I 
112TH CONGRESS 
1ST SESSION H. R. 2413 
To establish a sustainable Federal Secondary Market Facility for Residential 
Mortgages that is financed by private capital, to terminate the 
conservatorships of Fannie Mae and Freddie Mac and repeal the charter 
Acts of such enterprises, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 6, 2011 
Mr. GARY G. MILLER of California (for himself and Mrs. MCCARTHY of New 
York) introduced the following bill; which was referred to the Committee 
on Financial Services 
A BILL 
To establish a sustainable Federal Secondary Market Facility 
for Residential Mortgages that is financed by private 
capital, to terminate the conservatorships of Fannie Mae 
and Freddie Mac and repeal the charter Acts of such 
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 
‘‘Secondary Market Facility for Residential Mortgages Act 
of 2011’’. 
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(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title and table of contents. 
Sec. 2. Purpose. 
Sec. 3. Definitions. 
TITLE I—SECONDARY MARKET FACILITY FOR RESIDENTIAL 
MORTGAGES 
Sec. 101. Establishment of Secondary Market Facility for Residential Mort-
gages. 
Sec. 102. Limitations on mortgage purchases. 
Sec. 103. Reduction of market share. 
Sec. 104. Capital standards. 
Sec. 105. Guarantee fees. 
Sec. 106. Federal insurance backstop. 
Sec. 107. Deficit reduction. 
Sec. 108. Portfolio reduction. 
Sec. 109. Initial standards. 
TITLE II—ENDING THE CONSERVATORSHIPS OF FANNIE MAE 
AND FREDDIE MAC 
Sec. 201. Treasury plan. 
Sec. 202. Implementation of plan. 
Sec. 203. Repeal of charter Acts. 
TITLE III—FEDERAL HOUSING FINANCE AGENCY 
Sec. 301. Establishment of Federal Housing Finance Agency Board. 
Sec. 302. Supervision and regulation of Facility by FHFA. 
Sec. 303. Conforming amendments. 
SEC. 2. PURPOSE. 
The purpose of this Act is to establish a Federal sec-
ondary market facility for residential mortgages, to pro-
vide that the operations thereof shall be financed by pri-
vate capital, and to authorize such facility to— 
(1) provide stability in the secondary market 
for residential mortgages; 
(2) respond appropriately to the private capital 
market; 
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(3) maintain the secondary market for residen-
tial mortgages, including the ‘‘TBA’’ (to-be-an-
nounced) market; 
(4) improve the distribution of investment cap-
ital available for residential mortgage financing and 
as a result facilitate access to mortgage credit to 
qualified borrowers throughout the United States 
(including in central cities, rural areas, high-cost 
areas, and underserved areas); and 
(5) manage and liquidate the mortgage port-
folios of Fannie Mae and Freddie Mac in an orderly 
manner, in a way that contributes to the stability of 
the housing market and with minimum loss and 
maximum profit to the Federal Government. 
SEC. 3. DEFINITIONS. 
For purposes of this Act, the following definitions 
shall apply: 
(1) APPROVED SELLER.—The term ‘‘approved 
seller’’ means a seller of a mortgage who has been 
approved by the Facility in accordance with the 
standards established by the FHFA Board pursuant 
to section 102(j). 
(2) 
CONSERVATORSHIP.—The 
term 
‘‘con-
servatorship’’ means, with respect to an enterprise, 
the conservatorship of the enterprise established 
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pursuant to section 1367 of the Federal Housing 
Enterprises Financial Safety and Soundness Act of 
1992 (12 U.S.C. 4617) and in effect on the date of 
the enactment of this Act. 
(3) 
ENTERPRISE.—The 
term 
‘‘enterprise’’ 
means— 
(A) the Federal National Mortgage Asso-
ciation; and 
(B) the Federal Home Loan Mortgage 
Corporation. 
