I 115th CONGRESS 2d Session H. R. 6746 IN THE HOUSE OF REPRESENTATIVES September 7, 2018 Mr. Hensarling introduced the following bill; which was referred to the Committee on Financial Services , and in addition to the Committee on Ways and Means , 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 protect American taxpayers and homeowners by creating a sustainable housing finance system for the 21st century, and for other purposes.

1. Short title; table of contents (a) Short title This Act may be cited as the Protecting American Taxpayers and Homeowners Act of 2018 . (b) Table of contents The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Title I—Wind-down of Fannie Mae and Freddie Mac Sec. 101. Definitions. Sec. 102. Termination of current conservatorship; mandatory receivership. Sec. 103. Limitations on enterprise authority. Sec. 104. Modifications to increases in conforming loan limits. Sec. 105. Mandatory risk-sharing. Sec. 106. Limitation of enterprise mortgage purchases to qualified mortgages. Sec. 107. Prohibition relating to use of power of eminent domain. Sec. 108. Receiver’s discretionary authority to create receivership entity. Sec. 109. Authority of receiver to repeal enterprise charter. Title II—FHA Reform Subtitle A—Business authority and requirements Sec. 201. Authority to carry out FHA and other business. Sec. 202. Eligible single-family mortgages. Sec. 203. Risk transfer. Sec. 204. Premiums. Sec. 205. Affordability requirements for multifamily mortgage insurance. Sec. 206. Effective date. Subtitle B—Financial safety and soundness Sec. 211. Authority of Director. Sec. 212. Budgets and business plans. Sec. 213. Annual business plan. Sec. 214. Examinations, reports, and cost estimates. Sec. 215. Reimbursement of costs. Sec. 216. Mutual Mortgage Insurance Fund capital reserve. Sec. 217. Capital classifications and performance measures for Mutual Mortgage Insurance Fund. Sec. 218. Enforcement. Sec. 219. Capital reserve requirements for other funds. Sec. 220. Authority to establish temporary capital ratios in cases of nationwide countercyclical market adjustment. Sec. 221. 7-year borrower suspension for foreclosure. Sec. 222. Borrower ineligibility upon second foreclosure. Sec. 223. Limitation on seller concessions. Sec. 224. Lender repurchase requirement. Sec. 225. Indemnification by mortgagees. Sec. 226. Prohibitions relating to use of power of eminent domain. Sec. 227. Residual income requirement. Sec. 228. Effective date. Subtitle C—Miscellaneous Sec. 241. Rule of construction. Sec. 242. Definitions. Title III—Development and Deployment of a Mortgage Security Market Exchange, Data Repository, and Covered Bond Market Sec. 301. Purposes. Sec. 302. Definitions. Subtitle A—Establishment and authority of the Exchange Sec. 311. Establishment. Sec. 312. General powers; authorized and prohibited activities. Sec. 313. Mission and structure of Common Securitization Solutions. Sec. 314. Transition period. Sec. 315. Transfer date. Sec. 316. Repayment of cost. Sec. 317. Regulation, supervision, and enforcement. Subtitle B—Standards for qualified securities Sec. 321. Qualified securities. Sec. 322. Standards for qualified securities. Sec. 323. Conforming amendments to Securities Act of 1933. Subtitle C—National Mortgage Data Repository Sec. 331. Organization and operation. Sec. 332. Legal effect of registration with Repository. Sec. 333. Grants to States; repayment. Sec. 334. Judicial review. Sec. 335. Transition provisions. Subtitle D—Covered Bonds Sec. 341. Definitions. Sec. 342. Regulatory oversight of covered bond programs established. Sec. 343. Resolution upon default or insolvency. Sec. 344. Securities law provisions. Sec. 345. Miscellaneous provisions. Title IV—Removing Barriers to New Investment Sec. 401. Basel III Liquidity Coverage Ratio amendments. Sec. 402. Definition of points and fees. Sec. 403. Exclusion of issuers of asset-backed securities from covered funds. Sec. 404. Mortgages in qualified securities. Sec. 405. Mortgage loans held in portfolio. Sec. 406. Repeal of certain mortgage-related provisions. Sec. 407. Amendments to the Truth in Lending Act. Sec. 408. Financial Institutions Examination Fairness and Reform. Sec. 409. Notice of junior mortgage or lien. Sec. 410. Limitation on mortgages held by loan servicers. Title V—Regulatory structure Subtitle A—Ginnie Mae Sec. 501. Removal from HUD; establishment as independent entity. Sec. 502. Guarantee fees. Subtitle B—FHA Sec. 511. Definitions. Part 1—Organization Sec. 521. Establishment. Sec. 522. Purposes. Sec. 523. General powers. Sec. 524. Board of Directors. Sec. 525. Officers and personnel. Sec. 526. Financial, underwriting, and operations systems. Sec. 527. Procurement. Sec. 528. Applicability of laws. Sec. 529. Evaluation. Sec. 530. Funding. Part 2—Authority over Rural Housing Programs of Department of Agriculture Sec. 541. Authority over Rural Housing Service programs. Sec. 542. Termination of Secretary of Agriculture’s rural housing authority. Sec. 543. Continuation of Obligations. Sec. 544. Status of employees. Part 3—Transition Sec. 551. Transition period. Sec. 552. Authority during transition period. Sec. 553. Advisory Board. Sec. 554. Transfer of HUD authority. Sec. 555. Wind-up of HUD affairs. Sec. 556. Continuation and coordination of certain actions. Sec. 557. Transfer and rights of HUD employees. Sec. 558. Transfer of property and facilities. Sec. 559. Effective Date. Title VI—Miscellaneous Provisions Sec. 601. Preservation of attorney-client privilege for information provided to FHFA. Sec. 602. FHFA Liaison Membership in Federal Financial Institutions Examination Council. Sec. 603. Recognition of FHFA enforcement authority with regard to regulated entities. Sec. 604. Exception from Right to Financial Privacy Act for FHFA as conservator or receiver. Sec. 605. Technical amendment to Federal Housing Enterprises Financial Safety and Soundness Act of 1992. Sec. 606. Application of presumption to enterprise streamlined refinancings. Sec. 607. FHFA authority to regulate and examine contractual counterparties. Sec. 608. Election of directors of a merged Federal Home Loan Bank. Sec. 609. Home equity conversion mortgage program. Sec. 610. FHA-related conforming amendments. I Wind-down of Fannie Mae and Freddie Mac 101. Definitions For purposes of this title, the following definitions shall apply: (1) Charter The term charter means— (A) with respect to the Federal National Mortgage Association, the Federal National Mortgage Association Charter Act ( 12 U.S.C. 1716 et seq.); and (B) with respect to the Federal Home Loan Mortgage Corporation, the Federal Home Loan Mortgage Corporation Act ( 12 U.S.C. 1451 et seq.). (2) Director The term Director means the Director of the Federal Housing Finance Agency. (3) Enterprise The term enterprise means— (A) the Federal National Mortgage Association; and (B) the Federal Home Loan Mortgage Corporation. 102. Termination of current conservatorship; mandatory receivership Upon the expiration of the 5-year period beginning upon the date of the enactment of this Act, the Director shall, with respect to each enterprise, immediately appoint the Federal Housing Finance Agency as receiver under section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 and carry out such receivership under the authority of such section. 103. Limitations on enterprise authority (a) Portfolio limitations Subtitle B of title XIII of the Housing and Community Development Act of 1992 ( 12 U.S.C. 4611 et seq.) is amended by adding at the end the following new section: 1369F. Restriction on mortgage assets of enterprises (a) Restriction No enterprise shall own, at any time, mortgage assets in excess of $250,000,000,000. (b) Definition of mortgage assets For purposes of this section, the term mortgage assets means, with respect to an enterprise, assets of such enterprise consisting of mortgages, mortgage loans, mortgage-related securities, participation certificates, mortgage-backed commercial paper, obligations of real estate mortgage investment conduits and similar assets, in each case to the extent such assets would appear on the balance sheet of such enterprise in accordance with generally accepted accounting principles in effect in the United States as of September 7, 2008 (as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board from time to time; and without giving any effect to any change that may be made after September 7, 2008, in respect of Statement of Financial Accounting Standards No. 140 or any similar accounting standard). . (b) Equitability in guarantee fees Section 1327 of Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4547 ) is amended by adding at the end the following new subsection: (f) Equitability in guarantee fees (1) Requirement Notwithstanding any other provision of this section, the Director shall ensure, pursuant to the annual review conducted under paragraph (2), that each enterprise charges a guarantee fee, in connection with any mortgage guaranteed after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, in an amount that the Director determines is equivalent to the amount that the enterprise would charge if the enterprise were held to the same capital standards as private banks or financial institutions. (2) Annual determination Not less often than annually, the Director shall review the guarantee fees charged by each enterprise and determine how such fees compare to the amount determined by the Director under paragraph (1). If the Director determines that such fees charged by an enterprise are less than such amount, the Director shall, by order, require the enterprise to increase such fees in such amount as the Director determines necessary to comply with paragraph (1). (3) Flexibility in determination of increase To determine the amount of any increase under this subsection, the Director shall establish a pricing mechanism as the Director considers appropriate, taking into consideration current market conditions, including the current market share of an enterprise, and any data collected pursuant to section 1601 of the Housing and Economic Recovery Act of 2008 ( 12 U.S.C. 4514a ). . (c) Repeal of mandatory housing activities (1) Repeal of housing goals The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended by striking sections 1331 through 1336 ( 12 U.S.C. 4561–6 ). (2) Conforming amendments Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended— (A) in section 1303(28) ( 12 U.S.C. 4502(28) ), by striking , and, for the purposes and all that follows through designated disaster areas ; (B) in section 1324(b)(1)(A) ( 12 U.S.C. 4544(b)(1)(A) ), by striking clauses (i), (ii), and (iv); (C) in section 1339(h) ( 12 U.S.C. 4569(h) ), by striking paragraph (7); (D) in section 1341 ( 12 U.S.C. 4581 )— (i) in subsection (a)— (I) in paragraph (1), by inserting or after the semicolon at the end; (II) in paragraph (2), by striking the semicolon at the end and inserting a period; and (III) by striking paragraphs (3) and (4); and (ii) in subsection (b)(2)— (I) in subparagraph (A), by inserting or after the semicolon at the end; (II) by striking subparagraphs (B) and (C); and (III) by redesignating subparagraph (D) as subparagraph (B); (E) in section 1345(a) ( 12 U.S.C. 4585(a) )— (i) in paragraph (1), by inserting or after the semicolon at the end; (ii) in paragraph (2), by striking the semicolon at the end and inserting a period; and (iii) by striking paragraphs (3) and (4); and (F) in section 1371(a)(2) ( 12 U.S.C. 4631(a)(2) ), by striking with any housing goal established under subpart B of part 2 of subtitle A of this title, with section 1336 or 1337 of this title, . (3) Repeal of Housing Trust Fund (A) Repeal The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended by striking sections 1337 and 1338 ( 12 U.S.C. 4567 , 4568). (B) Conforming amendments The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended— (i) in section 1303(24)(B) ( 12 U.S.C. 4502(24)(B) ), by striking 1338 and ; (ii) in section 1324(b)(1)(A) ( 12 U.S.C. 4544(b)(1)(A) ), as amended by the preceding provisions of this Act— (I) by striking clause (iii); (II) by striking the dash after which and inserting the text of clause (v) and a period; and (III) by striking clause (v); (iii) in section 1339(b)— (I) by striking paragraph (1); (II) by striking the dash after consist of and inserting the text of paragraph (2) and a period; and (III) by striking paragraph (2); and (iv) in section 1345 ( 12 U.S.C. 4585 ), by striking subsection (f). 104. Modifications to increases in conforming loan limits (a) Fannie Mae Section 302(b)(2) of the Federal National Mortgage Association Charter Act ( 12 U.S.C. 1717(b)(2) ) is amended— (1) in the 8th sentence— (A) in inserting or subtracting from after adding to ; and (B) by inserting or decrease, respectively before the first comma; (2) by striking the 9th and 10th sentences; (3) by striking the last sentence; (4) by inserting (A) after the paragraph designation; and (5) by adding at the end the following new subparagraph: (B) High-Cost areas (i) Maximum original principal limitation Subject to clause (ii), the limitations established pursuant to subparagraph (A) shall also be increased, with respect to properties of a particular size located in any area for which 115 percent of the median house price for such size residence exceeds the limitation under subparagraph (A) for such size residence, to the lesser of— (I) (aa) for the first year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $20,000 in the case of a 1-family residence, $25,604 in the case of a 2-family residence, $30,950 in the case of a 3-family residence, and $38,463 in the case of a 4-family residence; (bb) for the second year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $40,000 in the case of a 1-family residence, $51,208 in the case of a 2-family residence, $61,900 in the case of a 3-family residence, and $76,926 in the case of a 4-family residence; (cc) for the third year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $60,000 in the case of a 1-family residence, $76,812 in the case of a 2-family residence, $92,850 in the case of a 3-family residence, and $103,389 in the case of a 4-family residence; (dd) for the fourth year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $80,000 in the case of a 1-family residence, $102,416 in the case of a 2-family residence, $123,800 in the case of a 3-family residence, and $153,852 in the case of a 4-family residence; and (ee) for the fifth year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $100,000 in the case of a 1-family residence, $128,020 in the case of a 2-family residence, $154,750 in the case of a 3-family residence, and $192,315 in the case of a 4-family residence; (II) the amount that is equal to 115 percent of the median house price in such area for such size residence; or (III) the limitation in effect for such size residence for such area, pursuant to the last sentence of this paragraph as in effect immediately before the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, as of the date of such enactment. (ii) Prohibition on new high-cost areas The limitations established pursuant to subparagraph (A) may not be increased, with respect to properties of any size located in a particular area unless, as of the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, such foregoing limitations in effect for such area for any size residence were determined under the authority provided in the last sentence of this paragraph, as in effect immediately before such enactment. . (b) Freddie Mac Section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act ( 12 U.S.C. 1454(a)(2) ) is amended— (1) in the 7th sentence— (A) in inserting or subtracting from after adding to ; and (B) by inserting or decrease, respectively before the first comma; (2) by striking the 8th and 9th sentences; (3) by striking the last sentence; (4) by inserting (A) after the paragraph designation; and (5) by adding at the end the following new subparagraph: (B) High-Cost areas (i) Maximum original principal limitation Subject to clause (ii), the limitations established pursuant to subparagraph (A) shall also be increased, with respect to properties of a particular size located in any area for which 115 percent of the median house price for such size residence exceeds the limitation under subparagraph (A) for such size residence, to the lesser of— (I) (aa) for the first year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $20,000 in the case of a 1-family residence, $25,604 in the case of a 2-family residence, $30,950 in the case of a 3-family residence, and $38,463 in the case of a 4-family residence; (bb) for the second year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $40,000 in the case of a 1-family residence, $51,208 in the case of a 2-family residence, $61,900 in the case of a 3-family residence, and $76,926 in the case of a 4-family residence; (cc) for the third year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $60,000 in the case of a 1-family residence, $76,812 in the case of a 2-family residence, $92,850 in the case of a 3-family residence, and $103,389 in the case of a 4-family residence; (dd) for the fourth year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $80,000 in the case of a 1-family residence, $102,416 in the case of a 2-family residence, $123,800 in the case of a 3-family residence, and $153,852 in the case of a 4-family residence; and (ee) for the fifth year beginning after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the difference between— (AA) 150 percent of the limitation under subparagraph (A) for such size residence; and (BB) $100,000 in the case of a 1-family residence, $128,020 in the case of a 2-family residence, $154,750 in the case of a 3-family residence, and $192,315 in the case of a 4-family residence; (II) the amount that is equal to 115 percent of the median house price in such area for such size residence; or (III) the limitation in effect for such size residence for such area, pursuant to the last sentence of this paragraph as in effect immediately before the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, as of the date of such enactment. (ii) Prohibition on new high-cost areas The limitations established pursuant to subparagraph (A) may not be increased, with respect to properties of any size located in a particular area unless, as of the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, such foregoing limitations in effect for such area for any size residence were determined under the authority provided in the last sentence of this paragraph, as in effect immediately before such enactment. . 105. Mandatory risk-sharing Subpart A of part 2 of subtitle A of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended by adding after section 1327 ( 12 U.S.C. 4547 ) the following new section: 1328. Mandatory risk-sharing transactions (a) In general The Director shall require each enterprise to develop and undertake transactions involving the guarantee by the enterprises of securities and obligations based on or backed by mortgages on residential real properties designed principally for occupancy of from 1 to 4 families that provide for private market participants to share or assume credit risk associated with such mortgages, as follows: (1) Required percentage of business The Director shall require that not less than 10 percent of the annual business of each enterprise (as measured in such manner as the Director shall determine) in guaranteeing such securities and obligations involve such transactions. (2) Multiple types of transactions The Director shall require that in complying with paragraph (1), each enterprise undertake multiple types of the various transactions and structures described in subsection (b). (b) Types of transactions The risk-sharing transactions referred to in subsection (a) may include transactions involving increased mortgage insurance requirements, credit-linked notes and securities, senior and subordinated security structures, and such other structures and transactions as the Director considers appropriate to increase private market assumption of credit risk. . 106. Limitation of enterprise mortgage purchases to qualified mortgages (a) Fannie Mae Section 302(b) of the Federal National Mortgage Association Charter Act ( 12 U.S.C. 1717(b) ) is amended by adding at the end the following new paragraph: (7) Effective for mortgages with application dates on or after January 10, 2019, the corporation may only purchase, make commitments to purchase, service, sell, lend on the security of, or otherwise deal in a mortgage that is a qualified mortgage (as such term is defined in section 129C(b) of the Truth in Lending Act ( 15 U.S.C. 1639c(b) ; as added by section 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (124 Stat. 2145)), in accordance with the regulations issued by the Bureau of Consumer Financial Protection to carry out such section. . (b) Freddie Mac Section 305(a) of the Federal Home Loan Mortgage Corporation Act ( 12 U.S.C. 1454(a) ) is amended by adding at the end the following new paragraph: (6) Effective for mortgages with application dates on or after January 10, 2019, the Corporation may only purchase, make commitments to purchase, service, sell, lend on the security of, or otherwise deal in a mortgage that is a qualified mortgage (as such term is defined in section 129C(b) of the Truth in Lending Act ( 15 U.S.C. 1639c(b) ; as added by section 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (124 Stat. 2145)), in accordance with the regulations issued by the Bureau of Consumer Financial Protection to carry out such section. . 107. Prohibition relating to use of power of eminent domain (a) Fannie Mae Subsection (b) of section 302 of the Federal National Mortgage Association Charter Act ( 12 U.S.C. 1717(b) ) is amended by adding at the end the following new paragraph: (7) (A) Notwithstanding any other provision of law, the corporation may not purchase or guarantee any mortgage that is secured by a structure or dwelling unit that is located within a county that contains any structure or dwelling unit that secures or secured a residential mortgage loan which mortgage loan was obtained by the State during the preceding 120 months by exercise of the power of eminent domain. (B) For purposes of this paragraph, the following definitions shall apply: (i) The term residential mortgage loan means a mortgage loan that is evidenced by a promissory note and secured by a mortgage, deed of trust, or other security instrument on a residential structure or a dwelling unit in a residential structure. Such term includes a first mortgage loan or any subordinate mortgage loan. (ii) The term State includes the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States, and includes any agency or political subdivision of a State. . (b) Freddie Mac Subsection (a) of section 305 of the Federal Home Loan Mortgage Corporation Act ( 12 U.S.C. 1454(a) ) is amended by adding at the end the following new paragraph: (6) (A) Notwithstanding any other provision of law, the Corporation may not purchase or guarantee any mortgage that is secured by a structure or dwelling unit that is located within a county that contains any structure or dwelling unit that secures or secured a residential mortgage loan which mortgage loan was obtained by the State during the preceding 120 months by exercise of the power of eminent domain. (B) For purposes of this paragraph, the following definitions shall apply: (i) The term residential mortgage loan means a mortgage loan that is evidenced by a promissory note and secured by a mortgage, deed of trust, or other security instrument on a residential structure or a dwelling unit in a residential structure. Such term includes a first mortgage or any subordinate mortgage. (ii) The term State includes the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States, and includes any agency or political subdivision of a State. . 108. Receiver’s discretionary authority to create receivership entity Section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4617 ) is amended by striking subsection (i) and inserting the following: (i) Receivership Entity (1) Authority; Organization The Agency, as receiver appointed pursuant to subsection (a), may establish a receivership entity in such form or structure as the Agency deems appropriate to meet the purposes of receivership and this section. (2) Powers Upon creation of such receivership entity, the Agency may transfer to it any assets or liabilities of the regulated entity in default as the Agency, in its discretion, determines to be appropriate, and may authorize the receivership entity to perform any temporary function that the Agency, in its discretion, prescribes in accordance with this section. The transfer of any assets or liabilities of a regulated entity for which the Agency has been appointed receiver shall be effective without any further approval under Federal or State law, assignment, or consent with respect thereto. Such authority is in addition to any other power the Agency may have as receiver or may confer on the receivership entity. (3) Exemption from Taxation Notwithstanding any other provision of Federal or State law, any receivership entity established by the Agency pursuant to this section, its franchise, property and income, shall be exempt from all taxation now or hereafter imposed by the United States, by any territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. (4) Regulations The Agency may promulgate such regulations as the Agency determines to be necessary or appropriate to implement this subsection. (5) No Federal Status A receivership entity established pursuant to this section shall not be an agency, establishment, or instrumentality of the United States. . 