SEC. 2. INSURED DEPOSITORY INSTITUTION CAPITAL RE-
QUIREMENTS FOR TRANSFERS OF MORT-
GAGE LOANS.
(a) ACCOUNTING PRINCIPLES.—The accounting prin-
ciples applicable to the transfer of a mortgage loan with
recourse contained in reports or statements required to be
filed with Federal banking agencies by a qualified insured
depository institution shall be consistent with generally ac-
cepted accounting principles.
(b) CAPITAL AND RESERVE REQUIREMENTS.—With
respect to the transfer of a mortgage loan with recourse
that is a sale under generally accepted accounting prin-
ciples, each qualified insured depository institution shall—
(1) establish and maintain a reserve equal to an
amount sufficient to meet the reasonable estimated
liability of the institution under the recourse ar-
rangement; and
(2) treat as an asset (for purposes of applicable
capital standards and other capital measures, includ-
ing risk-based capital requirements) only the maxi-
mum amount at risk under the recourse arrange-
ment.
(c) QUALIFIED INSTITUTIONS DEFINED.—An in-
sured depository institution is a qualified insured deposi-
tory institution for purposes of this section if, without re-
gard to the accounting principles or capital requirements
referred to in subsections (a) and (b), the institution is—
(1) well capitalized; or
(2) with the approval, by regulation or order, of
the appropriate Federal banking agency, adequately
capitalized.
(d) AGGREGATE AMOUNT OF RECOURSE.—The total
outstanding amount at risk with respect to transfers of
mortgage loans under subsections (a) and (b) (together
with the amount at risk under any provisions of law sub-
stantially similar to subsections (a) and (b)) shall not ex-
ceed—
(1) the amount which is equal to 15 percent of
the risk-based capital of the institution; or
(2) such greater amount, as established by the
appropriate Federal banking agency by regulation or
order.
(e) INSTITUTIONS THAT CEASE TO BE QUALIFIED
OR EXCEED AGGREGATE LIMITS.—If an insured deposi-
tory institution ceases to be a qualified insured depository
institution or exceeds the limits under subsection (d), this
section shall remain applicable to any transfer of mortgage
loans that occurred at a time when the institution was
qualified and had not exceeded such limit.
(f) PROMPT CORRECTIVE ACTION NOT AFFECTED.—
The capital of an insured depository institution shall be
computed without regard to this section in determining
whether the institution is less than well capitalized.
(g) REGULATIONS REQUIRED.—Before the end of the
180-day period beginning on the date of the enactment
of this Act, each appropriate Federal banking agency shall
prescribe final regulations implementing this section.
(h) ALTERNATIVE SYSTEM PERMITTED.—
(1) IN GENERAL.—At the discretion of the ap-
propriate Federal banking agency, this section shall
not apply if the regulations of the agency provide
that the aggregate amount of capital and reserves
required with respect to the transfer of mortgage
loans with recourse does not exceed the aggregate
amount of capital and reserves that would be re-
quired under subsection (b).
(2) 
EXISTING
TRANSACTIONS
NOT
AF-
FECTED.—Notwithstanding paragraph (1), this sec-
tion shall remain in effect with respect to transfers
of mortgage loans with recourse by qualified insured
depository institutions occurring before the effective
date of regulations referred to in paragraph (1).
(i) DEFINITIONS.—The following definitions apply
for purposes of this section:
(1) ADEQUATELY
CAPITALIZED.—The term
‘‘adequately capitalized’’ has the same meaning as in
section 38(b) of the Federal Deposit Insurance Act.
(2) APPROPRIATE
FEDERAL
BANKING
AGEN-
CY.—The term ‘‘appropriate Federal banking agen-
cy’’ has the same meaning as in section 3 of the
Federal Deposit Insurance Act.
(3) CAPITAL STANDARDS.—The term ‘‘capital
standards’’ has the same meaning as in section
38(c) of the Federal Deposit Insurance Act.
(4) FEDERAL BANKING AGENCIES.—The term
‘‘Federal banking agencies’’ has the same meaning
as in section 3 of the Federal Deposit Insurance
Act.
(5) INSURED DEPOSITORY INSTITUTION.—The
term ‘‘insured depository institution’’ has the same
meaning as in section 3 of the Federal Deposit In-
surance Act.
(6) OTHER
CAPITAL
MEASURES.—The term
‘‘other capital measures’’ has the same meaning as
in section 38(c) of the Federal Deposit Insurance
Act.
(7) RECOURSE.—The term ‘‘recourse’’ has the
meaning given to such term under generally accept-
ed accounting principles.
(8) MORTGAGE
LOAN.—The term ‘‘mortgage
loan’’ means any—
(A) note or certificate of interest or par-
ticipation in a note (including any rights de-
signed to assure servicing of, or the timeliness
of receipt by the holders of such notes, certifi-
cates, or participation of amounts payable
under such notes, certificates or participation)
that is principally secured by an interest in real
property; or
(B) any security (within the meaning of
section 8 of the Securities Exchange Act of
1934) that is secured by one or more notes de-
scribed in subparagraph (A) or certificates of
interest or participation in such notes (with or
without recourse to issuers thereof) and that,
by its terms, provides for payments of principal
in relation to payments, or reasonable projec-
tions of payments, on notes described in sub-
paragraph (A) or certificates of interest or par-
ticipation in such notes.
(9) WELL CAPITALIZED.—The term ‘‘well cap-
italized’’ has the same meaning as in section 38(b)
of the Federal Deposit Insurance Act.
SEC. 3. AMENDMENT TO DEFINITION OF MORTGAGE RE-
LATED SECURITY.
Section 3(a)(41)(A)(i) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)(41)(A)(i)) is amended by in-
serting before the semicolon ‘‘, or on 1 or more parcels
of real estate upon which is located one or more commer-
cial structures’’.
SEC. 4. AUTHORITY TO EXEMPT COMMERCIAL MORTGAGE
RELATED SECURITIES TRANSACTIONS FROM
PROHIBITED TRANSACTION RULES.
The Secretary of Labor, in consultation with the Sec-
retary of the Treasury, shall exempt, either uncondition-
ally or on stated terms and conditions, transactions involv-
ing commercial mortgage related securities (as such term
is defined in section 3(a)(41) of the Securities Exchange
Act of 1934, as amended by section 3 of this Act) from—
(1) the restrictions of sections 406(a) and
407(a) of the Employee Retirement Income Security
Act of 1974; and
(2) the taxes imposed under section 4975 of the
Internal Revenue Code of 1986.