I 
109TH CONGRESS 
1ST SESSION H. R. 1461 
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 
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. Assessments. 
Sec. 106. Examiners and accountants. 
Sec. 107. Prohibition and withholding of executive compensation. 
Sec. 108. Reviews of regulated entities. 
Sec. 109. Regulations and orders. 
Sec. 110. Risk-based capital requirements. 
Sec. 111. Minimum and critical capital levels. 
Sec. 112. Review of and authority over enterprise assets and obligations. 
Sec. 113. Corporate governance of enterprises. 
Sec. 114. Conforming amendments. 
Subtitle B—Improvement of Mission Supervision 
Sec. 121. Transfer of program and activities approval and housing goal over-
sight. 
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. Establishment of housing goals. 
Sec. 126. Home purchase goal and additions, modifications, and rescissions to 
goals. 
Sec. 127. Other requirements. 
Sec. 128. Monitoring and enforcing compliance with housing goals. 
Sec. 129. Enforcement. 
Sec. 130. 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. Enforcement and jurisdiction. 
Sec. 164. Civil money penalties. 
Sec. 165. Removal and prohibition authority. 
Sec. 166. Criminal penalty. 
Sec. 167. 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 
enterprises. 
Sec. 183. Conforming and technical amendments.
Sec. 184. 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. Debt issuing facility. 
Sec. 205. Securities and Exchange Commission disclosure. 
Sec. 206. Community financial institution members. 
TITLE III—TRANSFER OF FUNCTIONS, PERSONNEL, AND PROP-
ERTY OF OFFICE OF FEDERAL HOUSING ENTERPRISE OVER-
SIGHT AND FEDERAL HOUSING FINANCE BOARD 
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. 
SEC. 2. DEFINITIONS. 
Section 1303 of the Housing and Community Devel-
opment Act of 1992 (12 U.S.C. 4502) is amended— 
(1) by striking ‘‘an enterprise’’ each place such 
term appears (except in paragraphs (4), (13)(A), 
and (18)) 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 
Federal Housing Enterprise Oversight of the De-
partment 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 
appears 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 (19) through (22), respectively; 
(7) by striking paragraphs (14) and (15) and 
inserting the following new paragraphs: 
‘‘(17) REGULATED ENTITY.—The term ‘regu-
lated entity’ means— 
‘‘(A) the Federal National Mortgage Asso-
ciation and any affiliate thereof; 
‘‘(B) the Federal Home Loan Mortgage 
Corporation and any affiliate thereof; and 
‘‘(C) each Federal home loan bank. 
‘‘(18) 
REGULATED
ENTITY-AFFILIATED 
PARTY.—The term ‘regulated entity-affiliated party’ 
means— 
‘‘(A) any director, officer, employee, or 
controlling stockholder of, or agent for, a regu-
lated 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; and 
‘‘(C) any independent contractor for a reg-
ulated entity (including any attorney, appraiser, 
or accountant), if— 
‘‘(i) the independent contractor know-
ingly or recklessly participates in— 
‘‘(I) any violation of any law or 
regulation; 
‘‘(II) any breach of fiduciary 
duty; or 
‘‘(III) any unsafe or unsound 
practice; and 
‘‘(ii) such violation, breach, or prac-
tice caused, or is likely to cause, more than 
a minimal financial loss to, or a significant 
adverse effect on, the regulated entity; 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 (2) through 
(13) as paragraphs (5) through (16), respectively; 
and 
(9) 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 
Corporation Act; and 
‘‘(C) the Federal Home Loan Bank Act. 
‘‘(4) BOARD.—The term ‘Board’ means the 
Housing Finance Oversight Board established under 
section 1313.’’.
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. 
The Housing and Community Development Act of 
1992 (12 U.S.C. 4501 et seq.) is amended by striking sec-
tions 1311 and 1312 and inserting the following: 
‘‘SEC. 1311. ESTABLISHMENT OF THE FEDERAL HOUSING 
FINANCE AGENCY. 
‘‘(a) ESTABLISHMENT.—There is established the 
Federal 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
AND 
FREDDIE MAC, FEDERAL HOME LOAN BANKS, AND 
FEDERAL
HOME
LOAN
BANK
FINANCE
CORPORA-
TION.—The Director of the Federal Housing Fi-
nance Agency shall have general supervisory and
regulatory authority over each regulated entity and 
the Federal Home Loan Bank Finance Corporation, 
and shall exercise such general regulatory authority, 
including such duties and authorities 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 Di-
rector to take actions under subtitles B and C shall not 
in any way limit the general supervisory and regulatory 
authority granted to the Director under subsection (b). 
‘‘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 dem-
onstrated understanding of financial management or 
oversight, and have a demonstrated understanding 
of capital markets, including the mortgage securities 
markets and housing finance.
‘‘(2) TERM.—The Director shall be appointed 
for a term of 5 years. 