109. Authority of receiver to repeal enterprise charter Section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4617 ) is amended by striking subsection (k) and inserting the following new subsection: (k) Repeal of enterprise charters (1) Fannie Mae Effective five years after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the charter of the Federal National Mortgage Association is repealed and the Federal National Mortgage Association shall have no authority to conduct new business under such charter, except that the provisions of such charter in effect immediately before such repeal shall continue to apply with respect to the rights and obligations of any holders of— (A) outstanding debt obligations of the Federal National Mortgage Association, including any— (i) bonds, debentures, notes, or other similar instruments; (ii) capital lease obligations; or (iii) obligations in respect of letters of credit, bankers’ acceptances, or other similar instruments; or (B) mortgage-backed securities guaranteed by the Federal National Mortgage Association. (2) Freddie Mac Effective five years after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018, the charter of the Federal Home Loan Mortgage Corporation is repealed and the Federal Home Loan Mortgage Corporation shall have no authority to conduct new business under such charter, except that the provisions of such charter in effect immediately before such repeal shall continue to apply with respect to the rights and obligations of any holders of— (A) outstanding debt obligations of the Federal Home Loan Mortgage Corporation, including any— (i) bonds, debentures, notes, or other similar instruments; (ii) capital lease obligations; or (iii) obligations in respect of letters of credit, bankers’ acceptances, or other similar instruments; or (B) mortgage-backed securities guaranteed by the Federal Home Loan Mortgage Corporation. (3) Existing guarantee obligations (A) Explicit guarantee The full faith and credit of the United States is pledged to the payment of all amounts which may be required to be paid under any obligation described in paragraph (1) or (2). (B) Continued dividend payments Notwithstanding any other provision of law, provision 2(a) (relating to Dividend Payment Dates and Dividend Periods) and provision 2(c) (relating to Dividend Rates and Dividend Amount) of the Senior Preferred Stock Purchase Agreement, or any provision of any certificate in connection with such Agreement creating or designating the terms, powers, preferences, privileges, limitations, or any other conditions of the Variable Liquidation Preference Senior Preferred Stock of an enterprise issued pursuant to such Agreement— (i) shall not be amended, restated, or otherwise changed to reduce the rate or amount of dividends in effect pursuant to such Agreement as of the Letter Agreements between the Secretary of the Treasury and the conservator of the enterprises dated December 21, 2017, except that any amendment to such Agreement to facilitate the sale of assets of the enterprises shall be permitted; and (ii) shall remain in effect until the guarantee obligations described under paragraphs (1)(B) and (2)(B) of this subsection are fully extinguished. (C) Applicability All guarantee fee amounts derived from the single-family mortgage guarantee business of the enterprises in existence as of five years after the date of the enactment of the Protecting American Taxpayers and Homeowners Act of 2018 shall be deposited into the United States Treasury, for purposes of deficit reduction. (D) Senior Preferred Stock Purchase Agreement defined For purposes of this paragraph, the term Senior Preferred Stock Purchase Agreement means— (i) the Amended and Restated Senior Preferred Stock Purchase Agreement, dated September 26, 2008, as such Agreement has been amended on May 6, 2009, December 24, 2009, and August 17, 2012, respectively, as such Agreement has been modified by the Letter Agreements between the Secretary of the Treasury and the conservator of the enterprises dated December 21, 2017, and as such Agreement may be further amended and restated, entered into between the Department of the Treasury and each enterprise, as applicable; and (ii) any provision of any certificate in connection with such Agreement creating or designating the terms, powers, preferences, privileges, limitations, or any other conditions of the Variable Liquidation Preference Senior Preferred Stock of an enterprise issued or sold pursuant to such Agreement. . II FHA Reform A Business authority and requirements 201. Authority to carry out FHA and other business (a) In General After the expiration of the transition period under section 551— (1) the FHA may exercise (in addition to powers set forth in section 552) any authority and undertake any responsibilities of the Secretary of Housing and Urban Development under the National Housing Act (as amended by this title) relating to mortgage insurance, except as otherwise provided in this title and except that any authority that requires an appropriation may be conducted only to the extent that amounts are so appropriated; (2) any amounts in the Mutual Mortgage Insurance Fund under section 202(a) of the National Housing Act ( 12 U.S.C. 1708(a) ), any amounts in the General Insurance Fund and Special Risk Insurance Fund under sections 519 and 238(b), respectively, of such Act ( 12 U.S.C. 1735c , 1715z–3(b)), and any amounts in the Cooperative Management Housing Insurance Fund under section 213(k) of such Act ( 12 U.S.C. 1715e(k) ), shall be used by the FHA only— (A) for meeting any obligations of such Funds entered into before such transition date; and (B) for carrying out the mortgage insurance obligations of the FHA pursuant to section 662(1) and paragraph (1) of this section; and (3) the FHA may exercise any authority of the FHA under this title. (b) Termination of Secretary of HUD’s FHA Authority After the expiration of the transition period under section 551, the Secretary of Housing and Urban Development may not exercise any authority under the National Housing Act relating to mortgage insurance. This subsection may not be construed to limit or otherwise affect the Secretary’s authority under title I of the National Housing Act ( 12 U.S.C. 1702 et seq.). (c) Continuation of Obligations This section and section 552(1) may not be construed to affect the validity of any right, duty, or obligation of the United States or other person arising under or pursuant to any commitment or agreement lawfully entered into with the Secretary of Housing and Urban Development under the National Housing Act . 202. Eligible single-family mortgages (a) In General Notwithstanding section 203 of the National Housing Act ( 12 U.S.C. 1709 ) or any other provision of law, the FHA may insure, and make commitments to insure, a mortgage on a 1- to 4-family residential property only if the mortgage complies with the following requirements: (1) Mortgage amount The mortgage shall involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the FHA shall approve) in an amount not to exceed the following amounts: (A) Appraised value 100 percent of the appraised value of the property. (B) Area limitation (i) Maximum limit The lesser of the following amounts: (I) In the case of— (aa) a 1-family residence, 100 percent of the median 1-family house price in the area in which such residence is located, as determined by the FHA; and (bb) in the case of a 2-, 3-, or 4-family residence, the percentage of such median price that bears the same ratio to such median price as the dollar amount limitation determined under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act ( 12 U.S.C. 1454(a)(2) ) for a 2-, 3-, or 4-family residence, respectively, bears to the dollar amount limitation determined under such section for a 1-family residence; or (II) 150 percent of the dollar amount limitation determined under the sixth sentence of such section 305(a)(2) for a residence of the applicable size. For purposes of the preceding sentence, the term area means, for any property located within a metropolitan statistical area as established by the Office of Management and Budget, the zip code within which the property is located, and for any property not located within a metropolitan statistical area, the county within which the property is located. The dollar amount limitations referred to in this clause shall remain in effect for purposes of this clause notwithstanding the receivership or dissolution of the Federal Home Loan Mortgage Corporation. (ii) Minimum limit Notwithstanding clause (i), the principal obligation limitation in effect for any area under this subparagraph may not be less than $200,000. (2) Downpayment The mortgage shall be executed by a mortgagor who shall have paid on account of the property subject to the mortgage an amount, in cash or its equivalent, equal to or exceeding 3.5 percent of the appraised value of the property, as determined by the FHA. (3) Prohibited mortgages The mortgage is not— (A) a mortgage the proceeds of which are used to prepay or pay off an existing loan that is not— (i) a loan insured under the National Housing Act or under this title; or (ii) a loan insured, made, or guaranteed under title V of the Housing Act of 1949; or (B) a mortgage under which a portion of the proceeds of the mortgage are used to prepay or pay off the outstanding principal and interest owed on an existing loan and a portion of such proceeds are made available to or on behalf of the borrower. (4) Public purpose requirement The mortgage shall meet the requirements of any one of the following subparagraphs: (A) First-time homebuyer The mortgagor under the mortgage is a first-time homebuyer (as such term is defined in section 242) of the property subject to the mortgage and the property is used as the principal residence of the mortgagor. (B) Low- or moderate-income mortgagor The mortgagor under the mortgage is a member of a family as follows: (i) In general A family having an income that is less than 115 percent of the median income, as determined by the FHA, for the area in which the property subject to the mortgage is located, except that the FHA may establish income ceilings higher or lower than 115 percent of the median for the area to take into consideration various sizes of families. (ii) High-cost areas A family that— (I) resides in any area for which the median 1-family house price exceeds the maximum dollar amount limitation in effect for that year on the original principal obligation of a mortgage on a 1-family residence that may be purchased by the Federal Home Loan Mortgage Corporation, as determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act ( 12 U.S.C. 1454(a)(2) ); and (II) has an income that is less than 150 percent of the median income, as determined by the FHA, for the area in which the property subject to the mortgage is located, except that the FHA may establish income ceilings higher or lower than 150 percent of the median for the area to take into consideration various sizes of families. For purposes of this subparagraph, the term area has the meaning given such term in the last sentence of paragraph (1)(B)(i). (C) Counter-cyclical market adjustment The property subject to the mortgage is located in a county or counties for which a determination under this subparagraph has been made, as follows: (i) Determination A mortgage may be insured pursuant to this subparagraph only upon a determination by the Board, in consultation with the Chief Risk Officer that— (I) available credit for the purchase of 1- to 4-family homes located in such county or counties has contracted significantly, as measured by the credit availability measure of the Office of the Comptroller of the Currency; (II) housing prices in such county or counties have declined significantly, as measured by the applicable housing price index of the Federal Housing Finance Agency; or (III) available credit for the purchase of housing or such other economic conditions exist sufficient to evidence a significant contraction of capital in such county or counties, as measured by a metric identified by the Board, in consultation with the Chief Risk Officer, in a written notice made publicly available, and provided to the Congress, in advance of such determination. (ii) Conditions of termination Upon making a determination under clause (i), the Board, in consultation with the Chief Risk Officer, shall also identify measurable criteria for determining that the conditions determined under clause (i) for such county or counties have ceased to exist. (iii) Notice to Congress Upon making a determination under clause (i), the Board shall provide written notice to the Congress of such determination and the specific measurable criteria identified pursuant to clause (ii). (iv) Limitation The Board may not, pursuant to the authority under this subparagraph— (I) reduce premiums required to be paid for mortgage insurance under this title by more than 50 basis points from the premiums charged, immediately before the determination under this subparagraph was made for such county or counties, for mortgage insurance for mortgages on properties located in such county or counties; (II) increase the limitation under this title on the amount of the maximum principal obligation of a mortgage that may be insured; or (III) decrease the amount required to be paid, in cash or its equivalent, on account of a property subject to a mortgage insured under this title. (v) Termination The authority to insure mortgages pursuant to this subparagraph on properties located in a county or counties shall terminate upon the earlier of— (I) the expiration of the 18-month period beginning upon the date that notification under clause (iii) is provided to the Congress of the determination under clause (i) with respect to such county or counties; or (II) the occurrence of the conditions identified pursuant to clause (ii) with respect to such county or counties. (vi) Multiple determinations Nothing in this subparagraph may be construed to prevent multiple or consecutive periods for a county or counties during which mortgages on properties located in such county or counties may be insured pursuant to this subparagraph. (D) Disaster area The Board of Directors exercises the authority to insure mortgages under this subparagraph, subject to the following requirements: (i) Implementation The Board of Directors may implement authority to insure mortgages under this subparagraph only if the Board— (I) by a vote of the majority of its members, approves such implementation for a specific disaster area under clause (iii) and a specific disaster period under clause (iv); and (II) notifies the Congress and the President in writing of such approval, such disaster period, and such disaster area not less than 30 days before the commencement of the disaster period. (ii) Eligible mortgages The FHA may insure, or make a commitment to insure, a mortgage under authority under this subparagraph only if— (I) the mortgage is made for the purchase of a principal residence by a mortgagor whose home (that the mortgagor occupied as an owner or tenant) was located in a disaster area described under clause (iii) and was destroyed or damaged to such an extent that reconstruction is required, as a result of a major disaster declared by the President under the Robert T. Stafford Disaster Relief and Emergency Assistance Act; and (II) the commitment for mortgage insurance is made during the disaster period established under clause (iv) for such disaster area. (iii) Disaster area A disaster area may be established for purposes of this subparagraph only for the area affected by a major disaster, as declared by the President under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, or a portion of such area, as determined by the FHA. (iv) Disaster period A disaster period established for purposes of this subparagraph shall— (I) commence upon or after the declaration of the major disaster referred to in clause (iii); and (v) terminate on the date certain approved by the Board of Directors under clause (i)(I) and contained in the notice under clause (i)(II), which shall not be later than 18 months after the commencement of the period. (b) Conforming amendments Section 203(b) of the National Housing Act ( 12 U.S.C. 1709(b) ) is amended— (1) by striking paragraph (2); and (2) in paragraph (9)— (A) by striking subparagraph (A); and (B) in subparagraph (B), by striking this paragraph and inserting section 242(a)(2) of the Protecting American Taxpayers and Homeowners Act of 2018 . 203. Risk transfer (a) Demonstration model (1) In general The Administrator shall annually cede a portion of the risk with respect to the mortgages insured by the FHA to the private reinsurance or capital markets, or any combination thereof, and at rates and terms that the Administrator determines to be reasonable and appropriate, in an amount that— (A) is sufficient to maintain the ability of FHA to pay claims; (B) manages and limits the annual exposure of the funds managed by FHA; and (C) is subject to market conditions. (2) Development and implementation (A) Timing The Administrator shall develop and implement models and standards for ceding of risk as required under paragraph (1) not later than the expiration of the 24-month period beginning upon the date of the enactment of this Act. (B) Consultation with Ginnie Mae In developing the models and standards under subparagraph (A), the FHA shall consult with the Government National Mortgage Association and shall review such Association’s guidelines relating to risk-sharing and other credit enhancement activities. (b) Qualifications of risk transfer partners (1) Establishment The model and standards established under this section shall include guidelines for the qualification of persons or entities to participate in risk transfer and other credit enhancement activities with the FHA. (2) Procedures In establishing such guidelines, the FHA shall review the guidelines established by the Director for qualification of persons or entities to participate in risk transfer, risk-sharing, and other credit enhancement activities with the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. The FHA shall determine whether such guidelines for such enterprises are sufficient for purposes of the FHA, including whether such guidelines meet the requirements under paragraph (3), and— (A) if the FHA determines that such guidelines are so sufficient, the FHA shall adopt such guidelines for purposes of this section, to the extent appropriate, with any changes necessary to account for differences between the mortgages insured under this title and the National Housing Act and the business under such provisions and the business of such enterprises; or (B) if the FHA determines that such guidelines are not so sufficient, the FHA shall adopt such guidelines for purposes of this section, to the extent appropriate and with changes referred to in subparagraph (A), together with additional criteria sufficient to address any such insufficiency. (3) Content Such guidelines shall ensure that— (A) persons or entities participating in risk transfer, risk-sharing, and other credit enhancement activities pursuant to this section have sufficient capital, credit worthiness, and liquidity, and are otherwise capable of fulfilling their obligations to the FHA; (B) such persons or entities and their principals or officers are not engaged in a business the goals of which would conflict with the purposes of the FHA or the National Housing Act; for purposes of this section, private mortgage insurance is not considered a business the goals of which conflict with the purposes of the FHA or the National Housing Act; and (C) product or service delivery will be conducted in a manner that is efficient and effective, and that will comply with the requirement under section 521(d). (c) Risk transfer requirement (1) Requirement After the expiration of the 24-month period referred to in subsection (a)(2)(A), the FHA shall ensure that, in each fiscal year, not less than 10 percent of any new business in mortgages on 1- to 4-family residential property is insured pursuant to a risk transfer agreement with respect to such mortgage that complies with the standards established pursuant to subsection (a). (2) Limitation In any fiscal year, the FHA may not comply with paragraph (1) by entering into risk transfer agreements with respect only to one or a limited number of types or categories of mortgages, or mortgages having only particular, or a particular range of, original principal obligation amounts, but shall enter into risk transfer agreements for all types and amounts of mortgages insured by the FHA, to the extent required under paragraph (1). (3) New business For purposes of this subsection, with respect to a fiscal year, the term new business means the aggregate dollar amount of the principal obligations of mortgages for which a commitment to insure is made pursuant to the National Housing Act or this title, as applicable, during such fiscal year. (d) Reports to Congress Upon the expiration of each of the 3- and 5-year periods beginning on the date of the enactment of this Act, the FHA shall submit a report to the Congress on the findings and results of risk transfer activities under this section. Such reports shall describe the model and standards for entering into risk transfer agreements, analyze appropriate dollar amount limits for the original principal obligations of mortgages that should be subject to a risk transfer requirement, identify the effects of such risk transfer activities on the Mutual Mortgage Insurance Fund, identify the effects of such risk transfer activities with respect to the Government National Mortgage Association, and make recommendations regarding expanding the risk transfer requirement under subsection (c). (e) Effective date This section shall take effect on the date of the enactment of this Act. During the transition period under section 551, any reference in this section to the FHA shall be construed to refer to the Secretary of Housing and Urban Development to the extent the Secretary has not delegated authority under this section to the FHA pursuant to section 552(1). 204. Premiums (a) Establishment The FHA shall establish and collect premium payments for mortgage insurance provided pursuant to this title and the amendments made by this title, and shall provide for sharing of premiums with entities entering into risk transfer agreements with the FHA pursuant to section 203 based on the relative portion of the mortgage insured and the risk of loss borne. (b) Minimum premiums In the case of mortgages on 1- to 4-family residential properties insured by the FHA, the premiums established and collected by the FHA shall include an annual premium payment payable during the entire term of the mortgage, in the following amounts: (1) LTV equal to or exceeding 80 percent In the case of a mortgage for which the outstanding principal obligation is equal to or exceeds 80 percent of the appraised value of the property, the annual premium payment shall be an amount that is not less than 0.55 percent of the remaining insured principal balance (excluding the portion of the remaining balance attributable to any premium collected at the time of insurance and without taking into account delinquent payments or prepayments), as the FHA shall establish. (2) LTV less than 80 percent In the case of a mortgage for which the outstanding principal obligation is less than 80 percent of the appraised value of the property, the annual premium payment shall be an amount that is less than the amount of the annual premium payment established pursuant to paragraph (1), as the FHA shall establish. (c) Procedures The FHA shall establish guidelines and procedures for mortgagors to apply for reductions of premiums pursuant to subsection (b)(2) and to submit evidence regarding the appraised value of the property subject to the mortgage. (d) Self-Sufficient operations Notwithstanding section 203(c) of the National Housing Act ( 12 U.S.C. 1709(c) ) or any other provision of law, premium rates established under this section shall be established in amounts sufficient to cover— (1) costs of providing mortgage insurance coverage under this title; (2) costs for administration, operations, management, and technology systems for the FHA for carrying out this title; (3) the capital ratio required for the Mutual Mortgage Insurance Fund under section 216(b) and under section 219 with respect to mortgage insurance for mortgages on multifamily properties; and (4) salaries and expenses for officers and personnel of the FHA. (e) Risk-Based premiums The FHA may, with respect to mortgages on 1- to 4-family residential properties insured by the FHA, establish a mortgage insurance premium structure involving a single premium payment collected prior to the insurance of the mortgage or annual payments (which may be collected on a periodic basis), or both. (f) Distributive shares (1) Requirement Upon any termination of the insurance obligation of the Mutual Mortgage Insurance Fund by payment of any mortgage insured thereunder, which termination occurs after the expiration of the 24-month period beginning on the date of the enactment of this Act, the FHA shall distribute to the mortgagor a share of the Participating Reserve Account of the Mutual Mortgage Insurance Fund in such manner and amount as the Secretary shall determine to be equitable and in accordance with sound actuarial and accounting practice. (2) Amount In no event shall any distributable share pursuant to paragraph (1) exceed the aggregate scheduled annual premiums of the mortgagor to the year of termination of the insurance. (3) Statute of limitations The Secretary shall not distribute any share to an eligible mortgagor under this subsection beginning on the date which is 6 years after the date the Secretary first transmitted written notification of eligibility to the last known address of the mortgagor, unless the mortgagor has applied in accordance with procedures prescribed by the Secretary for payment of the share within the 6-year period. (4) Applicability This subsection shall apply with respect only to mortgages insured under the Mutual Mortgage Insurance Fund after the date of the enactment of this Act. (g) Savings provision Nothing in this section may be construed to affect premiums charged for mortgage insurance provided for mortgages insured before the date of the enactment of this Act. (h) Limitation Nothing in this section shall permit or be construed to permit the FHA to apply different premium rates to the same mortgage product during the same time period based solely on the characteristics of the mortgagor. 205. Affordability requirements for multifamily mortgage insurance (a) In general Notwithstanding any provision of the National Housing Act or any other provision of law, the FHA may not insure any mortgage on a residential property having 5 or more dwelling units unless the property complies with such affordability requirements as the FHA shall establish to ensure that each such insured mortgage contributes to the financing of affordable housing for low- and moderate-income families, including such families in areas that the FHA determines to have high housing costs. (b) Limitation This section may not be construed to require the FHA to establish or enforce annual income verification or rent certification requirements for residential properties referred to in subsection (a). 206. Effective date This subtitle and the amendments made by this subtitle, except for section 203, shall take effect upon the expiration of the transition period under section 551. B Financial safety and soundness 211. Authority of Director (a) Duty The Director of the Federal Housing Finance Agency shall supervise and regulate the safety and soundness of the FHA and the programs of the Rural Housing Service of the Department of Agriculture for housing loans made, insured, or guaranteed under title V of the Housing Act of 1949, and it shall be the duty of the Director to ensure that the FHA and such Rural Housing Service programs are adequately capitalized and operating safely. (b) Authority The Director may make such determinations, take such actions, and perform such functions as the Director determines necessary to meet the responsibilities of the Director under this subtitle. 212. Budgets and business plans (a) Submission of business-Type budget In each year, the FHA shall prepare and submit an annual budget as required under section 9103 of title 31, United States Code, and shall submit such budget to the Director by a date sufficient to enable the Director to produce, pursuant to section 215(c) of this title, the credit subsidy cost estimates that are required for the budget of the United States Government under section 1105(a) of title 31, United States Code. (b) Submission of Budget and Credit Cost Estimates to OMB For purposes of inclusion in the budget of the United States Government, the FHA shall submit the annual budget of the FHA and the annual credit subsidy cost estimates produced pursuant to section 215(c) of this title to the Director of the Office of Management and Budget. (c) Reserves (1) Establishment Subject to sections 216 and 219, the FHA may establish any reserve that the FHA determines is necessary for the business operations of the FHA. (2) Amounts The FHA may hold as a reserve in any financing account, as defined in section 502 of the Congressional Budget Act of 1974 ( 2 U.S.C. 661a ), such amounts as the FHA considers necessary to comply with the capital requirements established for the FHA under sections 216 and 219 of this title and to fulfill the purposes of this title. 213. Annual business plan The FHA shall establish a business plan on an annual basis and shall make such plan available for review by the Director. Such plan shall specify the products and operational strategy of the FHA, including plans to address compliance with the safety and soundness requirements applicable to the FHA. 214. Examinations, reports, and cost estimates (a) Examinations The Director shall conduct such examinations of the FHA and the Rural Housing Service programs referred to in section 211(a) as the Director determines necessary to evaluate the safety and soundness of the FHA and such programs. Such examinations shall be subject to and governed by subsections (c) through (h) of section 1317 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4517 ), except that the last sentence of subsection (c) shall not apply and any reimbursements referred to in such sentence shall be made from amounts collected under section 215 of this title. (b) Reports The Director may require the FHA and the Rural Housing Service to submit, within a reasonable period of time, any regular or special report, data, or other information whenever, in the judgment of the Director, such report, data, or information is necessary to carry out the Director’s responsibilities under this title. (c) Credit Subsidy Cost Estimates (1) In general The Director shall produce and submit to the Director of the Office of Management and Budget the annual credit subsidy cost estimates for the FHA and the Rural Housing Service programs referred to in section 211(a) required for the President’s budget. Such estimates shall be consistent with the estimates of performance generated by the risk-based capital model developed in accordance with section 217(b), and with the President’s economic forecast. (2) Unified estimates The annual credit subsidy cost estimates produced under this subsection by the Director shall be reported on a unified basis, which shall be based upon the business of the FHA, and the Rural Housing Service programs referred to in section 211(a), as a whole. (d) Annual Report on Safety and Soundness The Director shall submit an annual report to Congress and the Director of the Office of Management and Budget on the financial safety and soundness of the FHA and the Rural Housing Service programs referred to in section 211(a), as measured pursuant to this subtitle. 215. Reimbursement of costs (a) Assessment and Collection The Director shall assess and collect from the FHA and the Secretary of Agriculture annual assessments in such amounts determined by the Director as necessary to reimburse the Federal Housing Finance Agency for the reasonable costs and expenses of the activities undertaken by such Agency to carry out the duties of the Director under this subtitle, including the costs of examination, enforcement, and oversight expenses. (b) Requirements Annual assessments imposed by the Director shall be— (1) imposed prior to October 1 of each year; (2) allocated among the FHA and the Secretary of Agriculture proportionally based on the costs and expenses of the Agency of carrying out the duties under this subtitle with respect to FHA and the Rural Housing Service program referred to in section 211(a), respectively; (3) collected at such time or times during each assessment year as determined necessary or appropriate by the Director; and (4) treated in the same manner as provided under section 1316(f) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992( 12 U.S.C. 4516(f) ) with respect to amounts received by the Director from assessments under section 1316 of such Act, except that amounts from assessments under this section may be used only for expenses of the Director and the Agency relating to the functions and responsibilities under this subtitle. 216. Mutual Mortgage Insurance Fund capital reserve (a) Segregation of books To ensure accurate determinations of the capital ratio under subsection (b) of this section and such ratio under section 205(f) of the National Housing Act, as amended by subsection (d) of this section, the FHA shall establish separate accounts in the Mutual Mortgage Insurance Fund and take such other actions as may be necessary to segregate the following amounts: (1) Capital attributable to new business. (2) Capital attributable to mortgages that become insured before the expiration of the transition period under section 551. (b) Capital ratio for new business The FHA shall ensure that the account for the Mutual Mortgage Insurance Fund that is established pursuant to subsection (a)(1) of this section at all times maintains a capital ratio of not less than 4.0 percent. (c) Definitions For purposes of this section, the following definitions shall apply: (1) Capital The term capital means the economic net worth of the account of the Fund that is established pursuant to subsection (a)(1) of this section, as determined by the FHA under the annual audit required under section 538 of the National Housing Act ( 12 U.S.C. 1735f–16 ). (2) Capital ratio The term capital ratio means the ratio of capital to unamortized insurance-in-force. (3) Economic net worth The term economic net worth means the current cash available to the account of the Fund that is established pursuant to subsection (a)(1) of this section, plus the net present value of all future cash inflows and outflows expected to result from outstanding new business. (4) Fund The term Fund means the Mutual Mortgage Insurance Fund established under section 205 of the National Housing Act ( 12 U.S.C. 1711 ). (5) New business The term new business means mortgages that are obligations of the Mutual Mortgage Insurance Fund that become insured by the FHA after the expiration of the transition period under section 551. (6) Unamortized insurance in force The term unamortized insurance-in-force means the remaining obligation on outstanding new business, as estimated by the FHA. (d) Treatment of existing capital ratio Paragraph (4) of section 205(f) of the National Housing Act ( 12 U.S.C. 1711(f)(4) ) is amended— (1) in subparagraph (A), by striking Mutual Mortgage Insurance Fund and inserting account of the Mutual Mortgage Insurance Fund that is established pursuant to section 216(a)(2) of the Protecting American Taxpayers and Homeowners Act of 2018 ; (2) in subparagraph (C)— (A) by striking Fund the first place such term appears and inserting account of the Mutual Mortgage Insurance Fund that is established pursuant to section 216(a)(2) of the Protecting American Taxpayers and Homeowners Act of 2018 ; and (B) by striking the Fund. and inserting the following: such account that become insured by the Secretary of Housing and Urban Development (or the FHA, pursuant to subtitle B of title II of the Protecting American Taxpayers and Homeowners Act of 2018) before the expiration of the transition period under section 551 of such Act. ; and (3) in subparagraph (D), by inserting before the comma the following: and become insured before the expiration of the transition period under section 551 of the Protecting American Taxpayers and Homeowners Act of 2018 . 217. Capital classifications and performance measures for Mutual Mortgage Insurance Fund (a) Capital classification; effect on insurance authority (1) Adequately capitalized At any time that the capital ratio (as such term is defined in section 216(c)(2) of this title) is greater than 4.0 percent, the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1) shall be classified as adequately capitalized for purposes of this subtitle. (2) Undercapitalized At any time that the capital ratio is greater than 0.0 percent and is less than 4.0 percent, the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1) shall be classified as undercapitalized for purposes of this subtitle. (3) Significantly undercapitalized At any time that the capital ratio is less than 0.0 percent— (A) the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1) shall be classified as significantly undercapitalized for purposes of this subtitle; and (B) the Director may, pursuant to section 218(a)(1), take actions under section 218(b). (4) Quarterly determination of capital ratio The Director shall determine the capital ratio and the capital classification of the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1) for purposes of this subtitle not less frequently than each calendar quarter. (b) Stress test (1) In general The Director shall develop a risk-based capital model to determine the amount of capital that is sufficient for the FHA to maintain positive capital during a period of economic stress. The model shall incorporate the assumptions under paragraphs (2) and (3). (2) Credit risk For purposes of paragraph (1), the Director shall assume that, during the period of economic stress referred to in paragraph (1), credit losses occur at a rate consistent with a nationwide economic recession of average severity based on nationwide economic recessions since 1950. (3) Other risks For purposes of paragraph (1), the Director shall make assumptions about such other aspects of the period of economic stress as the Director determines are appropriate and consistent. (4) Timing Not later than the expiration of the 180-day period beginning on the date of the enactment of this Act, the Director shall submit the risk-based capital model developed pursuant to this to the Congress. The Director may not implement or otherwise employ such risk-based capital model before the expiration of the 120-day period beginning upon the submission of such model to the Congress. (c) Capital restoration plan requirement If the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1) is classified as undercapitalized or significantly undercapitalized, the FHA shall— (1) submit to the Director a capital restoration plan meeting the requirements of section 218(d) for raising or restoring the capital of such account to an amount not less than the amount required for such account to be classified as adequately capitalized; and (2) upon approval by the Director, carry out such plan. If the Director disapproves a capital restoration plan submitted under this subsection, the Director shall convey in writing reasons for such disapproval and shall provide for the FHA to resubmit a revised plan for approval by the Director. 218. Enforcement (a) Grounds The Director may take actions under subsection (b) only if— (1) the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1) is classified under section 217(a) as significantly undercapitalized; (2) the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1) is classified under section 217(a) as undercapitalized and— (A) the FHA does not submit a capital restoration plan that is substantially in compliance with section 217(c) within the applicable period, or the Director disapproves the capital restoration plan submitted by the FHA; or (B) the FHA has failed to make, in good faith, reasonable efforts necessary to comply with the capital restoration plan; or (3) the FHA is engaging or has engaged, or the Director has reasonable cause to believe that the FHA is about to engage in— (A) any conduct that is likely to threaten the adequacy of the capital of the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1); (B) any failure to comply with any written agreement entered into by the FHA with the Director; or (C) any failure to comply with any request by the Director for a report, data, or information under section 214(b). (b) Actions The Director may, under this subsection, require the FHA— (1) to cease and desist from any conduct or activity that— (A) with respect to the account for the Mutual Mortgage Insurance Fund established pursuant to section 216(a)(1), is described in paragraph (2) or (3) of subsection (a), or that contributes to the condition described in subsection (a)(1); and (B) with respect to any other Fund, contributes to a failure to meet a capital reserve requirement established pursuant to section 219(a) or is likely to threaten the adequacy of the capital of such Fund; and (2) to take corrective or remedial action, including— (A) restricting the growth of, or contracting, any category of assets or liabilities; (B) reducing, modifying, or terminating any activity that the Director determines creates excessive risk to the FHA; (C) terminating agreements or contracts; (D) engaging or employing qualified employees (who may be subject to approval by the Director at the direction of the Director); or (E) submitting to the Director for review and approval a detailed and complete operating plan. (c) Reports If the Director is authorized under subsection (a) of this section or section 219(b) to take action under subsection (b) of this section and determines not to take any such action, the Director shall prepare a report detailing the basis of the Director’s decision not to take such action and shall, within 30 days of the decision, submit the report to the President, the Director of the Office of Management and Budget, the Comptroller General of the United States, the Committee on Financial Services of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs of the Senate. (d) Capital restoration plans A capital restoration plan submitted pursuant to section 217(c), 219(b), or 220(d)(3) shall— (1) set forth a feasible plan for raising or restoring the capital of the Fund for which it is prepared; (2) specify the level of capital to be achieved and maintained; (3) be submitted to the Director within 45 days from the date of notification, or if the Director determines that an extension is necessary, within such additional time as the Director so determines; (4) describe the actions that the FHA shall take for such Fund to become classified as adequately capitalized; (5) establish a schedule for completing the actions set forth in the plan; and (6) specify the types and levels of activities (including existing and new business activities) in which the FHA shall engage during the term of the plan. 219. Capital reserve requirements for other funds (a) Requirements The Director shall establish capital reserve requirements for— (1) the General Insurance Fund established under section 519 of the National Housing Act ( 12 U.S.C. 1735c ); (2) the Special Risk Insurance Fund established under section 238(b) of such Act ( 12 U.S.C. 1715z–3(b) ); (3) the Cooperative Management Housing Insurance Fund established under section 213(k) of such Act ( 12 U.S.C. 1715e(k) ); (4) the Rural Housing Insurance Fund established under title V of the Housing Act of 1949 ( 42 U.S.C. 1471 ), or the various accounts of such Fund; and (5) the Home Equity Conversion Insurance Fund established under section 255(s) of the National Housing Act ( 12 U.S.C. 1715–20(s) ). (b) Enforcement The Director may enforce compliance with the requirements under subsection (a) of this section with respect to a Fund by taking action under section 218(b) or by requiring submission of a capital restoration plan for such Fund meeting the requirements of section 218(d). 220. Authority to establish temporary capital ratios in cases of nationwide countercyclical market adjustment (a) Authority; determination The Director may suspend the applicability of the capital ratio under section 716(b) for the Mutual Mortgage Insurance Fund or any capital reserve requirement established pursuant to section 219 for any Fund specified under such section and establish a temporary alternative capital ratio with respect to such Fund for a specified period of time, but only upon a determination by the Board, in consultation with the Chief Risk Officer, that— (1) available credit throughout the United States or a significant portion of the United States for the purchase of the types of residences for which mortgages that obligations of such Fund are made has contracted significantly, as measured by the credit availability measure of the Office of the Comptroller of the Currency; (2) housing prices throughout the United States or a significant portion of the United States have declined significantly, as measured by the applicable housing price index of the Federal Housing Finance Agency; or (3) available credit for the purchase of housing or such other economic conditions exist sufficient to evidence a significant contraction of capital throughout the United States or a significant portion of the United States, as measured by a metric identified by the Director and the Chief Risk Officer in a written notice made publicly available, and provided to the Congress, in advance of such determination. (b) Conditions of termination Upon making a determination under subsection (a), the Board, after consultation with the Chief Risk Officer, shall also identify measurable criteria for determining that the conditions determined under subsection (a) have ceased to exist. (c) Notice to Congress Upon making a determination under subsection (a), the Board, after consultation with the Chief Risk Officer, shall provide written notice to the Congress of such determination and the specific measurable criteria identified pursuant to subsection (b). (d) Effect of temporary alternative capital ratio During any period that a temporary alternative capital ratio is in effect pursuant to subsection (a) with respect to any Fund— (1) in the case of a temporary capital ratio for the Mutual Mortgage Insurance Fund, subsections (a) and (c) of section 217 and section 218 shall not apply; (2) such temporary and alternative capital classifications as the Director shall establish shall be in effect with respect to such Fund; and (3) the Director shall require the FHA to submit and carry out a capital restoration plan for such Fund meeting the requirements under section 218(d) and may take actions under section 218(b) with respect to such Fund only in accordance with such standards relating to such temporary and alternative capital classifications for such Fund as the Director shall establish. (e) Termination Any temporary alternative capital ratio established pursuant to subsection (a) shall terminate upon the earlier of— (1) the expiration of the 18-month period beginning upon the date that notification under subsection (c) is provided to the Congress of the determination under subsection (a); or (2) the occurrence of the conditions identified pursuant to subsection (b). (f) Multiple determinations Nothing in this section may be construed to prevent multiple or consecutive periods during which temporary alternative capital ratios are in effect pursuant to this section. 221. 7-year borrower suspension for foreclosure (a) FHA (1) In general Except as provided in paragraph (2), with respect to any mortgage on a 1- to 4-family residential property that is foreclosed upon, during the 7-year period beginning upon the date of such foreclosure, the FHA may not newly insure, under any provision of this title, the National Housing Act, or any FHA program, any other mortgage under which the mortgagor is the individual who was the mortgagor under the mortgage that was foreclosed upon. (2) Waiver The FHA shall provide, by regulation, for the FHA to waive the applicability of paragraph (1) with respect to a mortgagor in cases in which hardship circumstances materially contributed to the default and foreclosure of the mortgage. For purposes of this subsection, such hardship circumstances may include divorce, job or other income loss, health problems, death in the family, and such other situations as the FHA may prescribe. (b) Rural housing Section 505 of the Housing Act of 1949 ( 42 U.S.C. 1475 ) is amended by adding at the end the following new subsection: (c) 7-year borrower suspension for foreclosure (1) In general Except as provided in paragraph (2), with respect to any mortgage on a 1- to 4-family residential property that is foreclosed upon, during the 7-year period beginning upon the date of such foreclosure, the Secretary may not newly make, insure, or guarantee, under any provision of this title, any other loan under which the borrower is individual who was the mortgagor under the mortgage that was foreclosed upon. (2) Waiver The Secretary shall provide, by regulation, for waiver of the applicability of paragraph (1) with respect to a borrower in cases in which hardship circumstances materially contributed to the default and foreclosure of the mortgage. For purposes of this subsection, such hardship circumstances may include divorce, job or other income loss, health problems, death in the family, and such other situations as the Secretary may prescribe. . (c) Regulations The FHA and the Secretary of Agriculture shall jointly issue regulations required under subsection (a) of this section and section 505(c) of the Housing Act of 1949, as added by subsection (b) of this section. 222. Borrower ineligibility upon second foreclosure (a) FHA If any individual is the mortgagor under any two mortgages on 1- to 4-family residential properties that have been foreclosed upon, the FHA may not newly insure, under any provision of this title, the National Housing Act, or any FHA program, any other mortgage under which such individual is the mortgagor. (b) Rural housing Section 505 of the Housing Act of 1949 ( 42 U.S.C. 1475 ), as amended by the preceding provisions of this title, is further amended by adding at the end the following new subsection: (d) Borrower ineligibility upon second foreclosure If any individual is the mortgagor under any two mortgages for 1- to 4-family residential properties that have been foreclosed upon, the Secretary may not newly make, insure, or guarantee, under any provision of this title, any other loan under which such individual is the borrower. . 223. Limitation on seller concessions (a) FHA The FHA may not newly insure, under any provision of this title, the National Housing Act, or any FHA program, any mortgage on a 1- to 4-family residential property with respect to which the seller of the property subject to such mortgage (or any third party or entity that is reimbursed directly or indirectly by the seller) contributes toward the acquisition of the property by the mortgagor any amount in excess of 3 percent of the lesser of the sale price of the property or the appraised value of the property as of the time of such sale. (b) Rural housing Section 501 of the Housing Act of 1949 ( 42 U.S.C. 1471 ), as amended by the preceding provisions of this title, is further amended by adding at the end the following new subsection: (n) Limitation on seller concessions The Secretary may not newly make, insure, or guarantee, under any provision of this title, any loan for a 1- to 4-family residential property with respect to which the seller of the property for which the loan is made (or any third party or entity that is reimbursed directly or indirectly by the seller) contributes toward the acquisition of the property by the borrower any amount in excess of 3 percent of the lesser of the sale price of the property or the appraised value of the property as of the time of such sale. . 224. Lender repurchase requirement (a) Requirement The FHA may not newly insure, under any provision of this title, the National Housing Act, or any FHA program, any mortgage on a 1- to 4-family residential property unless the mortgagee under such mortgage enters into such binding agreements as the FHA considers necessary to ensure that, if the mortgagor is in default with respect to the mortgagor’s obligation to make payments under the mortgage for 60 or more consecutive days during the 6-month period beginning upon origination of the mortgage, the mortgagee will, except as provided pursuant to subsection (b) and upon notice by the FHA, repurchase such mortgage in an amount equal to the remaining principal obligation under the mortgage, as determined in accordance with guidelines issued by the FHA. (b) Exception The FHA shall provide, by regulation, for the FHA to waive the applicability of any binding agreements regarding repurchase of a mortgage entered into by a mortgagee pursuant to subsection (a) in cases in which hardship circumstances for the mortgagor materially contributed to the default of the mortgage. For purposes of this subsection, such hardship circumstances may include divorce, job or other income loss, health problems, death in the family, and such other situations as the FHA may prescribe. (c) Effective date This section shall take effect on the date of the enactment of this Act. During the transition period under section 551, any reference in this section to the FHA shall be construed to refer to the Secretary of Housing and Urban Development to the extent the Secretary has not delegated authority under this section to the FHA pursuant to section 552(1). 225. Indemnification by mortgagees (a) In general If the FHA determines that at or before the time of loan closing the mortgagee knew, or should have known based on the information then reasonably available to the mortgagee, of a serious and material violation of the requirements established by the FHA with respect to a mortgage executed after the date of the enactment of this Act by such mortgagee approved by the FHA under the direct endorsement program or insured by a mortgagee pursuant to the delegation of authority under section 256 of the National Housing Act ( 12 U.S.C. 1715z–21 ) such that the mortgage loan should not have been approved and endorsed for insurance, and the FHA pays an insurance claim with respect to the mortgage within a reasonable period specified by the FHA, the FHA may require the mortgagee approved by the FHA under the direct endorsement program or the mortgagee delegated authority under such section 256 to indemnify the FHA for the loss, or any portion thereof, if the violation was a materially contributing factor to the cause of the mortgage default. (b) Fraud or material misrepresentation If fraud or material misrepresentation was involved in connection with the origination or underwriting of a mortgage executed after enactment by the mortgagee and the FHA determines that at or before the time of loan closing such mortgagee knew or should have known, based on the information then reasonably available to such mortgagee, of the fraud or material misrepresentation such that the mortgage loan should not have been approved and endorsed for insurance, the FHA shall require the mortgagee approved by the FHA under the direct endorsement program or the mortgagee delegated authority under such section 256 to indemnify the FHA for the loss, or any portion thereof, if the fraud or material misrepresentation was a materially contributing factor to the cause of the mortgage default. (c) Appeals process The FHA shall, by regulation, establish an appeals process for mortgagees to appeal indemnification determinations made pursuant to subsection (a) or (b). (d) Requirements and procedures The FHA shall issue regulations establishing appropriate requirements and procedures governing the indemnification of the FHA by the mortgagee, including public reporting on— (1) the number of loans that— (A) were not originated or underwritten in accordance with the requirements established by the FHA; (B) involved fraud or material misrepresentation in connection with the origination or underwriting that was a material contributing factor to the cause of the mortgage default; and (C) the financial impact on the Mutual Mortgage Insurance Fund when indemnification is required. (e) Quality control and assurance (1) Manual The FHA shall, pursuant to its existing regulatory authority, issue and update annually a manual, handbook, or guide that collects all of the origination and underwriting requirements that a mortgagee must follow to make residential mortgage loans eligible for insurance by the FHA which shall— (A) provide clear and concise directions so that a mortgagee can reasonably know what is expected of it; (B) identify examples of specific serious and material violations that could be the basis for an indemnification demand under this section; (C) apply nationally and be interpreted by the FHA uniformly with respect to all mortgages endorsed for insurance; and (D) permit prospective changes with reasonable advance notice to mortgagees, which such changes must be incorporated into the following year’s revised version of the manual, handbook, or guide and may not provide for retroactive changes to mortgages previously endorsed for insurance. (2) Requirements The FHA shall— (A) make prompt initial determinations of a mortgagee’s potential liability for either indemnification under this section or other administrative remedies or sanctions that may be available under the National Housing Act or other applicable laws, based on either self-reports by the mortgagee or other findings by the FHA through its examination processes of potential serious and material violations of such origination and underwriting requirements established under paragraph (1) or other fraud and material misrepresentations; (B) promptly notify the mortgagee of such initial determination and afford the lender the opportunity to provide additional information and analysis before a final determination is made; and (C) not pursue indemnification under subsections (a) and (b) with respect to those mortgages reviewed under this subsection unless an initial determination of mortgagee liability is made and communicated to the mortgagee within six months of the FHA’s receipt of information that is reasonably sufficient to enable the FHA to determine initially that a serious and material violation or fraud or material misrepresentation may have occurred. (f) Effective date This section shall take effect on the date of the enactment of this Act. During the transition period under section 551, any reference in this section to the FHA shall be construed to refer to the Secretary of Housing and Urban Development to the extent the Secretary has not delegated authority under this section to the FHA pursuant to section 552(1). 226. Prohibitions relating to use of power of eminent domain (a) FHA (1) In general Notwithstanding any other provision of law, the FHA may not newly insure, under any provision of this title, the National Housing Act, or any FHA program, any mortgage that is secured by a structure or dwelling unit that is located within a county that contains any structure or dwelling unit that secures or secured a residential mortgage loan which mortgage loan was obtained by the State during the preceding 120 months by exercise of the power of eminent domain. (2) Definitions For purposes of this paragraph, the following definitions shall apply: (A) Residential mortgage loan The term residential mortgage loan means a mortgage loan that is evidenced by a promissory note and secured by a mortgage, deed of trust, or other security instrument on a residential structure or a dwelling unit in a residential structure. Such term includes a first mortgage or any subordinate mortgage. (B) State The term State includes the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States, and includes any agency or political subdivision of a State. (b) Rural housing Section 501 of the Housing Act of 1949 ( 42 U.S.C. 1471 ), as amended by the preceding provisions of this title, is further amended by adding at the end the following new subsection: (o) Prohibition relating to use of power of eminent domain (1) In general Notwithstanding any other provision of law, the Secretary may not newly guarantee, make, or insure under this title any mortgage that is secured by a structure or dwelling unit that is located within a county that contains any structure or dwelling unit that secures or secured a residential mortgage loan which mortgage loan was obtained by the State during the preceding 120 months by exercise of the power of eminent domain. (2) Definitions For purposes of this subsection, the following definitions shall apply: (A) Residential mortgage loan The term residential mortgage loan means a mortgage loan that is evidenced by a promissory note and secured by a mortgage, deed of trust, or other security instrument on a residential structure or a dwelling unit in a residential structure. Such term includes a first mortgage or any subordinate mortgage. (B) State The term State has the meaning given such term in section 502(h)(12), and includes any agency or political subdivision of a State. . (c) Effective date (1) In general This section and the amendment made by this section shall take effect on the date of the enactment of this Act. (2) Transition period During the transition period under section 551— (A) any reference in subsection (a) to the FHA shall be construed to refer to the Secretary of Housing and Urban Development to the extent such Secretary has not delegated authority under subsection (a) to the FHA pursuant to section 552(1); and (B) any reference in section 501(o) of the Housing Act of 1949 to the Secretary shall be construed to refer to the FHA to the extent the Secretary has delegated authority under such section 501(o) pursuant to section 552(4). 227. Residual income requirement (a) In general The FHA may not newly insure, under any provision of this title, the National Housing Act, or title V of the Housing Act of 1949, or under any FHA program, any mortgage on a 1- to 4-family residential property unless the mortgagor under such mortgage meets such requirements as the FHA shall, by regulation, establish to ensure that the mortgagor has sufficient residual income. (b) Residual income For purposes of this section, the term residual income means, with respect to a mortgagor, the net monthly income of the mortgagor, as provided by regulation by the FHA, after taking into consideration— (1) any assets of the mortgagor other than the property subject to such mortgage; and (2) any monthly obligations of the mortgagor with respect to mortgage payments, insurance payment, and taxes for the property subject to the mortgage, income and other taxes, maintenance, and utility expenses for the property, child care expenses, auto, consumer, and any other debt obligations, alimony and child support expenses, and such other expenses as the FHA may provide. (c) Effective date This section shall take effect on the date of the enactment of this Act. During the transition period under section 551, any reference in this section to the FHA shall be construed to refer to the Secretary of Housing and Urban Development to the extent the Secretary has not delegated authority under this section to the FHA pursuant to section 552(1). 228. Effective date This subtitle and the amendments made by this subtitle (except for sections 224, 225, 226, and 227, and any amendments made by such sections) shall take effect upon the expiration of the transition period under section 661. C Miscellaneous 241. Rule of construction Notwithstanding any other evidence of the intent of the Congress, it is hereby declared to be the intent of Congress that the provisions of this title shall be construed broadly to achieve the purposes of the title, and the provisions of any other Act that must be construed with any provision of this title shall similarly be construed to achieve the purposes of this title to the extent reasonably possible. This section shall take effect on the date of the enactment of this Act. 242. Definitions For purposes of this title, the following definitions shall apply: (1) Board The term Board means the Board of Directors of the FHA established under section 524. (2) Director The term Director means the Director of the Federal Housing Finance Agency. (3) FHA The term FHA means the Federal Housing Administration established under this title. (4) First-time homebuyer The term first-time homebuyer means an individual who meets any of the following criteria: (A) An individual, and his or her spouse, who has never had ownership in a principal residence, as evidenced by inclusion of such individual’s name on a mortgage, title, or deed in connection with such ownership. (B) A single parent (as such term is defined in section 956 of the Cranston-Gonzalez National Affordable Housing Act ( 42 U.S.C. 12713 )) who has only owned a principal residence with a former spouse while married. (C) An individual who is divorced, whose only ownership in a principal residence was together with a previous spouse, as evidenced by inclusion of such individual’s name on a mortgage, title, or deed in connection with such ownership. (D) An individual who is a displaced homemaker (as such term is defined in such section 956 of the Cranston-Gonzalez National Affordable Housing Act) and has only owned a principal residence with a spouse. (E) An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations. (F) An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure. (5) Native American government The term Native American government means the government of any Indian or Alaska native tribe, band, nation, pueblo, village or community that the Secretary of the Interior acknowledges to exist as an Indian Tribe, pursuant to the Federally Recognized Indian Tribe List Act of 1994. (6) United States The term United States includes the States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, the Virgin Islands, American Samoa, and Native American governments. III Development and Deployment of a Mortgage Security Market Exchange, Data Repository, and Covered Bond Market 301. Purposes The purposes of the national mortgage security market exchange created by this title are— (1) to enhance efficiency, liquidity, and security in the secondary market for residential mortgages, including mortgage-backed securities; (2) to establish standards related to originating and servicing eligible collateral and for issuers and trustees of qualified securities, which would be exempt from the Securities Act of 1933; (3) to improve uniformity, quality and accessibility of information related to the performance of residential mortgage loans; (4) to operate a common securitization platform that could be available to issuers of residential mortgage-backed securities; (5) to foster the use and uniformity of electronic methods for the creation, authentication, transmission, storage, and availability of materials relating to mortgages; (6) to provide a central repository for notes, mortgages, and other mortgage-related information, and address problems that can arise when paper notes cannot be produced, due to loss or destruction as a result of natural disaster or other causes; and (7) to provide a uniform procedure for demonstrating the right to act with regard to such notes or other registered data for all actions in any State or Federal proceeding, judicial or nonjudicial, involving such notes or other data. 302. Definitions For purposes of this title, the following definitions shall apply: (1) Affiliate With respect to the Exchange, the term affiliate means any entity that controls, is controlled by, or is under common control with, the Exchange. (2) Agency The term Agency means the Federal Housing Finance Agency. (3) Common Securitization Platform; Platform The terms Common Securitization Platform and Platform mean the securitization platform first described by the paper issued by the Agency on October 4, 2012, entitled Building a New Infrastructure for the Secondary Mortgage Market , and updated in subsequent documents released by the Agency, including annual strategic plans for the conservatorship of the enterprises and annual conservatorship scorecards. (4) Common Securitization Solutions The term Common Securitization Solutions means Common Securitization Solutions, LLC, the joint venture formed by the enterprises in October 2013, or any successor to Common Securitization Solutions, LLC, that is a joint venture of the enterprises. (5) Depositor The term depositor means— (A) any person authorized to submit documents or data for registration with the Repository; and (B) any person qualified pursuant to section 331 (relating to organization and operation of the Repository) to inform the Repository of— (i) newly identified interest holders, whether through creation, assignment, or transfer; or (ii) changes to interests of existing holders, including through modification, amendment, or restatement of, or discharge related to, any registered mortgage-related document. (6) Director The term Director means the Director of the Federal Housing Finance Agency. (7) Eligible collateral The term eligible collateral means a residential mortgage loan that meets any standard for mortgage classification established pursuant to section 322 (relating to standards for qualified securities). (8) Enterprise The term enterprise means— (A) the Federal National Mortgage Association and any affiliate thereof, and (B) the Federal Home Loan Mortgage Corporation and any affiliate thereof. (9) Exchange The term Exchange means the mortgage security market exchange established under section 311. (10) Exchange-affiliated party The term exchange-affiliated party means— (A) any director, officer, employee or controlling shareholder of, or agent for, the Exchange; (B) any shareholder, affiliate, consultant, or joint venture partner of the Exchange, and any other person, as determined by the Director (by regulation or on a case-by-case basis) that participates in the conduct of the affairs of the Exchange; and (C) any independent contractor of the Exchange (including any attorney, appraiser or accountant) if— (i) the independent contractor knowingly or recklessly participates in any violation of law or regulation, any breach of fiduciary duty, or 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 Exchange. (11) Mortgage-related document The term mortgage-related document means any document or other information or data related to the use of residential real estate as security for a loan, including documents establishing an obligation to repay a loan secured by residential real estate, establishing a security interest in real estate (so long as such security interest has first been recorded or registered under State law to establish the priority of such interest), establishing the value of the real estate at the time the security interest is created, and insuring clear title to residential real estate pledged as security, or as the Director by regulation may define. Such documents may include electronic documents. (12) Organizer The term organizer means the person or entity that establishes the Exchange. (13) Participant The term participant means any person authorized to use data maintained or created by the Repository that is not otherwise available to the public. (14) Repository The term Repository means the national mortgage data repository organized under section 331. (15) Transfer Date The term Transfer Date means the date established under section 315(b). (16) Transition Period The term Transition Period means the period beginning on the date of the enactment of this Act and ending on the Transfer Date. A Establishment and authority of the Exchange 311. Establishment (a) Authority of Director Under such regulations as the Director may prescribe, the Director shall provide for the organization, incorporation, examination, operation, and regulation of a Mortgage Security Market Exchange ( Exchange ). The Exchange shall be organized, operated, and managed as a not-for-profit entity. (b) Formation of Exchange; application (1) Formation Subject to the terms of this subtitle and any regulations issued by the Director, a person or entity may file an application with the Director to establish the Exchange. The Exchange may be established as a corporation, mutual association, partnership, limited liability corporation, cooperative, or any other organizational form that the applicant may deem appropriate. (2) Contents of application An application for establishment of the Exchange shall include— (A) the proposed articles of association; (B) a statement of the general object and purpose of the Exchange, consistent with the provisions of this subtitle; (C) the proposed capitalization and business plan for the Exchange; (D) the proposed State whose law would govern, by election of the applicant, the operation of the Exchange to the extent not otherwise covered by this subtitle; (E) information on the financial resources of the applicant; (F) a statement of the relevant housing finance experience of the applicant; (G) identification of the proposed senior managers of the Exchange, and the relevant experience of such individuals; and (H) any other information the Director determines to be necessary to evaluate the background, experience, and integrity of the applicant and the proposed senior managers, or information otherwise relevant to determine the likely success of the proposed Exchange. (3) Directors The Exchange shall be governed by a board of directors— (A) a majority of which have experience in housing and housing finance businesses; (B) at least one of which shall have knowledge of smaller financial institutions; and (C) at least one of which shall have knowledge of residential mortgage securitization investing. (4) Selection of applicant The Director shall select the applicant to establish the Exchange that the Director determines, in the Director’s sole discretion, has the managerial, financial, and operational resources to succeed, consistent with the purposes of this subtitle (c) Status (1) Not a Federal Government instrumentality The Exchange is not, and shall not be deemed to be, a department, agency, or instrumentality of the United States Government. (2) Supervision Notwithstanding any other provision of law— (A) the Exchange shall be subject to exclusive supervision by the Agency, and the Agency shall have sole enforcement authority with respect to the Exchange for any violation of Federal law; (B) the Exchange shall not be subject to designation under the Payment, Clearing, and Settlement Supervision Act of 2010; and (C) the Exchange is authorized to conduct its business without regard to any qualification or similar statute in any State. (3) Exemption from taxation The Exchange shall be exempt from all taxation imposed by the United States, any territory, dependency, or possession of the United States or any State, county, municipality, or local taxing authority, except that any real property of the Repository shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property. (d) Reports to Congress Commencing with the first annual report of the Director following the date of the enactment of this Act, the annual report of the Director under section 1319B of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4521 ) shall include a description of the Agency’s activities with regard to organization, incorporation, examination, operation, and regulation of the Exchange. 312. General powers; authorized and prohibited activities (a) General Powers The Exchange may— (1) adopt and use a corporate seal; (2) determine a State whose law will govern the corporate business activities of the Exchange; (3) adopt, amend, and repeal by-laws; (4) sue or be sued, subject to section 334 (relating to judicial review); (5) make contracts, incur liabilities, and borrow money; (6) purchase, receive, hold, and use real and personal property and other assets necessary for the conduct of its operations; (7) elect or appoint directors, officers, employees and agents, subject to section 311(d); and (8) upon receipt of the Director’s prior written approval, establish subsidiaries or affiliates that shall be subject to the same rights, duties and responsibilities as the Exchange. (b) Authorized activities In addition to the general powers under subsection (a), the Exchange shall— (1) develop standards and disclosures related to originating, pooling, and securitizing residential mortgage loans in accordance with subtitle B; (2) develop standards and disclosures related to servicing residential mortgage loans in accordance with subtitle B; (3) operate and maintain the Platform and establish fees for use of the Platform; (4) establish basic rules for use of the Platform; (5) establish the Repository and establish fees for registration of mortgage-related documents and maintenance and use of data of the Repository, in accordance with subtitle C; (6) perform any other service or engage in any other activity that the Director determines, by regulation or order, to be incidental to the activities enumerated in this subsection; and (7) establish fees for the provision of other related or incidental services not inconsistent with the purposes of this subtitle. (c) Prohibited activities The Exchange may not— (1) own, originate, aggregate, issue, service, insure, or guarantee any residential mortgage or other financial instrument that is associated with a residential mortgage; (2) guarantee timely payment of principal or interest on any mortgage-related security; (3) adopt access rules or fees for the Platform the effect of which is to discriminate against loan originators, aggregators, or issuers based on size, composition, business line, or loan volume; or (4) perform any service or engage in any activity other than those authorized under this subtitle, unless such activity has been determined by the Director to be incidental to an authorized activity. 313. Mission and structure of Common Securitization Solutions (a) Mission Prior to the Transfer Date, the mission of Common Securitization Solutions shall be to accomplish the following goals: (1) Developing a Common Securitization Platform— (A) that is based upon interoperable technology and standards that can accommodate all platform users; and (B) that ensures fair and non-discriminatory access for any issuer, enterprise, servicer, agency, or other counterparty. (2) Developing a uniform contractual and disclosure framework that facilitates a deep, liquid, and resilient secondary mortgage market for mortgage-backed securities. (3) Developing functions to support the non-Government guaranteed securitization market. (4) Continuing, advancing, or developing any other initiative as authorized by the CSS Board of Managers, with the approval of the Director, to enhance efficiency, liquidity, and security in the secondary market for residential mortgage loans, provided such initiative does not conflict with or unreasonably delay the completion of the goals described under paragraph (1), (2), or (3). (b) CSS Board of Managers (1) Size The size of the membership of the CSS Board of Managers shall be fixed at: (A) For the one-year period beginning upon commencement of the Transition Period, four members. (B) For the one-year period following the period described under subparagraph (A), seven members. (C) After the end of the one-year period described under subparagraph (B), nine members. (2) Appointment and qualifications The Director shall appoint the additional members required under paragraph (1) from among individuals that— (A) have demonstrated knowledge of, or experience in, financial management, financial services, risk management, information technology, mortgage securitization, secondary mortgage markets, or housing finance; and (B) will not be simultaneously employed by an enterprise or serving as a director of an enterprise. (3) Fiduciary duty All members of CSS Board of Managers shall owe a fiduciary duty to the enterprises prior to the Transfer Date. 314. Transition period (a) Required activities prior to the Transfer Date (1) In general Prior to the Transfer Date, Common Securitization Solutions shall develop, promulgate, and finalize standards that— (A) develop a uniform contractual and disclosure framework for issuers, including issuers other than the enterprises; (B) specify the requirements for loans that may serve as collateral for mortgage-backed securities issued through the Common Securitization Platform, including securities that will be issued by issuers other than the enterprises; and (C) specify the requirements for operating and maintaining the Common Securitization Platform and the establishment of reasonable fees for use of the Common Securitization Platform. (2) Approval and modifications of standards (A) Initial standards In establishing the standards described under paragraph (1), Common Securitization Solutions shall use established industry standards as a basis for standardization requirements for the issuance of such securities through the Common Securitization Platform. (B) Approval of standards The standards developed pursuant to paragraph (1) shall be subject to approval by a 2/3 vote of the CSS Board of Managers and by the Director. (C) Revisions to standards Common Securitization Solutions or the Exchange, as applicable, may revise the standards established pursuant to paragraph (1) from time to time as may be necessary. Material revisions to such standards shall require a 2/3 vote of the CSS Board of Managers or the board of directors of the Exchange, as applicable, and approval of the Director. (3) Issuing securities and ensuring capabilities (A) In general The Director shall establish a date or dates, not later than 2 years after the date of enactment of this Act, by which Common Securitization Solutions shall facilitate the issuance of securities by issuers other than the enterprises to issue mortgage-backed securities. (B) Exception The Director may delay a date established under subparagraph (A) for 1 year if the Director, in consultation with the Federal Housing Finance Oversight Board— (i) determines that— (I) facilitation of such securities is not feasible within that period of time and could adversely impact the housing market; or (II) the capabilities of other entities is not feasible within that period of time and could adversely impact facilitating the issuance of securities by the enterprises; and (ii) submits to Congress a report describing the justification for the determinations made under clause (i). (4) Transfer of funds from the enterprises At a time established by the Director, but not later than the Transfer Date, the Agency shall transfer to Common Securitization Solutions such funds from the enterprises as the Director, after consultation with the CSS Board of Managers, determines may be reasonably necessary for Common Securitization Solutions to begin carrying out the operations and activities of the Common Securitization Platform and the contractual and disclosure framework. (b) Reports on Development and Transition (1) Quarterly report on development Not later than 1 year after the date of enactment of this Act, and every quarter thereafter until the Transfer Date, the Director shall submit to Congress a report on the status of the development of the Common Securitization Platform and the contractual and disclosure framework, which shall include— (A) the projected timelines, including issues and impediments, for— (i) completing development of the Common Securitization Platform to support the securitization needs of the enterprises; and (ii) completing development of the Common Securitization Platform and the contractual and disclosure framework to support the securitization needs of issuers other than the enterprises; and (B) the projected budget, including costs incurred by Common Securitization Solutions and the enterprises, for the development of the Common Securitization Platform and the contractual and disclosure framework. (2) Report on transition Not later than 2 years after the date of enactment of this Act, the Director shall develop a plan, and submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report on such plan, to transition, by the Transfer Date, the Common Securitization Platform and the contractual and disclosure framework from Common Securitization Solutions into a private, nonprofit entity that best facilitates a deep, liquid, and resilient secondary mortgage market for mortgage-backed securities. (3) Annual report on the Common Securitization Platform The Inspector General of the Agency shall issue an annual report to the Congress on the status of the Common Securitization Platform until the Transfer Date. 315. Transfer date (a) Transfer of Platform to Exchange Common Securitization Solutions shall transition the Common Securitization Platform and the contractual and disclosure framework, including any associated intellectual property, technology, systems, and infrastructure, at the Transfer Date, to the Exchange, in accordance with this Act. (b) Transfer Date (1) Designated transfer date The Director shall establish a Transfer Date for the transition of ownership of the Common Securitization Platform and the contractual disclosure framework, including any associated intellectual property, technology, systems, and infrastructure, from the enterprises and Common Securitization Solutions to the Exchange. (2) Public notice In establishing the Transfer Date under paragraph (1), the Director shall provide notice to the public of such date, including on the website of the Agency. (3) Deadline The Transfer Date established under paragraph (1) shall be no earlier than 2 years after the date of the enactment of this Act and no later than the date on which both charters of the enterprises are terminated pursuant to section 1367(k) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. (c) Transfer of property (1) In general At a time established by the Director, but not later than the Transfer Date, the Director shall direct the enterprises or Common Securitization Solutions to transfer or sell to the Exchange any property, including intellectual property, technology, systems, and infrastructure (including technology, systems, and infrastructure developed by the enterprises for the Common Securitization Platform), as well as any other legacy systems, infrastructure, and processes that may be necessary to carry out their operations and activities. (2) Contractual and other legal obligations As may be necessary for the Agency and the enterprises to comply with legal, contractual, or other obligations, the Director shall have the authority to require that any transfer authorized under paragraph (1) occurs as an exchange for value, including through the provision of appropriate compensation to the enterprises or other entities responsible for creating, or contracting with, the Exchange. 