(4) FACILITY.—The term ‘‘Facility’’ means the 
Secondary Market Facility for Residential Mort-
gages established under section 101 of this Act. 
(5) FACILITY-AFFILIATED
PARTY.—The term 
‘‘Facility-affiliated party’’ means— 
(A) any director, officer, or employee of, or 
agent for, the Facility; 
(B) any affiliate, consultant, or joint ven-
ture partner of the Facility, and any other per-
son, as determined by the FHFA Board (by 
regulation or on a case-by-case basis) that par-
ticipates in the conduct of the affairs of the Fa-
cility; and 
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(C) any independent contractor for the Fa-
cility (including any attorney, appraiser, or ac-
countant), 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 practice 
caused, or is likely to cause, more than a 
minimal financial loss to, or a significant 
adverse effect on, the Facility. 
(6) FACILITY
BOARD.—The term ‘‘Facility 
Board’’ means the Board of Directors of the Sec-
ondary Market Facility for Residential Mortgages, 
established under section 101. 
(7) FHFA BOARD.—The term ‘‘FHFA Board’’ 
means the Federal Housing Finance Agency Board 
established under section 1312 of the Federal Hous-
ing Enterprises Financial Safety and Soundness Act 
of 1992, as amended by section 301 of this Act. 
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(8) RESIDENTIAL MORTGAGE.—The term ‘‘resi-
dential mortgage’’ means a mortgage on single-fam-
ily housing or multifamily housing. 
(9) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of the Treasury. 
(10) 
SINGLE-FAMILY
HOUSING.—The 
term 
‘‘single-family housing’’ means a residence consisting 
of 1 to 4 dwelling units. 
(11) MULTIFAMILY HOUSING.—The term ‘‘mul-
tifamily housing’’ means a residence consisting of 
more than 4 dwelling units. 
TITLE I—SECONDARY MARKET 
FACILITY FOR RESIDENTIAL 
MORTGAGES 
SEC. 101. ESTABLISHMENT OF SECONDARY MARKET FACIL-
ITY FOR RESIDENTIAL MORTGAGES. 
(a) ESTABLISHMENT.—There is hereby established a 
Secondary Market Facility for Residential Mortgages, 
which shall be a body corporate without capital stock. 
(b) PURPOSE.—The purpose of the Facility shall be 
to ensure that capital for residential mortgages is available 
to qualified homebuyers throughout the United States, 
without regard to region, area, or other geographic loca-
tion. 
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(c) FEDERAL STATUS.—The Facility shall be an in-
strumentality of the Federal Government. 
(d) BOARD OF DIRECTORS.— 
(1) ESTABLISHMENT; APPOINTMENT.—The Fa-
cility shall be under the direction of a Board of Di-
rectors, which shall consist of 5 members who shall 
be appointed by the President, and shall not be offi-
cers or employees of the Federal Government. The 
initial members of the Facility Board shall be ap-
pointed not later than the expiration of the 6-month 
period beginning on the date of the enactment of 
this Act. 
(2) QUALIFICATIONS.—Of the members ap-
pointed to the Facility Board— 
(A) 3 members shall possess extensive ex-
perience and expertise in financial management 
or oversight, capital markets (including debt 
markets), the secondary mortgage market, and 
mortgage-backed securities; and 
(B) 2 members shall possess extensive ex-
perience and expertise in mortgage finance (in-
cluding single-family and multifamily housing 
mortgage finance and with credit unions and 
small institutions). 
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(3) POLITICAL AFFILIATION.—Not more than 
three members of the Facility Board may be mem-
bers of the same political party. 
(4) TERM; REMOVAL.—Each member of the Fa-
cility Board shall be appointed for a term of 5 years, 
except that any member may be removed from office 
by the President for good cause. 
(5) CHAIRPERSON.—The Chairperson of the 
Facility Board shall be designated by the President 
at the time of appointment. The Chairperson shall 
designate another member to serve as Acting Chair-
person during the absence or disability of the Chair-
person. 