‘‘(3) VACANCY.—A vacancy in the position of 
Director 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 Director appointed to fill such vacancy 
shall be appointed 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 person serving 
as the Director of the Office of Federal Housing En-
terprise Oversight of the Department of Housing 
and Urban Development on the effective date under 
section 184 of the Federal Housing Finance Reform 
Act of 2005, shall serve as the Director until a suc-
cessor has been appointed under paragraph (1). 
‘‘(c) DEPUTY DIRECTOR OF THE DIVISION OF EN-
TERPRISE REGULATION.— 
‘‘(1) IN GENERAL.—The Agency shall have a 
Deputy Director of the Division of Enterprise Regu-
lation, who shall be designated by the Director from 
among individuals who are citizens of the United 
States, have a demonstrated understanding of finan-
cial management or oversight, and have a dem-
onstrated understanding of mortgage securities mar-
kets 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 
oversight of the enterprises as the Director shall pre-
scribe. 
‘‘(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 designated by 
the Director from among individuals who are citi-
zens of the United States, have a demonstrated un-
derstanding of financial management or oversight, 
and have a demonstrated understanding of the Fed-
eral Home Loan Bank System and housing finance. 
‘‘(2) FUNCTIONS.—The Deputy Director of the 
Division of Federal Home Loan Bank Regulation 
shall have such functions, powers, and duties with
respect 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 des-
ignated by the Director from among individuals who 
are citizens of the United States, and have a dem-
onstrated understanding of the housing markets and 
housing finance. 
‘‘(2) FUNCTIONS.—The Deputy Director for 
Housing shall have such functions, powers, and du-
ties with respect to the oversight of the housing mis-
sion and goals of the enterprises as the Director 
shall prescribe. 
‘‘(f) ACTING DIRECTOR.—In the event of the death, 
resignation, sickness, or absence of the Director, the 
Board shall, by a majority vote, designate either the Dep-
uty Director of the Division of Enterprise Regulation, the 
Deputy Director of the Division of Federal Home Loan 
Bank Regulation, or the Deputy Director for Housing, to 
serve as acting Director until the return of the Director, 
or the appointment of a successor pursuant to subsection 
(b). 
‘‘(g) LIMITATIONS.—The Director and each of the 
Deputy 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 di-
rector of any regulated entity, or regulated entity-af-
filiated party, at any time during the 3-year period 
ending on the date of appointment of such individual 
as Director or Deputy Director.’’. 
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 prudential operations 
of each regulated entity, on a consolidated 
basis; and 
‘‘(B) to ensure that—
‘‘(i) each regulated entity operates in 
a safe and sound manner, including main-
tenance of adequate capital and internal 
controls; 
‘‘(ii) the operations and activities of 
each regulated entity foster liquid, effi-
cient, competitive, and resilient national 
housing finance markets (including activi-
ties relating to mortgages on housing for 
low- and moderate- income families involv-
ing a reasonable economic return that may 
be less than the return earned on other ac-
tivities); 
‘‘(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 activi-
ties 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 control-
ling 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 and employees of the Agency any 
of the functions, powers, or duties of the Director, as the 
Director considers appropriate. 
‘‘(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
respect to any matter under this title or any other 
applicable 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 
Procedure. 
‘‘SEC. 1313A. PRUDENTIAL MANAGEMENT AND OPERATIONS 
STANDARDS. 
‘‘(a) STANDARDS.—The Director shall establish 
standards, by regulation, guideline, or order, for each reg-
ulated 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 regu-
lated entity, to ensure that they are consistent with 
the purposes of this Act and the Federal National 
Mortgage Association Charter Act, the Federal 
Home Loan Mortgage Corporation Act, or the Fed-
eral Home Loan Bank Act, as appropriate; 
‘‘(9) maintenance of adequate records, in ac-
cordance with consistent accounting policies and 
practices that enable the Director to evaluate the fi-
nancial condition of the regulated entity; 
‘‘(10) issuance of subordinated debt by that 
particular regulated entity, as the Director considers 
necessary; 
‘‘(11) overall risk management processes, in-
cluding adequacy of oversight by senior management 
and the board of directors and of processes and poli-
cies to identify, measure, monitor, and control mate-
rial risks, including reputational risks, and for ade-
quate, 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 al-
lowed under subparagraph (C); and 
‘‘(ii) if such standard is established by 
guideline, the Director may require the 
regulated entity to submit a plan described 
in clause (i). 
‘‘(B) 
CONTENTS.—Any 
plan 
required 
under subparagraph (A) shall specify the ac-
tions that the regulated entity will take to cor-
rect the deficiency. If the regulated entity is
undercapitalized, the plan may be a part of the 
capital restoration plan for the regulated entity 
under section 1369C. 
‘‘(C) DEADLINES
FOR
SUBMISSION
AND 
REVIEW.—The Director shall by regulation es-
tablish 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 
determines 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 al-
lowed under paragraph (1)(C), or fails in any mate-
rial respect to implement a plan accepted by the Di-
rector, the following shall apply: