I 
115TH CONGRESS 
1ST SESSION H. R. 3556 
To require Fannie Mae and Freddie Mac to engage in credit risk transfer 
transactions, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 28, 2017 
Mr. ROYCE of California (for himself and Ms. MOORE) introduced the fol-
lowing bill; which was referred to the Committee on Financial Services, 
and in addition to the Committees on Ways and Means, and Agriculture, 
for a period to be subsequently determined by the Speaker, in each case 
for consideration of such provisions as fall within the jurisdiction of the 
committee concerned 
A BILL 
To require Fannie Mae and Freddie Mac to engage in credit 
risk transfer transactions, 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. 
This Act may be cited as the ‘‘Taxpayer Protections 
and Market Access for Mortgage Finance Act of 2017’’. 
SEC. 2. CREDIT RISK-TRANSFER TRANSACTIONS. 
(a) REQUIREMENT FOR ENTERPRISES.—Subpart A 
of part 2 of subtitle A of the Federal Housing Enterprises 
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Financial Safety and Soundness Act of 1992 (12 U.S.C. 
4541 et seq.) is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 1328. ENTERPRISE CREDIT RISK-TRANSFER TRANS-
ACTIONS. 
‘‘(a) REQUIREMENT.—Not later than 12 months 
after the date of enactment of this Act, the Director shall, 
after taking into consideration market conditions and the 
safety and soundness of the enterprises, establish guide-
lines requiring that each enterprise engage in significant, 
increasing, and varied credit risk-transfer transactions, 
with an emphasis on front-end transactions. 
‘‘(b) CONSIDERATIONS.—In establishing the guide-
lines under subsection (a), the Director shall— 
‘‘(1) seek to promote a deep, broad market for 
a variety of structures that together insulate the tax-
payer from losses, minimize ongoing risks to the en-
terprises, remain stable through the economic cycle, 
maintain adequate access to the secondary market 
for lenders of all sizes, and promote credit for bor-
rowers in all communities; 
‘‘(2) continue and seek to increase the amount 
of credit risk transferred to the private sector and 
the types of risk-transfer transactions that the en-
terprises engaged in each year with the goal that the 
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risk transferred by an enterprise by all credit risk- 
transfer transactions shall be at least 400 basis 
points of risk in total, starting from the first dollar 
of credit loss among all the different credit risk- 
transfer structures; 
‘‘(3) continue and seek to increase front-end 
risk transfer transactions, including those done at 
the time of origination; and 
‘‘(4) continue and seek to increase transactions 
in which the first loss position is transferred or 
shared and through structures that are scalable and 
transparent. 
‘‘(c) GUARANTEE FEES.—The enterprises shall set 
and publish guarantee fees, including up-front delivery 
fees and loan level price adjustments, commensurate with 
the enterprises’ reduced credit risk resulting from any new 
risk-transfer transaction. 
‘‘(d) APA COMPLIANCE.—The guidelines required 
under subsection (a) shall be issued and made available 
to the public pursuant to section 553 of title 5, United 
States Code. 
‘‘(e) COMPENSATION.—The Director shall adjust in-
dividual and corporate scorecards used in determining 
compensation for relevant enterprise employees to align 
with the considerations of subsection (b). 
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‘‘(f) EXEMPTION FROM CERTAIN COMMODITY EX-
CHANGE ACT PROVISIONS.—A swap (as such term is de-
fined in section 1a of the Commodity Exchange Act (7 
U.S.C. 1a)) entered into for the purpose of transferring 
or sharing credit risk in connection with a risk-transfer 
transaction shall not be deemed to be a commodity interest 
(as such term is defined in section 1.3(yy) of the regula-
tions of the Commodity Futures Trading Commission (17 
C.F.R. 1.3(yy))), and no swap counterparty or other per-
son sponsoring or arranging a risk-transfer transaction 
shall be deemed to be a commodity pool operator (as such 
term is defined in section 1.3(cc) of such regulations), 
solely by virtue of entering into or sponsoring or arranging 
such a swap in connection with such transaction. 
‘‘(g) REPORT.—The Director shall submit a report, 
not later than October 30 of each year, to the Committee 
on Financial Services of the House of Representatives and 
the Committee on Banking, Housing, and Urban Affairs 
of the Senate, on the activities of each enterprise in meet-
ing the guidelines established under subsection (a) and 
any obstacles the Director has determined have impeded 
the ability of the enterprises to meet such guidelines. 
‘‘(h) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
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‘‘(1) CREDIT
RISK.—The term ‘credit risk’ 
means, with respect to a mortgage loan on a one- to 
four-family residential property that is held or guar-
anteed, or intended to be held or guaranteed, by an 
enterprise or any security backed by such residential 
mortgage loans held or guaranteed by the enterprise, 
the risk of loss to the enterprise that could result 
from a mortgagor’s failure to repay any such loan 
in accordance with its terms. 
‘‘(2) FIRST LOSS.—The term ‘first-loss’ means 
the risk of loss for an enterprise on a mortgage loan 
on a one- to four-family residential property or a se-
curity backed by such residential mortgage loans, be-
ginning with the first dollar of loss. 