(6) VACANCIES.—A member of the Facility 
Board appointed to fill a vacancy occurring before 
the expiration of the term for which the member’s 
predecessor was appointed shall be appointed only 
for the remainder of that term. 
(7) CONTINUATION OF MEMBERSHIP.—A mem-
ber of the Facility Board may serve after the expira-
tion of the member’s term until a successor has been 
appointed. 
(e) MORTGAGE-RELATED ACTIVITIES.—The business 
of the Facility shall be limited to the following functions, 
and such activities as may be incident to such functions: 
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(1) BORROWING.—Borrowing, giving security, 
paying interest and other return, and issuing notes, 
debentures, bonds, and other obligations and securi-
ties to fund the purchase of residential mortgages, 
and to achieve initial capitalization levels as required 
by the FHFA Board. 
(2) SINGLE-FAMILY
MORTGAGE
PURCHASE.— 
The purchase of residential mortgages on single- 
family housing that are originated by approved sell-
ers pursuant to section 102(j). 
(3) MULTIFAMILY MORTGAGE PURCHASE.—The 
purchase of residential mortgages on multifamily 
housing that are originated by approved sellers pur-
suant to section 102(j). 
(4) MAINTENANCE
OF
TBA
MARKET.—Main-
taining the ‘‘to-be-announced’’ market for securities 
based on or backed by residential mortgages on sin-
gle-family or multifamily housing. 
(5) MORTGAGE-BACKED SECURITIES.—Issuing, 
and guaranteeing timely payment of principal and 
interest on, securities and other obligations based on 
or backed by a pool of residential mortgages pur-
chased by the Facility, whose quality and character-
istics are interchangeable with securities issued by 
the enterprises before the date of the enactment of 
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this Act, including applicable rules related to the cal-
culation of net capital requirements. 
(6) COLLECTION OF FEES.—The collection of 
guarantee fees established under section 105 in con-
nection with mortgage purchases and reinsurance 
fees established under section 106(a). 
(7) RISK MANAGEMENT.—The management of 
interest rate risk associated with operations of the 
Facility. 
(f) PROHIBITION ON MORTGAGE ORIGINATION.—The 
Facility shall not engage in mortgage origination. 
(g) SELF-SUPPORTING.—The operations of the Facil-
ity shall be funded only by income derived from its oper-
ations, after obligations for capital reserves in accordance 
with section 104 and for the Reinsurance Fund under sec-
tion 106(b) are met. 
(h) EQUAL ACCESS
TO PRODUCTS.—The FHFA 
Board shall, by regulation, require that the Facility oper-
ate to carry out the purposes under subsection (b) in a 
manner that provides equal access at all times, by all eligi-
ble or qualified and approved residential mortgage lenders, 
and all markets, to products of the Facility. 
(i) PERSONNEL.—The Facility Board may fix the 
number and basic pay of, and appoint and direct, all em-
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ployees of the Facility without regard to the provisions 
of title 5, United States Code. 
(j) LEASING AUTHORITY.—For the purpose of miti-
gating losses to the taxpayer and stabilizing home prices, 
the Facility may market for rental any real-estate owned 
properties and assets of the enterprises that are trans-
ferred to the Facility pursuant to section 201(b) and enter 
into such lease agreements with lessees as the Facility 
Board determines appropriate, prior to sale of such prop-
erties and assets, except that any such lease agreement 
shall terminate before the expiration of the 5-year period 
beginning upon the establishment of the Facility. 
(k) BUDGETS; AUDITS; MANAGEMENT REPORTS; OB-
LIGATIONS.—The Facility shall be considered a wholly 
owned Government corporation for purposes of chapter 91 
of title 31, United States Code, but not including section 
9108 of such chapter. 
