLAIMS.—Subject to subsection 
(c), the Director may prescribe regulations regarding