‘‘(3) FRONT-END RISK TRANSFER.—The term 
‘front-end risk transfer’ means, with respect to a 
mortgage loan on a one- to four-family residential 
property or any security backed by such residential 
mortgage loans, a risk transfer or risk share that oc-
curs before or simultaneous with the acquisition of 
such loan or security by an enterprise. 
‘‘(4) GUARANTEE FEE.—The term ‘guarantee 
fee’ has the meaning given such term in section 
1327(a) (12 U.S.C. 4547(a)). 
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‘‘(5) RISK-TRANSFER TRANSACTION.—The term 
‘risk-transfer transaction’ means any transaction 
that provides for— 
‘‘(A) the sale, disposition, retention, or 
transfer within the private sector of credit risk 
on any residential mortgage loan on a one- to 
four-family residential property or a pool of 
such residential mortgage loans that back secu-
rities on which the enterprise guarantees the 
timely payment of principal and interest; or 
‘‘(B) the retention by the private sector of 
any such credit risk in connection with the sale 
of any such loan or security to an enterprise.’’. 
(b) CONFORMING AMENDMENT TO COMMODITY EX-
CHANGE ACT.—Paragraph (10) of section 1a of the Com-
modity Exchange Act (7 U.S.C. 1a(10)) is amended by 
adding at the end the following new subparagraph: 
‘‘(C) RULE OF CONSTRUCTION.—A swap 
(as such term is defined in section 1a) entered 
into for the purpose of transferring or sharing 
credit risk in connection with a risk-transfer 
transaction shall not be considered to be a com-
modity interest (as such term is defined in sec-
tion 1.3(yy) of title 17, Code of Federal Regula-
tions), and no swap counterparty or other per-
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son sponsoring or arranging a risk-transfer 
transaction shall be considered to be a com-
modity pool operator (as such term is defined 
in section 1.3(cc) of such title), solely by virtue 
of entering into or sponsoring or arranging 
such a swap in connection with such trans-
action.’’. 
(c) 
CONFORMING
AMENDMENTS
TO
EXISTING 
LAWS.— 
(1) INVESTMENT COMPANY ACT OF 1940.—Sec-
tion 3(c)(5) of the Investment Company Act of 1940 
(15 U.S.C. 80a–3(c)(5)) is amended by inserting be-
fore the period the following: ‘‘, including notes, 
bonds, other evidences of indebtedness, certificates, 
securities, and other interests, issued in connection 
with or otherwise related to a risk-transfer trans-
action (as such term is defined in section 1328(h) of 
the Federal Housing Enterprises Financial Safety 
and Soundness Act of 1992)’’. 
(2) ASSET AND INCOME TEST CLARIFICATION 
FOR ENTERPRISE RISK-TRANSFER TRANSACTIONS.— 
The Internal Revenue Code of 1986 is amended— 
(A) in each of paragraphs (2)(B) and 
(3)(B) of section 856(c) (26 U.S.C. 856(c)), by 
inserting before the semicolon at the end the 
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following ‘‘, and gross income resulting from 
participation in any transaction, including 
notes, bonds, other evidences of indebtedness, 
certificates, securities, and other interests, that 
are risk-transfer transactions (as such term is 
defined in section 1328(h) of the Federal Hous-
ing Enterprises Financial Safety and Sound-
ness Act of 1992)’’; and 
(B) in subparagraph (B) of section 
856(c)(5) (26 U.S.C. 856(c)(5)(B)), by insert-
ing before the period at the end of the first sen-
tence the following: ‘‘, and participation in any 
transaction, including notes, bonds, other evi-
dences of indebtedness, certificates, securities, 
and other interests, that are risk-transfer trans-
actions (as such term is defined in section 
1328(h) of the Federal Housing Enterprises Fi-
nancial Safety and Soundness Act of 1992)’’. 
SEC. 3. PILOT PROGRAM FOR SMALL LENDER RISK TRANS-
FER. 
(a) IN GENERAL.—Not later than one year after the 
date of the enactment of this Act, the Director of the Fed-
eral Housing Finance Agency shall require each enterprise 
(as such term is defined in section 1303 of the Federal 
Housing Enterprises Financial Safety and Soundness Act 
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of 1992 (12 U.S.C. 4502)) to establish a pilot program 
under which the enterprise shall annually engage, for each 
of the next 5 consecutive years, in at least one front-end 
risk-transfer transaction for which at least 75 percent of 
the credit risk transferred is transferred to bank or non- 
bank mortgage originators having under $10,000,000,000 
in assets. 
(b) REPORT.—Not later than the conclusion of the 
fifth year of the pilot program, the Director shall submit 
a report to the Congress that assesses the extent to which 
the pilot program under this section has— 
(1) transferred credit risk from the Federal 
Government to mortgage originators; and 
(2) resulted in increased participation in credit 
risk-transfer transactions by bank or non-bank 
mortgage originators having under $10,000,000,000 
in assets. 