(l) GENERAL POWERS.—The Facility may— 
(1) adopt, amend, and repeal bylaws; 
(2) adopt and use a corporate seal; 
(3) enter into contracts, incur liabilities, make 
guarantees, borrow money, issue notes, bonds, and 
other obligations; 
(4) sue or be sued in its own capacity; and 
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(5) purchase, receive, hold, and use real and 
personal property and other assets necessary for the 
conduct of its operations. 
SEC. 102. LIMITATIONS ON MORTGAGE PURCHASES. 
(a) SAFE AND SOUND MORTGAGES.— 
(1) LIMITATION ON FACILITY PURCHASES.—To 
limit the risk assumed by the Facility, the FHFA 
Board shall, by regulation, limit the residential 
mortgages that may be purchased by the Facility to 
safe and sound mortgages, as such term is defined 
pursuant to paragraph (2), within such mortgage 
product types and classifications as are approved in 
advance by the FHFA Board pursuant to paragraph 
(3). 
(2) DEFINITION.—The FHFA Board shall, by 
regulation, define the term ‘‘safe and sound residen-
tial mortgages’’ for purposes of this subsection, 
which shall— 
(A) be established by the FHFA Board; 
(B) be limited to mortgages that are of a 
quality, type, and class determined by the 
FHFA Board to be appropriate to provide ade-
quate liquidity in the housing finance markets 
and that serve a range of residential mortga-
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gors and residential housing markets, which 
shall include— 
(i) mortgages having a term to matu-
rity of 30 years or less and a fixed rate of 
interest over the entire term of mortgage; 
(ii) mortgages for single-family hous-
ing and mortgages for multifamily housing; 
(iii) programs for whole loans and cer-
tificates; and 
(iv) other mortgages that are not in-
sured under the National Housing Act and 
not securitized through securities guaran-
teed by the Government National Mortgage 
Association; 
(C) incorporate— 
(i) the outstanding balance require-
ments for single-family mortgages under 
subsection (b) of this section; 
(ii) the conforming loan limits for sin-
gle-family mortgages under subsection (c) 
of this section; 
(iii) the downpayment requirements 
for single-family mortgages under sub-
section (d) of this section; 
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(iv) the requirements for adjustable 
rate mortgages under subsection (e) of this 
section; 
(v) the representation and warranty 
requirements under subsection (f) of this 
section; 
(vi) the underwriting standards under 
subsection (g) of this section; and 
(vii) the property valuation standards 
under subsection (h) of this section. 
(3) PRODUCT APPROVAL.—The FHFA Board 
shall require the Facility to obtain the approval of 
the FHFA Board for any product of the Facility be-
fore initially offering the product. The FHFA Board 
shall establish standards for approval of products, 
which shall provide for conditional approval and pro-
cedures for submission of requests for such approval. 
(b) OUTSTANDING BALANCE REQUIREMENTS
FOR 
SINGLE-FAMILY MORTGAGES.—The regulations of the 
FHFA Board pursuant to subsection (a) shall ensure that 
a mortgage on single-family housing shall not be consid-
ered a safe and sound mortgage if the outstanding prin-
cipal balance under the mortgage at the time of purchase 
by the Facility exceeds 80 percent of the sale price of the 
single-family residence securing the mortgage, unless— 
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(1) the seller retains a participation of not less 
than 10 percent of the sale price of the single-family 
residence securing the mortgage, and the aggregate 
amount any outstanding principal balance (including 
such participation) shall not exceed 90 percent of 
the sale price of the single-family residence securing 
the mortgage; 
(2) for such period and under such cir-
cumstances as the Facility Board may require, the 
seller agrees to repurchase or replace the mortgage 
upon demand of the Facility in the event that the 
mortgage is in default; 
(3) the portion of the outstanding principal bal-
ance of the mortgage that exceeds such 80 percent 
is guaranteed or insured by a qualified insurer, as 
determined by the Facility in accordance with such 
standards and requirements as the FHFA Board 
shall establish; or 
(4) the mortgage is financed in part through a 
shared equity arrangement under which inde-
pendent, private sector investors invest, together 
with the mortgagors, equity funds for such resi-
dences in the form of cash (or its equivalent) paid 
on account of the property and thereby share in the 
ownership of such residences, except that— 
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(A) the mortgagor shall retain an owner-
ship in the residence under the shared equity 
arrangement that is not less than 50 percent; 
and 
(B) such private sector financing may pro-
vide not more than half of the minimum down-
payment amount required under subsection (d). 