316. Repayment of cost (a) In general Not later than 10 years after the Transfer Date, the total cost of the property transferred in accordance with section 315(c) at the time of the transition, as determined by the Director, in consultation with the Federal Housing Finance Oversight Board, shall be repaid by the Exchange to the entity that owned the property prior to the time of transfer. (b) Third-Party valuation Before the repayment required under subsection (a), the Director shall contract with a third-party to provide a valuation of the total cost of the property transferred in accordance with section 315(c) at the time of the transition. (c) Fees permitted The Exchange may charge a reasonable fee for the use of the Common Securitization Platform and other services, for the purpose of making the repayment described under subsection (a). 317. Regulation, supervision, and enforcement (a) General oversight The Director shall exercise, by rule, order, or guidance, oversight of the Exchange, which shall include the authority to regulate, supervise, and examine the Exchange and take enforcement actions against the Exchange or any Exchange-affiliated party, consistent with the provisions of the Federal Housing Enterprise Financial Safety and Soundness Act of 1992. (b) Scope of Authority The authority of the Director under this section shall include the authority to exercise such incidental powers as may be necessary or appropriate to fulfill the duties and responsibilities of the Director in the oversight, supervision, and regulation of the Exchange. (c) Consultation with Other Agencies In exercising authority to regulate and supervise the Exchange, the Director shall consult with other Federal departments and agencies that regulate or supervise entities, institutions, or companies that are or may become subject to standards, rules, processes, or procedures developed by the Exchange (including issuers through the Platform and depositors or participants in the Repository), including the Government National Mortgage Association, the Bureau of Consumer Financial Protection, any Federal banking agency (as defined under section 3 of the Federal Deposit Insurance Act), and the National Credit Union Administration. (d) Annual Assessment The Director shall establish and collect from the Exchange an annual assessment in an amount not exceeding the amount sufficient to provide for reasonable costs (including administrative costs) and expenses of the Agency related to its oversight of the Exchange. The amounts received by the Director from assessments under this section shall not be construed to be Government or public funds or appropriated money. Notwithstanding any other provision of law, the amounts received by the Director from assessments under this section shall not be subject to apportionment for the purpose of chapter 15 of title 31, United States Code, or under any other authority. B Standards for qualified securities 321. Qualified securities For purposes of this subtitle, the term qualified security means a security that— (1) is collateralized by a class, or multiple classes, of residential mortgages established under section 322(a); (2) is issued in accordance with a standard form securitization agreement under section 322(d); (3) is issued in accordance with section 322(c); (4) is issued through the Platform; and (5) is not guaranteed, in whole or in part, by the United States Government. 322. Standards for qualified securities (a) Standard mortgage classifications (1) Establishment of mortgage classifications The Exchange shall prescribe classifications for residential mortgages having various degrees of credit risk, ranging from a classification of mortgages having little to no credit risk to a classification of mortgages having higher credit risk. In prescribing such classifications the Exchange shall seek to allow for the pricing of credit risk, allow for the trading of securities collateralized by each classification of mortgages established pursuant to this subsection in the forward market, and maintain well-functioning liquid markets in securities collateralized by each of the classifications of mortgages established pursuant to this subsection. (2) Underwriting Criteria For each classification of mortgages established under paragraph (1), the Exchange shall establish standards for each of the following underwriting criteria: (A) Debt-to-Income Ratio The ratio of the amount of the total monthly debt of the mortgagor to the amount of the monthly income of the mortgagor. (B) Loan-to-Value Ratio The ratio of the principal obligation under the mortgage to the value of the residence subject to the mortgage, at the time of mortgage origination. (C) Credit History Information on the credit history of the mortgagor, including credit scores of the mortgagor. (D) Loan Documentation The extent of loan documentation and verification of the financial resources of the mortgagor used to qualify the mortgagor for the mortgage, including any appraisal. (E) Occupancy Whether the residence subject to the mortgage is occupied by the mortgagor. (F) Credit Enhancement Whether any mortgage insurance or other type of insurance or credit enhancement was obtained at the time of origination. (G) Loan Payment Terms (i) In general The terms of the mortgage that determine the magnitude and timing of payments due from the mortgagor, including the term to maturity of the mortgage, the frequency of payment, the type of amortization, any prepayment penalties, and whether the interest rate is fixed or may vary. (ii) Inclusion of 30-Year Fixed Interest Rate Terms established under clause (i) shall include a 30-year fixed interest rate mortgage. (H) Other Such other underwriting criteria as the Exchange may establish, consistent with the goals of this subtitle. (3) Definitions The Exchange shall, for purposes of this subsection, prescribe definitions for each of the following terms: (A) Mortgage The term mortgage , which definition shall include only mortgages on residential properties. (B) Default The term default , with respect to a mortgage. (C) Delinquency The term delinquency , with respect to a mortgage. (D) Loan documentation The term loan documentation , with respect to a mortgage. (E) Additional terms Such other terms as the Exchange may establish. (b) Standards for Aggregators The Exchange may develop, adopt, and publish standards for aggregation of eligible collateral by entities, institutions, or companies other than an issuer. Notwithstanding any such standards developed by the Exchange, any Federal Home Loan Bank may act as an aggregator and offer the service of aggregation to any member of such Bank, subject to regulations prescribed by the Director. (c) Standards for Qualified Issuers (1) In General The Exchange shall develop, adopt, and publish standards for an issuer to qualify as a qualified issuer. Such standards shall only include— (A) the experience, financial resources, and integrity of the issuer and its principals, including compliance history with Federal and State laws; (B) the adequacy of insurance and fidelity coverage of the issuer with respect to errors and omissions; and (C) a requirement that the issuer submit audited financial statements to the Exchange, who shall make such statements publicly available through the Exchange’s Web site. (2) Application process (A) In general The Exchange shall establish an application process for the qualification of issuers, in such form and manner and requiring such information as the Exchange may prescribe, in accordance with standards adopted under paragraph (1). (B) Approval The Exchange shall approve any application made pursuant to subparagraph (A) unless the issuer does not meet the standards adopted under paragraph (1). (C) Publication The Agency shall publish a list of newly qualified issuers in the Federal Register and the Exchange shall maintain an updated list of qualified issuers on the Exchange’s Web site. (3) Review and revocation of qualified status (A) In General The Exchange may review the status of a qualified issuer if the Exchange is notified that a claim has been made against the issuer by a trustee with respect to a violation of a contractual term in a securitization document of the issuer. (B) Revocation (i) In general Subject to subparagraph (C), if the Exchange determines, subject to the approval of the Director, in a review pursuant to subparagraph (A), that an issuer no longer meets the standards for qualification, the Exchange shall revoke the issuer’s qualified status. (ii) Construction The revocation of an issuer’s qualified status under this subparagraph shall— (I) have no effect on the qualified status of any security issued before such revocation; and (II) not relieve the issuer of any obligation associated with any representation or warranty or any repurchase obligations related to any qualified security issued before such revocation. (C) Grace Period The Exchange shall establish standards by which a qualified issuer who no longer meets the standards for qualification may remediate and return to meeting the standards, without losing the issuer’s qualified status. (D) Publication The Agency shall publish a list of issuers who are no longer qualified in the Federal Register and the Exchange shall maintain an updated list of such issuers on the Exchange’s Web site. (d) Standard Form Securitization Agreements (1) In general The Exchange shall develop, adopt, and publish standard form securitization agreements for collateral that will be used to back qualified securities. (2) Required Content The standard form securitization agreements to be developed under paragraph (1) shall include terms relating to— (A) pooling and servicing; (B) purchase and sale; (C) representations and warranties, including representations and warranties as to compliance or conformity with standards established by the Exchange, as appropriate; (D) indemnification and remedies, including principles of a repurchase program that will ensure an appropriate amount of risk retention under the representations and warranties set forth under subparagraph (C); and (E) the qualification, responsibilities, and duties of trustees. (e) Registration with the Repository The Exchange shall require that any mortgage-related document associated with collateral for qualified securities be registered with the Repository. (f) Standards for Servicing The Exchange shall develop, adopt, and publish— (1) servicing standards, including for the modification, restructuring, or work-out of any mortgage that serves as collateral for a qualified security; and (2) a servicer succession plan, which may include provisions for— (A) a specialty servicer that can replace the existing servicer if the performance of the mortgage pool deteriorates to specified levels; and (B) a plan to achieve consistency in servicing systems related to systematic note-taking, consistent mailing addresses, and other points of contact for borrowers to use, among other items. (g) Standards for Servicer Reporting The Exchange shall develop, adopt, and publish standards for the reporting obligations of servicers of any mortgage that serves as collateral for a qualified security. (h) Data Standards; Disclosure Standards (1) Data Standards The Exchange shall develop, adopt, and publish standard data definitions for all aspects of loan origination, appraisals, and servicing. In developing such definitions, the Exchange shall consider the data standard-setting work undertaken by the Mortgage Industry Standards Maintenance Organization through the enterprises’ Uniform Mortgage Data Program announced by the Agency on May 24, 2010. (2) Disclosure Standards The Exchange shall develop, adopt, and publish standards for disclosure of loan origination, appraisal, and servicing data, including data required in subsection (a)(2) (relating to underwriting criteria) for residential mortgage loans that comprise qualified securities. (3) Coordination In developing the data and disclosure standards required by this subsection, the Exchange shall ensure that such standards are coordinated. (4) Privacy Protections In prescribing the definitions and standards required under this subsection, the Exchange shall take into consideration issues of consumer privacy and all statutes, rules, and regulations related to privacy of consumer credit information and personally identifiable information. Such standards shall expressly prohibit the identification of specific borrowers. (5) Consultation When reviewing any disclosure standards established under this subsection, the Director shall consult with the Securities and Exchange Commission. (i) Standards for Trustees (1) In General There shall at all times be one or more trustee for each pool of mortgages that acts as collateral for a qualified security. (2) Rulemaking The Director shall issue regulations regarding the qualifications of trustees under paragraph (1) that shall, to the extent practicable, be consistent with the qualification provisions applicable to trustees under section 310(a) of the Trust Indenture Act of 1939 ( 15 U.S.C. 77jjj(a) ). (3) Conflicts of Interest The Director shall issue conflicts of interest regulations that apply to a qualified trustee. Such regulations shall, to the extent practicable, be consistent with those conflicts of interest provisions applicable to an indenture trustee under section 310(b) of the Trust Indenture Act of 1939 ( 15 U.S.C. 77jjj(b) ). (4) Reporting of Claims Any time a trustee brings a claim against a qualified issuer on behalf of investors with respect to a standard form securitization agreement, the trustee shall notify the Director of such claim. (5) Protection of Investor Rights For the purpose of protecting investor rights, each trustee shall— (A) maintain a list of all investors (beneficial owners) in a qualified security; (B) update such list from time to time; (C) not make such list available to investors (beneficial owners); and (D) act as a means to communicate information about the qualified security to investors (beneficial owners) and act as a means for investors (beneficial owners) to communicate with each other. (6) No Liability for Certain Communications A trustee shall not be liable for the content of any information provided to the trustee by an investor (beneficial owner) that the trustee communicates to another investor (beneficial owner). (7) Investor (Beneficial Owner) Notification of Trustee A person who becomes an investor (beneficial owner) in a qualified security shall promptly notify the trustee of such security of the change in ownership. (j) Independent Third Party If the majority of investors (beneficial owners) in a pool of qualified securities chooses to hire an independent third party to act on behalf of the best interests of the investors (beneficial owners), such party shall— (1) be granted access to the loan documents for the mortgage loans backing such security and all servicing reports the servicer provides to investors (beneficial owners) or the trustee; (2) be granted access to the list of investors (beneficial owners) maintained by the trustee, on the condition that the independent third party will not make the list available to the investors (beneficial owners); and (3) have the right, on behalf of the investors (beneficial owners), to inform the trustee of such securities of any breach of the securitization agreement identified by the third party. (k) Mandatory Arbitration (1) In general All disputes between an owner of a qualified security and the qualified issuer of such security relating to representations and warranties shall be subject to mandatory arbitration procedures established by the Exchange, in accordance with current market practices. (2) Selection of Arbitrator Investors (beneficial owners) and issuers subject to a dispute described under paragraph (1) shall have the right to agree on an independent arbitrator. If the parties cannot agree on an independent arbitrator, the Exchange shall select an independent arbitrator for the parties. (3) Reporting Duty of Arbitrator (A) Upon Commencement The arbitrator shall provide the Exchange with notice upon commencement of any arbitration under this subsection. (B) Upon Conclusion Upon conclusion of any arbitration under this subsection, the arbitrator shall provide the Exchange with— (i) the decision reached by the arbitrator; and (ii) the basis for the arbitrator’s decision, including any evidence or testimony received during the arbitration process. (l) Use of standards In developing, adopting, and publishing the initial standards required under this section, the Exchange shall, to the extent practicable, utilize the standards finalized by Common Securitization Solutions pursuant to section 314(a). (m) Timing of issuance; Agency review; authority To revise standards (1) Timing The Director shall issue any regulations required by this section not later than the end of the 12-month period beginning on the date of the enactment of this Act. The Exchange shall issue any definitions, standards, rules, processes, or procedures required by this section not later than the end of the 12-month period beginning on the date of the establishment of the Exchange. (2) Agency review Any definition, standard, rule, process or procedure established by the Exchange shall be submitted to the Director for review and approval prior to its implementation if, in the Director’s discretion, the Director requires such submission. Any definition, standard, rule, process or procedure that the Director requires be submitted to the Agency for review and approval shall be reviewed within three months of submission. (3) Authority to revise (A) In general The Exchange may review, revise, and, if revised, re-publish any standard form securitization agreement or other definition, standard, rule, process, or procedure required to be developed by this subtitle if the Exchange determines review or revision to be necessary or appropriate to satisfy the goals of this subtitle. (B) Application of revisions Any revisions made pursuant to subparagraph (A) shall apply only to securitizations made after the date of such revision. (n) Effect of Conflict In the event a definition, standard, rule, process, or procedure established by the Exchange is in conflict with any definition, standard, rule, process, or procedure established by another Federal department or agency, the Director shall consult with the other Federal department or agency, and provide prompt written notification to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, of the conflict. (o) Public Involvement In developing definitions, standards, rules, processes, and procedures required by this subtitle, the Exchange shall work with market participants, including servicers, originators, and mortgage investors, and develop methods for gathering information and comment from such groups. 323. Conforming amendments to Securities Act of 1933 (a) Exempted securities Section 3(a) of the Securities Act of 1933 ( 15 U.S.C. 77c(a) ) is amended by adding at the end the following new paragraph: (15) Any qualified security, as such term is defined in section 321 of the Protecting American Taxpayers and Homeowners Act of 2018. . (b) Removal of credit risk retention reference Section 27B of the Securities Act of 1933 ( 15 U.S.C. 77z–2a ) is amended by striking subsection (d). C National Mortgage Data Repository 331. Organization and operation (a) Organization and operation Under such regulations as the Director may prescribe, the Exchange shall organize and operate a national mortgage data repository ( Repository ). (b) Authorized activities In addition to organizing and operating the Repository, the Exchange shall— (1) establish and operate a repository for mortgage-related documents; (2) establish standards for qualification of any depositor of mortgage-related documents to the Repository; (3) establish standards and procedures for submission of mortgage-related documents to the Repository, including required information and the type and format of information and data; (4) establish procedures for validation of mortgage-related documents and the data contained in the Repository; (5) establish standards and procedures for acceptance of mortgage-related documents (including electronic copies), and notice of acceptance, by the Repository; (6) establish standards and procedures for registration of any mortgage-related document with the Repository, including notice of registration and the assignment of a unique identifier, where such standards and procedures include a requirement that any such mortgage-related document must first be recorded in the appropriate local jurisdiction, as may be required under State or local law; (7) establish standards and procedures for recording the creation, assignment, or transfer of an interest in any registered mortgage-related document and for requiring the Repository to notify the appropriate local jurisdiction of such creation, assignment, or transfer; (8) establish standards and procedures for qualification of depositors and participants in the Repository; (9) establish procedures for proper demonstration of registration of mortgage-related documents with the Repository and recordation of an interest by the holder of an interest in any such document, subject to regulations issued by the Director in accordance with section 332 (relating to legal effect of registration with the Repository); (10) establish and maintain a catalog of the mortgage-related documents registered with the Repository; (11) establish standards and procedures for disposition of mortgage-related documents, including safekeeping, long-term storage, or destruction of paper documents; (12) establish standards and procedures for making data publicly available; (13) ensure that data collected and maintained by the Repository are kept secure and protected against unauthorized disclosure, taking into consideration issues of consumer privacy and all statutes, rules, and regulations related to privacy of consumer credit information and personally identifiable information, and prohibit the identification of specific borrowers; (14) establish a process, including notification from the public, for identification and correction of incorrect information submitted to or maintained by the Repository; (15) establish fees for registration of mortgage-related documents and maintenance and use of data, and for the provision of other related services not inconsistent with the purposes of this subtitle; and (16) perform any other service or engage in any other activity that the Director determines, by regulation or order, to be incidental to the activities enumerated in this subsection. (c) Prohibited activities The Exchange may not— (1) transfer or sell data maintained by the Repository to the parent or affiliated companies of the operator of the Exchange; and (2) use data maintained by the Repository for marketing or any other purpose not directly associated with the operation of the Exchange. (d) Requirements on participants Each participant shall— (1) comply with such requirements as may be set by the Repository for using data maintained or created by the Repository; and (2) use such designation as the Repository may provide, such as a unique identifier. 332. Legal effect of registration with Repository Notwithstanding any provision of State or Federal law to the contrary, by proper demonstration of registration with the Repository, any holder of an interest in any mortgage-related note shall satisfy any requirement for demonstration of a right to act regarding such note or other registered data that exists in State or Federal law, including any obligation to produce or possess an original note. The Director shall provide for the establishment of procedures for proper demonstration of registration of any mortgage-related document and of an interest by the holder of an interest in any such document with the Repository. Once registered with the Repository, such registration shall be a legal right enforceable in any judicial or nonjudicial process. Nothing in this section shall be construed as preempting any State or local law requiring a mortgage-related document to be recorded in the appropriate local jurisdiction. 333. Grants to States; repayment (a) Grants to States There is hereby authorized to be appropriated $50,000,000 to the Director for the establishment of a fund to be administered by the Agency for providing grants to States, on application to the Agency, to facilitate participation in the Repository by any depositor or participant or class of depositors or participants, or any other person upon appropriate demonstration to the Agency that such a grant would assist in the accomplishment of the purposes of this subtitle. Any such amounts appropriated and not granted by the Agency within five years of the date of the enactment of this Act shall be returned to the Treasury of the United States. (b) Repayment The Director shall cause to be collected from the Exchange and deposit in the Treasury of the United States an amount equal to the aggregate amount provided as grants to States pursuant to subsection (a) within the 10-year period beginning on the date that the first grant is made pursuant to subsection (a). 334. Judicial review Except as otherwise expressly provided under this subtitle, no person other than the Director or the Attorney General of the United States, or any duly authorized representative of the Director or the Attorney General, may proceed against the Repository in any State or Federal court. The prohibition in the preceding sentence shall not apply to a civil action against the Repository or any duly authorized agent thereof for breach of a contract, including breach of a representation or warranty, or breach of privacy related to data collected and maintained by the Repository or any duly authorized agent thereof. 