(c) EXTENSION OF PROGRAM.—Based on the assess-
ments in the report required under subsection (b), the Di-
rector may extend the program beyond its fifth year of 
operation if the Director determines that such extension 
would be in the public interest. 
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SEC. 4. PILOT PROGRAM FOR MORTGAGE INSURANCE RISK 
TRANSFER. 
(a) IN GENERAL.—Not later than one year after the 
date of the enactment of this Act, the Director shall re-
quire each enterprise to establish a pilot program to in-
crease the amount of risk that is shared by the enterprise 
using private mortgage insurance. 
(b) PROGRAM REQUIREMENTS.—Each pilot program 
established pursuant to subsection (a) shall meet the fol-
lowing requirements: 
(1) DURATION.—The pilot program shall have 
a duration of 5 years. 
(2) AMOUNT OF MORTGAGE PURCHASES.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), in each year each enterprise 
shall purchase under its pilot program sufficient 
qualifying loans or pools of qualifying loans 
such that the aggregate unpaid principal bal-
ance of all qualifying loans or loan pools pur-
chased by the enterprise is not less than 
$25,000,000,000. 
(B) EXCEPTION.—The amount of quali-
fying loans that each enterprise is required to 
purchase each year under paragraph (1) may be 
reduced if the Director and the Secretary of the 
Treasury jointly— 
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(i) make a determination that such a 
reduction is necessary to prevent an ad-
verse impact to the housing market; and 
(ii) submit to the Congress a report 
describing the justification for the deter-
mination referred to in clause (i). 
(3) SELECTION OF MORTGAGE INSURANCE.— 
For each transaction under the pilot program involv-
ing a qualifying loan, the loan originator shall select 
an eligible mortgage insurance provider or providers, 
consistent with existing market practice. 
(4) MORTGAGE INSURANCE PREMIUMS.—Mort-
gage insurance premiums applicable to qualifying 
loans purchased by an enterprise under the pilot 
program shall be subject to requirements and limita-
tions under applicable State laws. 
(5) GUARANTEE FEES.—Each enterprise shall 
set and publish guarantee fees, including up-front 
delivery fees and loan level price adjustments, com-
mensurate with the enterprise’s reduced credit risk 
resulting from any new risk-transfer transaction 
under the pilot program. 
(c) REPORT.—Not later than the conclusion of the 
fifth year of the pilot program, the Director shall submit 
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a report to the Congress that assesses the extent to which 
the pilot program under this section has— 
(1) transferred credit risk from the enterprises 
to the private sector; 
(2) resulted in reduced guarantee fees for mort-
gage originators; and 
(3) produced benefits or costs for borrowers 
under qualifying loans under the program. 
(d) EXTENSION OF PROGRAM.—Based on the assess-
ments in the report required under subsection (c), the Di-
rector may extend the program beyond its fifth year of 
operation if the Director determines that such extension 
would be in the public interest. 
(e) MITIGATING COUNTERPARTY RISK.—Nothing in 
this section shall prevent the Director from establishing 
additional requirements on participants in the pilot pro-
gram necessary to mitigate counterparty risk to the enter-
prises comparable to other credit risk-transfer structures. 
(f) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
(1) DIRECTOR.—The term ‘‘Director’’ means 
the Director of the Federal Housing Finance Agen-
cy. 
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(2) ELIGIBLE
MORTGAGE
INSURANCE
PRO-
VIDER.—The term ‘‘eligible mortgage insurance pro-
vider’’ means a company that— 
(A) is regulated as a mortgage guaranty 
insurance company by its State of domicile; 
(B) provides qualifying mortgage insur-
ance; and 
(C) satisfies— 
(i)(I) minimum requirements estab-
lished or recognized by the Director, pur-
suant to public notice and comment, with 
respect to capital, leverage, and reserve re-
quirements; or 
(II) Private Mortgage Insurer Eligi-
bility Requirements published by the enter-
prises on April 17, 2015; and 
(ii) any additional requirements added 
by subsection (e) of this section. 
(3) ENTERPRISE.—The term ‘‘enterprise’’ has 
the meaning given such term in section 1303 of the 
Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (12 U.S.C. 4502). 
(4) QUALIFYING LOAN.—The term ‘‘qualifying 
loan’’ means a first mortgage loan that— 
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(A) is secured by a one- to four-family res-
idence; and 
(B) is subject to qualifying mortgage in-
surance. 
(5) QUALIFYING MORTGAGE INSURANCE.—The 
term ‘‘qualifying mortgage insurance’’ means, with 
respect to a qualifying loan, primary mortgage guar-
anty insurance for such qualifying loan that— 
(A) is placed at the time the qualifying 
loan is originated; 
(B) guarantees or insures that portion of 
the unpaid principal balance of the qualifying 
loan that is in excess of 50 percent of the value 
of the property securing the mortgage; and 
(C) is provided by an eligible mortgage in-
surance provider. 
SEC. 5. RULE OF CONSTRUCTION. 
Nothing in this Act or the amendments made by this 
Act shall be affected solely by termination of the con-
servatorship of an enterprise pursuant to section 1367 of 
the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (12 U.S.C. 4617). 
Æ 
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