(c) CONFORMING LOAN LIMITS FOR SINGLE-FAMILY 
MORTGAGES.—The regulations of the FHFA Board pur-
suant to subsection (a) shall ensure that a mortgage on 
single-family housing of a particular size shall not be con-
sidered a safe and sound mortgage if the mortgage has 
an original principal obligation that exceeds the higher 
of— 
(1) the maximum dollar amount limitation for 
such fiscal year governing the maximum original 
principal obligation of mortgages that are purchased 
by the Federal Home Loan Mortgage Corporation 
for such size residence, as determined under section 
305(a)(2) of the Federal Home Loan Mortgage Cor-
poration Act (12 U.S.C. 1454(a)(2)), or 
(2) 125 percent of the area median price for a 
residence of the applicable size, but in no case to ex-
ceed 175 percent of the limitation for such year de-
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termined under such section 305(a)(2) for a resi-
dence of the applicable size, 
except that, for mortgages originated in any year, if the 
limitation for such year on the maximum original principal 
obligation of a mortgage that may be purchased by the 
Federal National Mortgage Association or the Federal 
Home Loan Mortgage Corporation determined under sec-
tion 302(b)(2) of the Federal National Mortgage Associa-
tion Charter Act (12 U.S.C. 1717(b)(2)) or section 
305(a)(2) of the Federal Home Loan Mortgage Corpora-
tion Act (12 U.S.C. 1754(a)(2)) respectively, for any size 
residence for any area is less than such maximum original 
principal obligation limitation that was in effect for such 
size residence for such area for 2008 pursuant to section 
201 of the Economic Stimulus Act of 2008 (Public Law 
110–185; 122 Stat. 619), notwithstanding any other pro-
vision of law or of this Act, the limitation under this sub-
section on the maximum original principal obligation of 
a mortgage for such size residence for such area that may 
be considered a safe and sound mortgage shall be such 
maximum limitation in effect for such size residence for 
such area for 2008. 
(d) DOWNPAYMENT REQUIREMENT.—The regula-
tions of the FHFA Board pursuant to subsection (a) shall 
ensure that, notwithstanding any other provision of this 
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title, a mortgage on single-family housing shall not be con-
sidered a safe and sound mortgage unless the mortgagor 
has paid on account of the property subject to the mort-
gage, in cash (or its equivalent), an amount equal to not 
less than 5 percent of the sale price of the property or 
such larger amount as the FHFA Board may establish 
to mitigate risks and prevent losses to the Facility. 
(e) ADJUSTABLE RATE MORTGAGES.—The regula-
tions of the FHFA Board pursuant to subsection (a) shall 
provide that a mortgage on single-family housing having 
an interest rate that is not fixed at a single annual per-
centage rate for the entire term of the mortgage shall not 
be considered a safe and sound mortgage unless such qual-
ity, type, and class of non-fixed rate mortgages has been 
approved for purposes of this section by the FHFA Board 
as consistent with the safety and soundness of the Facility 
and the mortgage finance system. 
(f) REPRESENTATION
AND WARRANTY REQUIRE-
MENT.—The regulations of the FHFA Board pursuant to 
subsection (a) shall provide that a mortgage shall not be 
considered a safe and sound mortgage unless such mort-
gage meets such requirements regarding representations 
and warranties sufficient to certifying that the mortgage 
is covered by a policy for title insurance as the FHFA 
Board shall establish to ensure that title-related risks for 
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