335. Transition provisions (a) In general The Agency shall provide for a transition period to permit the efficient implementation of the provisions of this subtitle. Such transition may include periods for testing, early adoption, and final mandatory adoption for all recorded mortgages. (b) Electronic Submissions The Repository shall accept electronic submissions and paper-based documents submitted electronically subject to rules of the Repository. After the expiration of the 10-year period that begins upon the date of the enactment of this Act, subject to an extension of such period for up to 5 additional years if the Director determines appropriate, the Repository shall require only electronic submission. D Covered Bonds 341. Definitions For purposes of this subtitle, the following definitions shall apply: (1) Ancillary asset The term ancillary asset means— (A) any interest rate or currency swap associated with 1 or more eligible assets, substitute assets, or other assets in a cover pool; (B) any credit enhancement or liquidity arrangement associated with 1 or more eligible assets, substitute assets, or other assets in a cover pool; (C) any guarantee, letter-of-credit right, or other secondary obligation that supports any payment or performance of 1 or more eligible assets, substitute assets, or other assets in a cover pool; and (D) any proceeds of, or other property incident to, 1 or more eligible assets, substitute assets, or other assets in a cover pool. (2) Corporation The term Corporation means the Federal Deposit Insurance Corporation. (3) Cover pool The term cover pool means a dynamic pool of assets that is comprised of— (A) in the case of any eligible issuer described in subparagraph (A), (B), or (C) of paragraph (9)— (i) 1 or more eligible assets from a single eligible asset class; and (ii) 1 or more substitute assets or ancillary assets; and (B) in the case of any eligible issuer described in paragraph (9)(D)— (i) the covered bonds issued by each sponsoring eligible issuer; and (ii) 1 or more substitute assets or ancillary assets. (4) Covered bond The term covered bond means any recourse debt obligation of an eligible issuer that— (A) has an original term to maturity of not less than 1 year; (B) is secured by a perfected security interest in or other perfected lien on a cover pool that is owned directly or indirectly by the issuer of the obligation; (C) is issued under a covered bond program that has been approved by the applicable covered bond regulator; (D) is identified in a register of covered bonds that is maintained by the Secretary; and (E) is not a deposit (as defined in section 3(l) of the Federal Deposit Insurance Act ( 12 U.S.C. 1813(l) )). (5) Covered bond program The term covered bond program means any program of an eligible issuer under which, on the security of a single cover pool, 1 or more series of covered bonds may be issued. (6) Covered bond regulator The term covered bond regulator means— (A) for any eligible issuer that is subject to the jurisdiction of an appropriate Federal banking agency (as defined in section 3(q) of the Federal Deposit Insurance Act ( 12 U.S.C. 1813(q) )), the appropriate Federal banking agency; (B) for any eligible issuer that is described in paragraph (9)(D), that is not subject to the jurisdiction of an appropriate Federal banking agency, and that is sponsored by only 1 eligible issuer, the covered bond regulator for the sponsor; (C) for any eligible issuer that is described in paragraph (9)(D), that is not subject to the jurisdiction of an appropriate Federal banking agency, and that is sponsored by more than 1 eligible issuer, the covered bond regulator for the sponsor whose covered bonds constitute the largest share of the cover pool of the issuer; and (D) for any other eligible issuer that is not subject to the jurisdiction of an appropriate Federal banking agency, the Secretary. (7) Eligible asset The term eligible asset means— (A) in the case of the residential mortgage asset class, any first-lien mortgage loan that— (i) is secured by 1-to-4 family residential property; and (ii) is not made, insured, or guaranteed by the Government; (B) in the case of the commercial mortgage asset class, any commercial mortgage loan (including any multifamily mortgage loan); (C) in the case of the public sector asset class— (i) any security issued by a State, municipality, or other governmental authority; (ii) any loan made to a State, municipality, or other governmental authority; and (iii) any loan, security, or other obligation that is insured or guaranteed, in full or substantially in full, by the full faith and credit of the United States Government (whether or not such loan, security, or other obligation is also part of another eligible asset class); (D) in the case of the auto asset class, any auto loan or lease; (E) in the case of the student loan asset class, any student loan (whether guaranteed or nonguaranteed); (F) in the case of the credit or charge card asset class, any extension of credit to a person under an open-end credit plan; (G) in the case of the small business asset class, any loan that is made or guaranteed under a program of the Small Business Administration; and (H) in the case of any other eligible asset class, any asset designated by the Secretary, by rule and in consultation with the covered bond regulators, as an eligible asset for purposes of such class. (8) Eligible asset class The term eligible asset class means— (A) a residential mortgage asset class; (B) a commercial mortgage asset class; (C) a public sector asset class; (D) an auto asset class; (E) a student loan asset class; (F) a credit or charge card asset class; (G) a small business asset class; and (H) any other eligible asset class designated by the Secretary, by rule and in consultation with the covered bond regulators. (9) Eligible issuer The term eligible issuer means— (A) any insured depository institution and any subsidiary of such institution; (B) any bank holding company, any savings and loan holding company, and any subsidiary of any of such companies; (C) any nonbank financial company (as defined in section 102(a)(4) of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5311(a)(4) )) that is supervised by the Board of Governors of the Federal Reserve System under section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5323 ), including any intermediate holding company supervised as a nonbank financial company, and any subsidiary of such a nonbank financial company; and (D) any issuer that is sponsored by 1 or more eligible issuers for the sole purpose of issuing covered bonds on a pooled basis. (10) Oversight program The term oversight program means the covered bond regulatory oversight program established under section 342(a). (11) Secretary The term Secretary means the Secretary of the Department of the Treasury. (12) Substitute asset The term substitute asset means— (A) cash; (B) any direct obligation of the United States Government, and any security or other obligation whose full principal and interest are insured or guaranteed by the full faith and credit of the United States Government; (C) any direct obligation of a United States Government corporation or Government-sponsored enterprise of the highest credit quality, and any other security or other obligation of the highest credit quality whose full principal and interest are insured or guaranteed by such corporation or enterprise, except that the outstanding principal amount of these obligations in any cover pool may not exceed an amount equal to 20 percent of the outstanding principal amount of all assets in the cover pool without the approval of the applicable covered bond regulator; (D) any overnight investment in Federal funds; (E) any other substitute asset designated by the Secretary, by rule and in consultation with the covered bond regulators; and (F) any deposit account or securities account into which only an asset described in subparagraph (A), (B), (C), (D), or (E) may be deposited or credited. 342. Regulatory oversight of covered bond programs established (a) Establishment (1) In general Not later than 180 days after the date of the enactment of this Act, the Secretary shall, by rule and in consultation with the covered bond regulators, establish a covered bond regulatory oversight program that provides for— (A) covered bond programs to be evaluated according to reasonable and objective standards in order to be approved under paragraph (2), including any additional eligibility standards for eligible assets and any other criteria determined appropriate by the Secretary to further the purposes of this subtitle; (B) covered bond programs to be maintained in a manner that is consistent with this subtitle and safe and sound asset-liability management and other financial practices; and (C) any estate created under section 343 to be administered in a manner that is consistent with maximizing the value and the proceeds of the related cover pool in a resolution under this subtitle. (2) Approval of each covered bond program (A) In general A covered bond shall be subject to this subtitle only if the covered bond is issued by an eligible issuer under a covered bond program that is approved by the applicable covered bond regulator. (B) Approval process Each covered bond regulator shall apply the standards established by the Secretary under the oversight program to evaluate a covered bond program that has been submitted by an eligible issuer for approval. Each covered bond regulator also shall take into account relevant supervisory factors, including safety and soundness considerations, in evaluating a covered bond program that has been submitted for approval. Each covered bond regulator, promptly after approving a covered bond program, shall provide the Secretary with the name of the covered bond program, the name of the eligible issuer, and all other information reasonably requested by the Secretary in order to update the registry under paragraph (3)(A). Each eligible issuer, promptly after issuing a covered bond under an approved covered bond program, shall provide the Secretary with all information reasonably requested by the Secretary in order to update the registry under paragraph (3)(B). (C) Existing covered bond programs A covered bond regulator may approve a covered bond program that is in existence on the date of the enactment of this Act. Upon such approval, each covered bond under the covered bond program shall be subject to this subtitle, regardless of when the covered bond was issued. (D) Multiple covered bond programs permitted An eligible issuer may have more than 1 covered bond program. (E) Cease and desist authority The applicable covered bond regulator may direct an eligible issuer to cease issuing covered bonds under an approved covered bond program if the covered bond program is not maintained in a manner that is consistent with this subtitle and the oversight program and if, after notice that is reasonable under the circumstances, the issuer does not remedy all deficiencies identified by the applicable covered bond regulator. (F) Cap on the amount of outstanding covered bonds (i) In general With respect to each eligible issuer that submits a covered bond program for approval, the applicable covered bond regulator shall set, consistent with safety and soundness considerations and the financial condition of the eligible issuer, the maximum amount, as a percentage of the eligible issuer’s total assets, of outstanding covered bonds that the eligible issuer may issue. (ii) Review of cap The applicable covered bond regulator may, not more frequently than quarterly, review the percentage set under clause (i) and, if safety and soundness considerations or the financial condition of the eligible issuer has changed, increase or decrease such percentage. Any decrease made pursuant to this clause shall have no effect on existing covered bonds issued by the eligible issuer. (3) Registry Under the oversight program, the Secretary shall maintain a registry that is published on a Web site available to the public and that, for each covered bond program approved by a covered bond regulator, contains— (A) the name of the covered bond program, the name of the eligible issuer, and all other information that the Secretary considers necessary to adequately identify the covered bond program and the eligible issuer; and (B) all information that the Secretary considers necessary to adequately identify all outstanding covered bonds issued under the covered bond program (including the reports described in paragraphs (3) and (4) of subsection (b)). (4) Fees Each covered bond regulator may levy, on the issuers of covered bonds under the primary supervision of such covered bond regulator, reasonably apportioned fees that such covered bond regulator considers necessary, in the aggregate, to defray the costs of such covered bond regulator carrying out the provisions of this subtitle. Such funds shall not be construed to be Government funds or appropriated monies and shall not be subject to apportionment for purposes of chapter 15 of title 31, United States Code, or any other provision of law. (b) Minimum over-Collateralization requirements (1) Requirements established The Secretary, by rule and in consultation with the covered bond regulators, shall establish minimum over-collateralization requirements for covered bonds backed by each of the eligible asset classes. The minimum over-collateralization requirements shall be designed to ensure that sufficient eligible assets and substitute assets are maintained in the cover pool to satisfy all principal and interest payments on the covered bonds when due through maturity and shall be based on the credit, collection, and interest rate risks (excluding the liquidity risks) associated with the eligible asset class. (2) Asset coverage test The eligible assets and the substitute assets in any cover pool shall be required, in the aggregate, to meet at all times the applicable minimum over-collateralization requirements. (3) Monthly reporting On a monthly basis, each issuer of covered bonds shall submit a report on whether the cover pool that secures the covered bonds meets the applicable minimum over-collateralization requirements to— (A) the Secretary; (B) the applicable covered bond regulator; (C) the applicable indenture trustee; (D) the applicable covered bondholders; and (E) the applicable independent asset monitor. (4) Independent asset monitor (A) Appointment Each issuer of covered bonds shall appoint the indenture trustee for the covered bonds, or another unaffiliated entity, as an independent asset monitor for the applicable cover pool. (B) Duties An independent asset monitor appointed under subparagraph (A) shall, on an annual or other more frequent periodic basis determined by the Secretary under the oversight program— (i) verify whether the cover pool meets the applicable minimum over-collateralization requirements; and (ii) report to the Secretary, the applicable covered bond regulator, the applicable indenture trustee, and the applicable covered bondholders on whether the cover pool meets the applicable minimum over-collateralization requirements. (5) No loss of status Covered bonds shall remain subject to this subtitle regardless of whether the applicable cover pool ceases to meet the applicable minimum over-collateralization requirements. (6) Failure to meet requirements (A) In general If a cover pool fails to meet the applicable minimum over-collateralization requirements, and if the failure is not cured within the time specified in the related transaction documents, the failure shall be an uncured default for purposes of section 343(a). (B) Notice required An issuer of covered bonds shall promptly give the Secretary and the applicable covered bond regulator written notice if the cover pool securing the covered bonds fails to meet the applicable minimum over-collateralization requirements, if the failure is cured within the time specified in the related transaction documents, or if the failure is not so cured. (c) Requirements for eligible assets (1) Requirements (A) Loans A loan shall not qualify as an eligible asset for so long as the loan is delinquent for more than 60 consecutive days. (B) Securities A security shall not qualify as an eligible asset for so long as the security does not meet any credit-quality requirement under this subtitle. (C) Origination An asset shall not qualify as an eligible asset if the asset was not originated in compliance with any rule or supervisory guidance of a Federal agency applicable to the asset at the time of origination. (D) No double pledge An asset shall not qualify as an eligible asset for so long as the asset is subject to a prior perfected security interest or other prior perfected lien that has been granted in an unrelated transaction. Nothing in this subtitle shall affect such a prior perfected security interest or other prior perfected lien, and the rights of such lien holders. (2) Failure to meet requirements Subject to paragraph (1)(D), if an asset in a cover pool does not satisfy any applicable requirement described in paragraph (1) or any other applicable standard or criterion described in this subtitle, the oversight program, or the related transaction documents, the asset shall not qualify as an eligible asset for purposes of the asset coverage test described in subsection (b)(2). A disqualified asset shall remain in the cover pool unless and until removed by the issuer in compliance with the provisions of this subtitle, the oversight program, and the related transaction documents. No disqualified asset may be removed from the cover pool after an estate has been created for the related covered bond program under section 343(b)(1) or 343(c)(2), except in connection with the management of the cover pool under section 343(d)(1)(E). (d) Other requirements (1) Books and records of issuer Each issuer of covered bonds shall clearly mark its books and records to identify the assets that comprise the cover pool securing the covered bonds. (2) Schedule of eligible assets and substitute assets Each issuer of covered bonds shall deliver to the applicable indenture trustee and the applicable independent asset monitor, on at least a monthly basis, a schedule that identifies all eligible assets and substitute assets in the cover pool securing the covered bonds. (3) Single eligible asset class No cover pool described in section 341(3)(A) may include eligible assets from more than 1 eligible asset class. No cover pool described in section 341(3)(B) may include covered bonds backed by more than 1 eligible asset class. 343. Resolution upon default or insolvency (a) Uncured default defined For purposes of this section, the term uncured default means a default on a covered bond that has not been cured within the time, if any, specified in the related transaction documents. (b) Default on covered bonds prior to conservatorship, receivership, liquidation, or bankruptcy (1) Creation of separate estate If an uncured default occurs on a covered bond before the issuer of the covered bond enters conservatorship, receivership, liquidation, or bankruptcy, an estate shall be immediately and automatically created by operation of law and shall exist and be administered separate and apart from the issuer or any subsequent conservatorship, receivership, liquidating agency, or estate in bankruptcy for the issuer or any other assets of the issuer. A separate estate shall be created for each affected covered bond program. (2) Assets and liabilities of estate Any estate created under paragraph (1) shall be comprised of the cover pool (including over-collateralization in the cover pool) that secures the covered bond. The cover pool shall be immediately and automatically released to and held by the estate free and clear of any right, title, interest, or claim of the issuer or any conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer or any other assets of the issuer. Assets disqualified under section 342(c)(1)(D) shall not be released to the estate. The estate shall be fully liable on the covered bond and all other covered bonds and related obligations of the issuer (including obligations under related derivative transactions) that are secured by a perfected security interest in or other perfected lien on the cover pool when the estate is created. The estate shall not be liable on any obligation of the issuer that is not secured by a perfected security interest in or other perfected lien on the cover pool when the estate is created. No conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer may charge or assess the estate for any claim of the conservator, receiver, liquidating agent, or trustee in bankruptcy or the conservatorship, receivership, liquidating agency, or estate in bankruptcy and may not obtain or perfect a security interest in or other lien on the cover pool to secure such a claim. (3) Retention of claims Any holder of a covered bond or related obligation for which an estate has become liable under paragraph (2) shall retain a claim against the issuer for any deficiency with respect to the covered bond or related obligation. If the issuer enters conservatorship, receivership, liquidation, or bankruptcy, any contingent claim for such a deficiency shall be allowed as a provable claim in the conservatorship, receivership, liquidating agency, or bankruptcy case. The contingent claim shall be estimated by the conservator, receiver, liquidating agent, or bankruptcy court for purposes of allowing the claim as a provable claim if awaiting the fixing of the contingent claim would unduly delay the resolution of the conservatorship, receivership, liquidating agency, or bankruptcy case. (4) Residual interest (A) Issuance of residual interest Upon the creation of an estate under paragraph (1), a residual interest in the estate shall be immediately and automatically issued by operation of law to the issuer. (B) Nature of residual interest The residual interest under subparagraph (A) shall— (i) be an exempted security as described in section 344; (ii) represent the right to any surplus from the cover pool after the covered bonds and all other liabilities of the estate have been fully and irrevocably paid; and (iii) be evidenced by a certificate executed by the trustee of the estate. (5) Obligations of issuer (A) In general After the creation of an estate under paragraph (1), the issuer shall— (i) transfer to or at the direction of the trustee for the estate all property of the estate that is in the possession or under the control of the issuer, including all tangible or electronic books, records, files, and other documents or materials relating to the assets and liabilities of the estate; and (ii) at the election of the trustee or a servicer or administrator for the estate, continue servicing the applicable cover pool for 120 days after the creation of the estate in return for a fair-market-value fee, as determined by the trustee in consultation with the applicable covered bond regulator, that shall be payable from the estate as an administrative expense. (B) Obligations absolute Neither the issuer, whether acting as debtor in possession or in any other capacity, nor any conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer or any other assets of the issuer may disaffirm, repudiate, or reject the obligation to turn over property or to continue servicing the cover pool as provided in subparagraph (A). (c) Default on covered bonds upon conservatorship, receivership, liquidation, or bankruptcy (1) Corporation conservatorship or receivership (A) In general If the Corporation is appointed as conservator or receiver for an issuer of covered bonds before an uncured default results in the creation of an estate under subsection (b), the Corporation as conservator or receiver shall have an exclusive right, during the 1-year period beginning on the date of the appointment, to transfer any cover pool owned by the issuer in its entirety, together with all covered bonds and related obligations that are secured by a perfected security interest in or other perfected lien on the cover pool, to another eligible issuer that meets all conditions and requirements specified in the related transaction documents. The Corporation as conservator or receiver may not remove any asset from the cover pool, except to the extent otherwise agreed by a transferee that has assumed the covered bond program pursuant to subparagraph (C). (B) Obligations during 1-year period During the 1-year period described in subparagraph (A), the Corporation as conservator or receiver shall fully and timely satisfy all monetary and nonmonetary obligations of the issuer under all covered bonds and the related transaction documents and shall fully and timely cure all defaults by the issuer (other than its conservatorship or receivership) under the applicable covered bond program, in each case, until the earlier of— (i) the transfer of the applicable covered bond program to another eligible issuer as provided in subparagraph (A); or (ii) the delivery to the Secretary, the applicable covered bond regulator, the applicable indenture trustee, and the applicable covered bondholders of a written notice from the Corporation as conservator or receiver electing to cease further performance under the applicable covered bond program. (C) Assumption by transferee If the Corporation as conservator or receiver transfers a covered bond program to another eligible issuer within the 1-year period as provided in subparagraph (A), the transferee shall take ownership of the applicable cover pool and shall become fully liable on all covered bonds and related obligations of the issuer that are secured by a perfected security interest in or other perfected lien on the cover pool. (2) Other circumstances An estate shall be immediately and automatically created by operation of law and shall exist and be administered separate and apart from an issuer of covered bonds and any conservatorship, receivership, liquidating agency, or estate in bankruptcy for the issuer or any other assets of the issuer, if— (A) a conservator, receiver, liquidating agent, or trustee in bankruptcy, other than the Corporation, is appointed for the issuer before an uncured default results in the creation of an estate under subsection (b); or (B) in the case of the appointment of the Corporation as conservator or receiver as described in paragraph (1)(A), the Corporation as conservator or receiver— (i) does not complete the transfer of the applicable covered bond program to another eligible issuer within the 1-year period as provided in paragraph (1)(A); (ii) delivers to the Secretary, the applicable covered bond regulator, the applicable indenture trustee, and the applicable covered bondholders a written notice electing to cease further performance under the applicable covered bond program; or (iii) fails to fully and timely satisfy all monetary and nonmonetary obligations of the issuer under the covered bonds and the related transaction documents or to fully and timely cure all defaults by the issuer (other than its conservatorship or receivership) under the applicable covered bond program. A separate estate shall be created for each affected covered bond program. (3) Assets and liabilities of estate Any estate created under paragraph (2) shall be comprised of the cover pool (including over-collateralization in the cover pool) that secures the covered bonds. The cover pool shall be immediately and automatically released to and held by the estate free and clear of any right, title, interest, or claim of the issuer or any conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer or any other assets of the issuer. The estate shall be fully liable on the covered bonds and all other covered bonds and related obligations of the issuer (including obligations under related derivative transactions) that are secured by a perfected security interest in or other perfected lien on the cover pool when the estate is created. The estate shall not be liable on any obligation of the issuer that is not secured by a perfected security interest in or other perfected lien on the cover pool when the estate is created. No conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer may charge or assess the estate for any claim of the conservator, receiver, liquidating agent, or trustee in bankruptcy or the conservatorship, receivership, liquidating agency, or estate in bankruptcy and may not obtain or perfect a security interest in or other lien on the cover pool to secure such a claim. (4) Contingent claim Any contingent claim against an issuer for a deficiency with respect to a covered bond or related obligation for which an estate has become liable under paragraph (3) shall be allowed as a provable claim in the conservatorship, receivership, liquidating agency, or bankruptcy case for the issuer. The contingent claim shall be estimated by the conservator, receiver, liquidating agent, or bankruptcy court for purposes of allowing the claim as a provable claim if awaiting the fixing of the contingent claim would unduly delay the resolution of the conservatorship, receivership, liquidating agency, or bankruptcy case. (5) Residual interest (A) Issuance of residual interest Upon the creation of an estate under paragraph (2), and regardless of whether any contingent claim described in paragraph (4) becomes fixed or is estimated, a residual interest in the estate shall be immediately and automatically issued by operation of law to the conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer. (B) Nature of residual interest The residual interest under subparagraph (A) shall— (i) be an exempted security as described in section 344; (ii) represent the right to any surplus from the cover pool after the covered bonds and all other liabilities of the estate have been fully and irrevocably paid; and (iii) be evidenced by a certificate executed by the trustee of the estate. (6) Obligations of issuer (A) In general After the creation of an estate under paragraph (2), the issuer and its conservator, receiver, liquidating agent, or trustee in bankruptcy shall— (i) transfer to or at the direction of the trustee for the estate all property of the estate that is in the possession or under the control of the issuer or its conservator, receiver, liquidating agent, or trustee in bankruptcy, including all tangible or electronic books, records, files, and other documents or materials relating to the assets and liabilities of the estate; and (ii) at the election of the trustee or a servicer or administrator for the estate, continue servicing the applicable cover pool for 120 days after the creation of the estate in return for a fair-market-value fee, as determined by the trustee in consultation with the applicable covered bond regulator, that shall be payable from the estate as an administrative expense. (B) Obligations absolute Neither the issuer, whether acting as debtor in possession or in any other capacity, nor any conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer or any other assets of the issuer may disaffirm, repudiate, or reject the obligation to turn over property or to continue servicing the cover pool as provided in subparagraph (A). (d) Administration and resolution of estates (1) Trustee, servicer, and administrator (A) In general Upon the creation of any estate under subsection (b)(1) or (c)(2), the applicable covered bond regulator shall— (i) appoint the trustee for the estate; (ii) appoint 1 or more servicers or administrators for the cover pool held by the estate; and (iii) give the Secretary, the applicable indenture trustee, the applicable covered bondholders, and the owner of the residual interest written notice of the creation of the estate. (B) Terms and conditions of appointment All terms and conditions of any appointment under paragraph (1), including the terms and conditions relating to compensation, shall conform to the requirements of this subtitle and the oversight program and otherwise shall be determined by the applicable covered bond regulator. (C) Qualification The applicable covered bond regulator may require the trustee or any servicer or administrator for an estate to post in favor of the United States, for the benefit of the estate, a bond that is conditioned on the faithful performance of the duties of the trustee or the servicer or administrator. The covered bond regulator shall determine the amount of any bond required under this subparagraph and the sufficiency of the surety on the bond. A proceeding on a bond required under this subparagraph may not be commenced after two years after the date on which the trustee or the servicer or administrator was discharged. (D) Powers and duties of trustee The trustee for an estate is the representative of the estate and, subject to the provisions of this subtitle, has capacity to sue and be sued. The trustee shall— (i) administer the estate in compliance with this subtitle, the oversight program, and the related transaction documents; (ii) be accountable for all property of the estate that is received by the trustee; (iii) make a final report and file a final account of the administration of the estate with the applicable covered bond regulator; and (iv) after the estate has been fully administered, close the estate. (E) Powers and duties of servicer or administrator Any servicer or administrator for an estate— (i) shall— (I) collect, realize on (by liquidation or other means), and otherwise manage the cover pool held by the estate for the purpose of winding down the related cover bond program in compliance with this subtitle, the oversight program, and the related transaction documents and in a manner consistent with maximizing the value and the proceeds of the cover pool; (II) deposit or invest all proceeds and funds received in compliance with this subtitle, the oversight program, and the related transaction documents and in a manner consistent with maximizing the net return to the estate, taking into account the safety of the deposit or investment; and (III) apply, or direct the trustee for the estate to apply, all proceeds and funds received and the net return on any deposit or investment to make distributions in compliance with paragraphs (3) and (4); (ii) may borrow funds or otherwise obtain credit, for the benefit of the estate, in compliance with paragraph (2) on a secured or unsecured basis and on a priority, pari passu, or subordinated basis; (iii) shall, at the times and in the manner required by the applicable covered bond regulator, submit to the covered bond regulator, the Secretary, the applicable indenture trustee, the applicable covered bondholders, the owner of the residual interest, and any other person designated by the covered bond regulator, reports that describe the activities of the servicer or administrator on behalf of the estate, the performance of the cover pool held by the estate, and distributions made by the estate; and (iv) shall assist the trustee in preparing the final report and the final account of the administration of the estate. (F) Supervision of trustee, servicer, and administrator The applicable covered bond regulator shall supervise the trustee and any servicer or administrator for an estate. The covered bond regulator shall require that all reports submitted under subparagraph (E)(iii) do not contain any untrue statement of a material fact and do not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading. (G) Removal and replacement of trustee, servicer, and administrator If the covered bond regulator determines that it is in the best interests of an estate, the covered bond regulator may remove or replace the trustee or any servicer or administrator for the estate. The removal of the trustee or any servicer or administrator does not abate any pending action or proceeding involving the estate, and any successor or other trustee, servicer, or administrator shall be substituted as a party in the action or proceeding. (H) Professionals The trustee or any servicer or administrator for an estate may employ 1 or more attorneys, accountants, appraisers, auctioneers, or other professional persons to represent or assist the trustee or the servicer or administrator in carrying out its duties. The employment of any professional person and all terms and conditions of employment, including the terms and conditions relating to compensation, shall conform to the requirements of this subtitle and the oversight program and otherwise shall be subject to the approval of the applicable covered bond regulator. (I) Approved fees and expenses Unless otherwise provided in the applicable terms and conditions of appointment or employment, all approved fees and expenses of the trustee, any servicer or administrator, or any professional person employed by the trustee or any servicer or administrator shall be payable from the estate as administrative expenses. (J) Actions by or on behalf of estate The trustee or any servicer or administrator for an estate may commence or continue judicial, administrative, or other actions, in the name of the estate or in its own name on behalf of the estate, for the purpose of collecting, realizing on, or otherwise managing the cover pool held by the estate or exercising its other powers or duties on behalf of the estate. (K) Actions against estate No court may issue an attachment or execution on any property of an estate. Except at the request of the applicable covered bond regulator or as otherwise provided in this subparagraph or subparagraph (J), no court may take any action to restrain or affect the resolution of an estate under this subtitle. No person (including the applicable indenture trustee and any applicable covered bondholder) may commence or continue any judicial, administrative, or other action against the estate, the trustee, or any servicer or administrator or take any other act to affect the estate, the trustee, or any servicer or administrator that is not expressly permitted by this subtitle, the oversight program, and the related transaction documents, except for a judicial or administrative action to compel the release of funds that— (i) are available to the estate; (ii) are permitted to be distributed under this subtitle and the oversight program; and (iii) are permitted and required to be distributed under the related transaction documents and any contracts executed by or on behalf of the estate. (L) Sovereign immunity Except in connection with a guarantee provided under paragraph (4) or any other contract executed by the applicable covered bond regulator under this section 343, the Secretary and the covered bond regulator shall be entitled to sovereign immunity in carrying out the provisions of this subtitle. (2) Borrowings and credit (A) In general Any servicer or administrator for an estate created under subsection (b)(1) or (c)(2) may borrow funds or otherwise obtain credit, on behalf of and for the benefit of the estate, from any person in compliance with this paragraph (2) solely for the purpose of providing liquidity in the case of timing mismatches among the assets and the liabilities of the estate. Except with respect to an underwriter, section 5 of the Securities Act of 1933, the Trust Indenture Act of 1939, and any State or local law requiring registration for an offer or sale of a security or registration or licensing of an issuer of, underwriter of, or broker or dealer in a security does not apply to the offer or sale under this paragraph (2) of a security that is not an equity security. (B) Conditions A servicer or administrator may borrow funds or otherwise obtain credit under subparagraph (A)— (i) on terms affording the lender only claims or liens that are fully subordinated to the claims and interests of the applicable indenture trustee and the applicable covered bondholders and all other claims against and interests in the estate, except for the residual interest, if the servicer or administrator certifies to the applicable covered bond regulator that, in the business judgment of the servicer or administrator, the borrowing or credit is in the best interests of the estate and is expected to maximize the value and the proceeds of the cover pool held by the estate; or (ii) on terms affording the lender claims or liens that have priority over or are pari passu with the claims or interests of the applicable indenture trustee or the applicable covered bondholders or other claims against or interests in the estate, if— (I) the servicer or administrator certifies to the applicable covered bond regulator that, in the business judgment of the servicer or administrator, the borrowing or credit is in the best interests of the estate and is expected to maximize the value and the proceeds of the cover pool held by the estate; and (II) the applicable covered bond regulator authorizes the borrowing or credit. (C) Limited liability A servicer or administrator shall not be liable for any error in business judgment when borrowing funds or otherwise obtaining credit under this paragraph (2) unless the servicer or administrator acted in bad faith or in willful disregard of its duties. (D) Limits on borrowings and credit Funds may not be borrowed or credit otherwise obtained under subparagraph (A)— (i) for the purpose of investing in additional portfolios of eligible assets through the issuance of new covered bonds; or (ii) otherwise for a purpose other than winding down the related covered bond program in compliance with this Act, the oversight program, and the related transaction documents. (E) Study on borrowings and credit The Comptroller General of the United States shall conduct a study on whether the Federal reserve banks should be authorized to lend funds or otherwise extend credit to an estate under this paragraph (2) and, if so, what conditions and limits should be established to mitigate any risk that the United States Government could absorb credit losses on the cover pool held by the estate. The Comptroller General shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of the study not later than 6 months after the date of enactment of this Act. (3) Distributions by estate All payments or other distributions by an estate shall be made at the times, in the amounts, and in the manner set forth in the covered bonds, the related transaction documents, and any contracts executed by or on behalf of the estate in compliance with this subtitle and the oversight program. To the extent that the relative priority of the liabilities of the estate are not specified in or otherwise ascertainable from their terms, distributions shall be made on each distribution date under the covered bonds, the related transaction documents, or any contracts executed by or on behalf of the estate— (A) first, to pay accrued and unpaid superpriority claims under paragraph (2)(B)(ii); (B) second, to pay accrued and unpaid administrative expense claims under paragraph (1)(I), paragraph (2)(B)(ii), section 343(b)(5)(A), or section 343(c)(6)(A); (C) third, to pay— (i) accrued and unpaid claims under the covered bonds and the related transaction documents according to their terms; and (ii) accrued and unpaid pari passu claims under paragraph (2)(B)(ii); and (D) fourth, to pay accrued and unpaid subordinated claims under paragraph (2)(B)(i). (4) Distributions on residual interest After all other claims against and interests in an estate have been fully and irrevocably paid or defeased, the trustee shall or shall cause a servicer or administrator to distribute the remainder of the estate to or at the direction of the owner of the residual interest. No interim distribution on the residual interest may be made before that time, unless the applicable covered bond regulator— (A) approves the distribution after determining that all other claims against and interests in the estate will be fully, timely, and irrevocably paid according to their terms; and (B) provides an indemnity, for the benefit of the estate, assuring that all other claims against and interests in the estate will be fully, timely, and irrevocably paid according to their terms. (5) Closing of estate After an estate has been fully administered, the trustee shall close the estate and, except as otherwise directed by the applicable covered bond regulator, shall destroy all records of the estate. (6) No loss to taxpayers Taxpayers shall bear no losses from the resolution of an estate under this subtitle. To the extent that the Secretary and the Corporation jointly determine that the Deposit Insurance Fund incurred actual losses that are higher because the covered bond program of an insured depository institution was subject to resolution under this subtitle rather than as part of the receivership of the institution under the Federal Deposit Insurance Act ( 12 U.S.C. 1811 et seq.), the Corporation may exercise the powers available under section 7(b) of the Federal Deposit Insurance Act ( 12 U.S.C. 1817(b) ) to recover an amount equal to those losses after consulting with the Secretary. 344. Securities law provisions (a) Existing exemptions applicable to covered bonds (1) Treatment of certain banks and other entities Any covered bond issued or guaranteed by a bank or by an eligible issuer described in section 341(9)(D) and sponsored solely by 1 or more banks for the sole purpose of issuing covered bonds is and shall be treated as a security issued or guaranteed by a bank under section 3(a)(2) of the Securities Act of 1933 ( 15 U.S.C. 77c(a)(2) ), section 3(c)(3) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–3(c)(3) ), and section 304(a)(4)(A) of the Trust Indenture Act of 1939 ( 15 U.S.C. 77ddd(a)(4)(A) ). No covered bond issued or guaranteed by a bank or by an eligible issuer described in section 341(9)(D) and sponsored solely by 1 or more banks for the sole purpose of issuing covered bonds shall be treated as an asset-backed security (as defined in section 3 of the Securities and Exchange Act of 1934 ( 15 U.S.C. 78c )). Each covered bond regulator for 1 or more banks shall adopt disclosure and reporting regulations for offers or sales of covered bonds by a bank or an eligible issuer described in this paragraph. Such regulations shall provide for uniform and consistent standards for such covered bond issuers, to the extent possible, and shall be consistent with existing regulations governing offers or sales of nonconvertible debt. (2) Treatment of certain associations and cooperative banks Any covered bond issued by an entity described in section 3(a)(5)(A) of the Securities Act of 1933 ( 15 U.S.C. 77c(a)(5)(A) ) or by an eligible issuer described in section 341(9)(D) and sponsored solely by 1 or more such entities for the sole purpose of issuing covered bonds is and shall be treated as a security issued by such an entity under section 3(a)(5)(A) of the Securities Act of 1933 ( 15 U.S.C. 77c(a)(5)(A) ), section 3(c)(3) of the Investment Company Act of 1940 ( 15 U.S.C. 80a–3(c)(3) ), and section 304(a)(4)(A) of the Trust Indenture Act of 1939 ( 15 U.S.C. 77ddd(a)(4)(A) ). No covered bond issued by an entity described in section 3(a)(5)(A) of the Securities Act of 1933 ( 15 U.S.C. 77c(a)(5)(A) ) or by an eligible issuer described in section 341(9)(D) and sponsored solely by 1 or more such entities for the sole purpose of issuing covered bonds shall be treated as an asset-backed security (as defined in section 3 of the Securities and Exchange Act of 1934 ( 15 U.S.C. 78c )). Each covered bond regulator for 1 or more entities described in section 3(a)(5)(A) of the Securities Act of 1933 ( 15 U.S.C. 77c(a)(5)(A) ) shall adopt, as part of the securities regulations of the covered bond regulator, a separate scheme of registration, disclosure, and reporting obligations and exemptions for offers or sales of covered bonds that are described in this paragraph. Such regulations shall provide for uniform and consistent standards for such covered bond issuers, to the extent possible, and shall be consistent with regulations governing offers or sales of similar securities. (3) Construction No provision of this subtitle, including paragraph (1) or (2), may be construed or applied in a manner that impairs or limits any other exemption that is available under applicable securities laws. (b) Exemptions for estates Any estate that is or may be created under section 343(b)(1) or 343(c)(2) shall be exempt from all securities laws but— (1) shall be subject to the reporting requirements established by the applicable covered bond regulator under section 343(d)(1)(E)(iii); and (2) shall succeed to any requirement of the issuer to file such periodic information, documents, and reports in respect of the covered bonds as specified in section 13(a) of the Securities and Exchange Act of 1934 ( 15 U.S.C. 78m(a) ) or rules established by an appropriate Federal banking agency. (c) Exemptions for residual interests Any residual interest in an estate that is or may be created under section 343(b)(1) or 343(c)(2) shall be exempt from all securities laws. 345. Miscellaneous provisions (a) Domestic securities Section 106(a)(1) of the Secondary Mortgage Market Enhancement Act of 1984 ( 15 U.S.C. 77r–1(a)(1) ) is amended— (1) in subparagraph (C), by striking or at the end; (2) in subparagraph (D), by adding or at the end; and (3) by inserting after subparagraph (D) the following: (E) covered bonds (as defined in section 341 of the Protecting American Taxpayers and Homeowners Act of 2018), . (b) Tax treatment of covered bond programs (1) Treatment of estates created under covered bond programs Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (p) as subsection (q) and by inserting after subsection (o) the following new subsection: (p) Treatment of estates created under covered bond programs For purposes of this title— (1) Treatment as disregarded entity Any estate created with respect to a covered bond program— (A) shall not be treated as an entity subject to taxation separate from the owner of the residual interest with respect to such estate, and (B) shall be treated as a disregarded entity that is owned by the owner of such residual interest. (2) Limitations on treatment as disregarded entity (A) Maximum duration Paragraph (1) shall not apply with respect to an estate after the earlier of— (i) the end of the 30-year period beginning on the date of the creation of such estate, or (ii) the end of the 180-day period beginning on the date of the final payment on the last outstanding covered bond that is secured by the cover pool held by such estate. (B) Restrictions on owner of residual interest Paragraph (1) shall apply with respect to an estate for any period only if— (i) at no time during such period does more than one person hold a residual interest with respect to such estate, (ii) such person is— (I) subject to tax under subtitle A on the net income of such estate for the taxable year of such person which includes such period, or (II) a conservator, receiver, liquidating agent, or trustee in bankruptcy with respect to the issuer for such period, and (iii) such person is not a regulated investment company (as defined in section 851) or real estate investment trust (as defined in section 856) for the taxable year which includes such period. (3) Treatment as corporation With respect to any period for which paragraph (1) does not apply to an estate created with respect to a covered bond program, such estate shall be treated as a corporation. (4) Coordination with rules for taxable mortgage pools No portion of any estate created with respect to a covered bond program shall be treated as a taxable mortgage pool for purposes of subsection (i) during any period for which paragraph (1) applies to such estate. (5) Definitions For purposes of this subsection, the terms covered bond program , cover pool , estate , and residual interest shall each have the same respective meanings as when used for purposes of subtitle D of title III of the Protecting American Taxpayers and Homeowners Act of 2018. (6) Cross references (A) For nonrecognition with respect to certain transfers under covered bond programs, see section 1001(f). (B) For excise tax on estates created under covered bond programs by reason of default, see section 4475. . (2) Treatment of certain transfers under covered bond programs Section 1001 of such Code is amended by adding at the end the following new subsection: (f) Certain transfers under covered bond programs (1) In general With respect to any covered bond program, none of the following shall be treated as a taxable exchange of a covered bond to a covered bond holder or to a notional principal contract counterparty: (A) The transfer of all of the assets and liabilities of such program. (B) The creation of an estate with respect to such program. (C) The transfer of the residual interest in such estate. (2) Definitions For purposes of this subsection, the terms covered bond program , estate , and residual interest shall each have the same respective meanings as when used for purposes of subtitle D of title III of the Protecting American Taxpayers and Homeowners Act of 2018. . (3) Excise tax on estates created under covered bond programs by reason of default (A) In general Chapter 36 of such Code is amended by inserting after subchapter B the following new subchapter: C Tax on certain estates created under covered bond programs Sec. 4475. Tax on estates created under covered bond programs by reason of default. 4475. Tax on estates created under covered bond programs by reason of default (a) Imposition of tax A tax is hereby imposed on the creation of an estate by operation of section 343(b)(1) of the Protecting American Taxpayers and Homeowners Act of 2018. (b) Amount of tax The tax imposed under subsection (a) with respect to the creation of any estate shall be equal to 1 percent of the principal amount of the covered bonds secured by the cover pool with respect to such estate determined as of the close of the day before the creation of such estate. (c) By whom paid The tax imposed under subsection (a) shall be paid by the issuer of the covered bonds with respect to the covered bond program with respect to which the estate referred to in subsection (a) is created. (d) No effect on cover pool The tax imposed under subsection (a) shall not reduce the assets of the cover pool and no liability for such tax shall attach to the estate or to the assets of the cover pool. (e) Refund in case of bankruptcy, etc If an issuer liable for the tax imposed under subsection (a) enters conservatorship, receivership, liquidation, or bankruptcy during the 5-year period beginning on the date of the creation of the estate referred to in subsection (a), such liability shall be extinguished and any such tax paid shall refunded to the issuer immediately upon such event. (f) Definitions For purposes of this section, the terms covered bond program , cover pool , and estate shall each have the same respective meanings as when used for purposes of subtitle D of title III of the Protecting American Taxpayers and Homeowners Act of 2018. . (B) Clerical amendment The table of subchapters for chapter 36 of such Code is amended by inserting after the item relating to subchapter B the following new item: Subchapter C—Tax on certain estates created under covered bond programs . (4) Effective date The amendments made by this subsection shall apply to estates created, and transfers made, after the date of the enactment of this Act. (c) State and local taxes The Secretary may promulgate regulations under this subtitle that are similar to the provisions of section 346 of title 11, United States Code, including regulations to provide that— (1) if an estate created under section 343(b)(1) or 343(c)(2) is not treated as an entity subject to taxation separate from the owner of the residual interest for purposes of the Internal Revenue Code of 1986 ( 26 U.S.C. 1 et seq.), no separate taxable entity shall be created with respect to the estate for purposes of any State or local law imposing a tax on or measured by income; and (2) if a transfer or assumption of an asset or liability to or by an estate or an eligible issuer under section 343(b) or 343(c) does not cause or constitute an event in which gain or loss is recognized under section 1001 of the Internal Revenue Code of 1986 ( 26 U.S.C. 1001 ), the transfer or assumption shall not cause or constitute a disposition for purposes of any provision assigning tax consequences to a disposition in connection with any State or local law imposing a tax on or measured by income. (d) No conflict The provisions of this subtitle shall apply, notwithstanding any provision of the Federal Deposit Insurance Act ( 12 U.S.C. 1811 et seq.), title 11, United States Code, title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5381 et seq.), or any other provision of Federal law with respect to conservatorship, receivership, liquidation, or bankruptcy. No provision of the Federal Deposit Insurance Act ( 12 U.S.C. 1811 et seq.), title 11, United States Code, title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5381 et seq.), or any other provision of Federal law with respect to conservatorship, receivership, liquidation, or bankruptcy may be construed or applied in a manner that defeats or interferes with the purpose or operation of this subtitle. (e) Annual report to Congress The covered bond regulators shall, annually— (1) submit a joint report to the Congress describing the current state of the covered bond market in the United States; and (2) testify on the current state of the covered bond market in the United States before the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. IV Removing Barriers to New Investment 401. Basel III Liquidity Coverage Ratio amendments (a) In general In implementing the Basel III Liquidity Coverage Ratio amendments, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency may not require, as a condition for status as a high quality liquid asset, that residential mortgage-backed securities be collateralized only by (or be collateralized by a certain percentage of) full recourse mortgage loans. (b) Definition The term Basel III Liquidity Coverage Ratio amendments means the final rule issued by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation titled “Liquidity Coverage Ratio: Liquidity Risk Measurement Standards”, published October 10, 2014 (79 Fed. Reg. 61439). 402. Definition of points and fees (a) Amendment to section 103 of TILA Section 103(bb)(4) of the Truth in Lending Act ( 15 U.S.C. 1602(bb)(4) ) is amended— (1) by striking paragraph (1)(B) and inserting paragraph (1)(A) and section 129C ; (2) in subparagraph (C)— (A) by inserting and insurance after taxes ; (B) in clause (ii), by inserting , except as retained by a creditor or its affiliate as a result of their participation in an affiliated business arrangement (as defined in section 2(7) of the Real Estate Settlement Procedures Act of 1974 ( 12 U.S.C. 2602(7) ) after compensation ; and (C) by striking clause (iii) and inserting the following: (iii) the charge is— (I) a bona fide third-party charge not retained by the mortgage originator, creditor, or an affiliate of the creditor or mortgage originator; or (II) a charge set forth in section 106(e)(1); ; and (3) in subparagraph (D)— (A) by striking accident, ; and (B) by striking or any payments and inserting and any payments . (b) Amendment to section 129C of TILA Section 129C of the Truth in Lending Act ( 15 U.S.C. 1639c ) is amended— (1) in subsection (a)(5)(C), by striking 103 and all that follows through or mortgage originator and inserting 103(bb)(4) ; and (2) in subsection (b)(2)(C)(i), by striking 103 and all that follows through or mortgage originator) and inserting 103(bb)(4) . (c) Rulemaking Not later than the end of the 90-day period beginning on the date of the enactment of this Act, the Bureau of Consumer Financial Protection shall issue final regulations to carry out the amendments made by this section, and such regulations shall be effective upon issuance. 403. Exclusion of issuers of asset-backed securities from covered funds Section 13(h)(2) of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1851(h)(2) ) is amended— (1) by striking private equity fund mean an issuer and inserting the following: private equity fund — (A) mean an issuer ; (2) by striking the period and inserting ; and ; and (3) by adding at the end the following: (B) does not include an issuer, if such issuer is described under subparagraph (A) solely because such issuer issues asset-backed securities (as such term is defined under section 3(a) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a) )). . 404. Mortgages in qualified securities Section 129C of the Truth in Lending Act ( 15 U.S.C. 1639c ) is amended by adding at the end the following: (j) Mortgages in qualified securities This section and any regulations promulgated under this section do not apply to a mortgage serving as collateral for a qualified security, as such term is defined under section 321 of the Protecting American Taxpayers and Homeowners Act of 2018. . 405. Mortgage loans held in portfolio (a) Home Mortgage Disclosure Act of 1975 Section 304(g) of the Home Mortgage Disclosure Act of 1975 ( 12 U.S.C. 2803(g) ) is amended— (1) in paragraph (1), by striking and at the end; (2) in paragraph (2), by striking the period and inserting ; and ; and (3) by adding at the end the following: (3) made by the creditor, so long as such loan appears on the balance sheet of such creditor. . (b) Truth in Lending Act The Truth in Lending Act ( 15 U.S.C. 1601 et seq.), as amended by the preceding provisions of this Act, is further amended— (1) in section 129C ( 15 U.S.C. 1639c ), by adding at the end the following: (k) Mortgage loans held in portfolio This section and any regulations promulgated under this section do not apply to a residential mortgage loan made by the creditor so long as such loan appears on the balance sheet of such creditor. ; and (2) in section 129D ( 15 U.S.C. 1639d ), by adding at the end the following: (k) Mortgage loans held in portfolio This section and any regulations promulgated under this section do not apply to a residential mortgage loan made by the creditor so long as such loan appears on the balance sheet of such creditor. . 406. Repeal of certain mortgage-related provisions (a) Repeal Sections 1413, 1431, and 1432 of the Dodd-Frank Wall Street Reform and Consumer Protection Act are hereby repealed, and the provisions of law amended or repealed by such sections are restored or revived as if such sections had not been enacted. (b) Clerical amendment The table of contents for the Dodd-Frank Wall Street Reform and Consumer Protection Act is amended by striking the items relating to sections 1413, 1431, and 1432. 407. Amendments to the Truth in Lending Act The Truth in Lending Act ( 15 U.S.C. 1601 et seq.) is amended— (1) in section 129 ( 15 U.S.C. 1639 )— (A) in subsection (b)(3), by adding at the end the following: The Bureau may not, by regulation or otherwise, prohibit a consumer from modifying or waiving the rights provided to the consumer under this subsection. ; and (B) in subsection (u), by adding at the end the following: (4) Ensuring access to counseling services for rural communities Certification described under paragraph (1) may be provided by a person who operates an online or telephone-operated counseling service approved by the Secretary of Housing and Urban Development or by an online or telephone-operated counseling service operated by the Department of Housing and Urban Development. (5) Effective date Notwithstanding section 1400(c) of the Mortgage Reform and Anti-Predatory Lending Act, this subsection shall take effect after the end of the 1-year period beginning on the earlier of— (A) the date on which the first online or telephone-operated counseling service is approved under paragraph (4); and (B) the date on which the Department of Housing and Urban Development begins providing online or telephone-operated counseling services described under paragraph (4). ; (2) in section 129C ( 15 U.S.C. 1639c )— (A) in subsection (b)(2)(A)(viii), by striking 30 and inserting 40 ; (B) by striking subsections (c), (d), and (e); and (C) by redesignating subsections (f), (g), (h), and (i) as subsections (c), (d), (e), and (f), respectively; and (3) in section 129E(k)(1) ( 15 U.S.C. 1639e(k)(1) ) by inserting after this section the following: , other than subsection (e), . 408. Financial Institutions Examination Fairness and Reform (a) Amendment to definition of financial institution Section 1003(3) of the Federal Financial Institutions Examination Council Act of 1978 ( 12 U.S.C. 3302(3) ) is amended to read as follows: (3) the term financial institution — (A) means a commercial bank, a savings bank, a trust company, a savings association, a building and loan association, a homestead association, a cooperative bank, or a credit union; and (B) for purposes of sections 1012, 1013, and 1014, includes a nondepository covered person subject to supervision by the Bureau of Consumer Financial Protection under section 1024 of the Consumer Financial Protection Act of 2010 ( 12 U.S.C. 5514 ). . (b) Timeliness of examination reports The Federal Financial Institutions Examination Council Act of 1978 ( 12 U.S.C. 3301 et seq.) is amended by adding at the end the following: 1012. Timeliness of examination reports (a) In general (1) Final examination report A Federal financial institutions regulatory agency shall provide a final examination report to a financial institution not later than 60 days after the later of— (A) the exit interview for an examination of the institution; or (B) the provision of additional information by the institution relating to the examination. (2) Exit interview If a financial institution is not subject to a resident examiner program, the exit interview shall occur not later than the end of the 9-month period beginning on the commencement of the examination, except that such period may be extended by the Federal financial institutions regulatory agency by providing written notice to the institution and the Independent Examination Review Director describing with particularity the reasons that a longer period is needed to complete the examination. (b) Examination materials Upon the request of a financial institution, the Federal financial institutions regulatory agency shall include with the final report an appendix listing all examination or other factual information relied upon by the agency in support of a material supervisory determination. . (c) Independent Examination Review Director The Federal Financial Institutions Examination Council Act of 1978 ( 12 U.S.C. 3301 et seq.), as amended by subsection (b) of this section, is further amended by adding at the end the following: 1013. Office of Independent Examination Review (a) Establishment There is established in the Council an Office of Independent Examination Review (the Office ). (b) Head of Office There is established the position of the Independent Examination Review Director (the Director ), as the head of the Office. The Director shall be appointed by the Council and shall be independent from any member agency of the Council. (c) Term The Director shall serve for a term of 5 years, and may be appointed to serve a subsequent 5-year term. (d) Staffing The Director is authorized to hire staff to support the activities of the Office. (e) Duties The Director shall— (1) receive and, at the Director’s discretion, investigate complaints from financial institutions, their representatives, or another entity acting on behalf of such institutions, concerning examinations, examination practices, or examination reports; (2) hold meetings, at least once every three months and in locations designed to encourage participation from all sections of the United States, with financial institutions, their representatives, or another entity acting on behalf of such institutions, to discuss examination procedures, examination practices, or examination policies; (3) in accordance with subsection (f), review examination procedures of the Federal financial institutions regulatory agencies to ensure that the written examination policies of those agencies are being followed in practice and adhere to the standards for consistency established by the Council; (4) conduct a continuing and regular review of examination quality assurance for all examination types conducted by the Federal financial institutions regulatory agencies; (5) adjudicate any supervisory appeal initiated under section 1014; and (6) report annually to the Committee on Financial Services of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Council, on the reviews carried out pursuant to paragraphs (3) and (4), including compliance with the requirements set forth in section 1012 regarding timeliness of examination reports, and the Council’s recommendations for improvements in examination procedures, practices, and policies. (f) Standard for reviewing examination procedures In conducting reviews pursuant to subsection (e)(4), the Director shall prioritize factors relating to the safety and soundness of the financial system of the United States. (g) Removal If the Director is removed from office, the Council shall communicate in writing the reasons for any such removal to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate not later than 30 days before the removal. (h) Confidentiality The Director shall keep confidential all meetings with, discussions with, and information provided by financial institutions. . (d) Right to independent review of material supervisory determinations The Federal Financial Institutions Examination Council Act of 1978 ( 12 U.S.C. 3301 et seq.), as amended by subsection (c) of this section, is further amended by adding at the end the following: 1014. Right to independent review of material supervisory determinations (a) In general A financial institution shall have the right to obtain an independent review of a material supervisory determination contained in a final report of examination. (b) Notice (1) Timing A financial institution seeking review of a material supervisory determination under this section shall file a written notice with the Independent Examination Review Director (the Director ) within 60 days after receiving the final report of examination that is the subject of such review. (2) Identification of determination The written notice shall identify the material supervisory determination that is the subject of the independent examination review, and a statement of the reasons why the institution believes that the determination is incorrect or should otherwise be modified. (3) Information to be provided to institution Any information relied upon by the agency in the final report that is not in the possession of the financial institution may be requested by the financial institution and shall be delivered promptly by the agency to the financial institution. (c) Right to hearing (1) In general The Director shall determine the merits of the appeal on the record or, at the financial institution’s election, shall refer the appeal to an Administrative Law Judge to conduct a confidential hearing pursuant to the procedures set forth under sections 556 and 557 of title 5, United States Code, which hearing shall take place not later than 60 days after the petition for review was received by the Director, and to issue a proposed decision to the Director based upon the record established at such hearing. (2) Standard of review In rendering a determination or recommendation under this subsection, neither the Administrative Law Judge nor the Director shall defer to the opinions of the examiner or agency, but shall conduct a de novo review to independently determine the appropriateness of the agency’s decision based upon the relevant statutes, regulations, and other appropriate guidance, as well as evidence adduced at any hearing. (d) Final decision A decision by the Director on an independent review under this section shall— (1) be made not later than 60 days after the record has been closed; and (2) subject to subsection (e), be deemed a final agency action and shall bind the agency whose supervisory determination was the subject of the review and the financial institution requesting the review. (e) Limited review by FFIEC (1) In general If the agency whose supervisory determination was the subject of the review believes that the Director’s decision under subsection (d) would pose an imminent threat to the safety and soundness of the financial institution, such agency may file a written notice seeking review of the Director’s decision with the Council within 10 days of receiving the Director’s decision. (2) Standard of review In making a determination under this subsection, the Council shall conduct a review to determine whether there is substantial evidence that the Director’s decision would pose an imminent threat to the safety and soundness of the financial institution. (3) Final determination A determination by the Council shall— (A) be made not later than 30 days after the filing of the notice pursuant to paragraph (1); and (B) be deemed a final agency action and shall bind the agency whose supervisory determination was the subject of the review and the financial institution requesting the review. (f) Right to judicial review A financial institution shall have the right to petition for review of final agency action under this section by filing a Petition for Review within 60 days of the Director’s decision or the Council’s decision in the United States Court of Appeals for the District of Columbia Circuit or the Circuit in which the financial institution is located. (g) Report The Director shall report annually to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on actions taken under this section, including the types of issues that the Director has reviewed and the results of those reviews. In no case shall such a report contain information about individual financial institutions or any confidential or privileged information shared by financial institutions. (h) Retaliation prohibited A Federal financial institutions regulatory agency may not— (1) retaliate against a financial institution, including service providers, or any institution-affiliated party (as defined under section 3 of the Federal Deposit Insurance Act), for exercising appellate rights under this section; or (2) delay or deny any agency action that would benefit a financial institution or any institution-affiliated party on the basis that an appeal under this section is pending under this section. (i) Rule of construction Nothing in this section may be construed— (1) to affect the right of a Federal financial institutions regulatory agency to take enforcement or other supervisory actions related to a material supervisory determination under review under this section; or (2) to prohibit the review under this section of a material supervisory determination with respect to which there is an ongoing enforcement or other supervisory action. . (e) Additional amendments (1) Riegle Community Development and Regulatory Improvement Act of 1994 Section 309 of the Riegle Community Development and Regulatory Improvement Act of 1994 ( 12 U.S.C. 4806 ) is amended— (A) in subsection (a), by inserting after appropriate Federal banking agency the following: , the Bureau of Consumer Financial Protection, ; (B) in subsection (b)— (i) in paragraph (2), by striking the appellant from retaliation by agency examiners and inserting the insured depository institution or insured credit union from retaliation by the agencies referred to in subsection (a) ; and (ii) by adding at the end the following flush-left text: For purposes of this subsection and subsection (e), retaliation includes delaying consideration of, or withholding approval of, any request, notice, or application that otherwise would have been approved, but for the exercise of the institution’s or credit union’s rights under this section. ; (C) in subsection (e)(2)— (i) in subparagraph (B), by striking and at the end; (ii) in subparagraph (C), by striking the period and inserting ; and ; and (iii) by adding at the end the following: (D) ensure that appropriate safeguards exist for protecting the insured depository institution or insured credit union from retaliation by any agency referred to in subsection (a) for exercising its rights under this subsection. ; and (D) in subsection (f)(1)(A)— (i) in clause (ii), by striking and at the end; (ii) in clause (iii), by striking and at the end; and (iii) by adding at the end the following: (iv) any issue specifically listed in an exam report as a matter requiring attention by the institution’s management or board of directors; and (v) any suspension or removal of an institution’s status as eligible for expedited processing of applications, requests, notices, or filings on the grounds of a supervisory or compliance concern, regardless of whether that concern has been cited as a basis for another material supervisory determination or matter requiring attention in an examination report, provided that the conduct at issue did not involve violation of any criminal law; and . (2) Federal Credit Union Act Section 205(j) of the Federal Credit Union Act ( 12 U.S.C. 1785(j) ) is amended by inserting the Bureau of Consumer Financial Protection, before the Administration each place such term appears. (3) Federal Financial Institutions Examination Council Act of 1978 The Federal Financial Institutions Examination Council Act of 1978 ( 12 U.S.C. 3301 et seq.) is amended— (A) in section 1003, by amending paragraph (1) to read as follows: (1) the term Federal financial institutions regulatory agencies — (A) means the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration; and (B) for purposes of sections 1012, 1013, and 1014, includes the Bureau of Consumer Financial Protection; ; and (B) in section 1005, by striking One-fifth and inserting One-fourth . (f) Reduction of surplus funds of Federal reserve banks (1) In general Section 7(a)(3)(A) of the Federal Reserve Act ( 12 U.S.C. 289(a)(3)(A) ) is amended by striking $7,500,000,000 and inserting $7,324,285,000 . (2) Effective date Paragraph (1) shall take effect on June 1, 2018. 409. Notice of junior mortgage or lien With respect to the dwelling of a borrower that serves as security for a securitized senior mortgage loan, if the borrower enters into any credit transaction that would result in the creation of a new mortgage or other lien on such dwelling, the creditor of such new mortgage or other lien shall notify the servicer of the senior mortgage loan of the existence of the new mortgage or other lien. 410. Limitation on mortgages held by loan servicers (a) Limitation Neither the servicer of a residential mortgage loan, nor any affiliate of such servicer, may own, or hold any interest in, any other residential mortgage loan that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on the same dwelling or residential real property that is subject to the mortgage, deed of trust, or other security interest that secures the residential mortgage loan serviced by the servicer. (b) Definitions For purposes of this section, the following definitions shall apply: (1) Affiliate The term affiliate has the meaning given such term under section 104(g) of the Gramm-Leach-Bliley Act ( 15 U.S.C. 6701(g) ). (2) Residential mortgage loan The term residential mortgage loan means any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit transaction under an open end credit plan or an extension of credit relating to a plan described in section 101(53D) of title 11, United States Code. (3) Servicer The term servicer has the meaning provided such term in section 129A of the Truth in Lending Act, except that such term includes a person who makes or holds a residential mortgage loan (including a pool of residential mortgage loans) if such person also services the loan. (c) Interests For purposes of subsection (a), ownership of, or holding an interest in, a residential mortgage loan includes ownership of, or holding an interest in— (1) a pool of residential mortgage loans that contains such residential mortgage loan; or (2) any security based on or backed by a pool of residential mortgage loans that contains such residential mortgage loan. (d) Effective date This section shall apply— (1) with respect to the servicer (or affiliate of the servicer) of a residential mortgage loan that is originated after the date of the enactment of this Act, on such date of enactment; and (2) with respect to the servicer (or affiliate of the servicer) of a residential mortgage loan that is originated on or before the date of the enactment of this Act, upon the expiration of the 12-month period beginning upon such date of enactment. V Regulatory structure A Ginnie Mae 501. Removal from HUD; establishment as independent entity (a) In general Paragraph (2) of section 302(a) of the National Housing Act ( 12 U.S.C. 1717(a)(2) ) is amended by striking in the Department of Housing and Urban Development and inserting independent of any other agency or office in the Federal Government . (b) Conforming amendments Title III of the National Housing Act ( 12 U.S.C. 1716 et seq.) is amended— (1) in section 306(g)(3)(D) ( 12 U.S.C. 1721(g)(3)(D) ), by striking Secretary and inserting Association ; (2) in section 307 ( 12 U.S.C. 1722 ), by striking Secretary of Housing and Urban Development and inserting Association ; and (3) in section 317 ( 12 U.S.C. 1723i )— (A) in subsection (a)(1), by striking Secretary of Housing and Urban Development and inserting Administrator of the Association ; (B) in subsection (c)(4), by striking Secretary’s and inserting Administrator of the Association’s ; (C) in subsection (d)(1), by striking Secretary’s and inserting Administrator of the Association’s ; (D) in the heading for subsection (f), by striking by Secretary ; and (E) by striking Secretary each place such term appears and inserting Administrator of the Association . (c) Management; Board of Directors (1) In general Section 308 of the National Housing Act ( 12 U.S.C. 1723(a) ) is amended by striking subsection (a) and inserting the following new subsection: (a) Management (1) Board of Directors (A) Number and appointment The Association shall be governed by a Board of Directors consisting of 5 members, who shall be appointed by the President, by and with the advice and consent of the Senate, from among individuals who— (i) are citizens of the United States; and (ii) have demonstrated technical expertise in the mortgage market and one of whom has technical expertise in the secondary mortgage market. (B) Political affiliation Not more than 3 members of the Board of Directors may be members of the same political party. (C) Terms (i) In general Each member of the Board of Directors shall be appointed for a term of 5 years, except as provided in clauses (ii) and (iii). (ii) Terms of initial appointees As designated by the President at the time of appointment, of the members first appointed to the Board of Directors pursuant to subparagraph (A)— (I) 1 shall be appointed for a term of 1 year; (II) 1 shall be appointed for a term of 2 years; (III) 1 shall be appointed for a term of 3 years; and (IV) 1 shall be appointed for a term of 4 years. (iii) Interim appointments Any member appointed to fill a vacancy occurring before the expiration of the term for which such member’s predecessor was appointed shall be appointed only for the remainder of such term. (iv) Continuation of service The Director and each member may continue to serve after the expiration of the term of office to which such member was appointed until a successor has been appointed and qualified. (2) Administrator; Chairperson (A) Designation; term One of the members of the Board of Directors shall be designated by the President, at the time of appointment, to serve as Chairperson of the Board of Directors and Administrator of the Association for a term of 5 years, unless removed before the end of such term pursuant to subparagraph (C). (B) Advice The Board of Directors shall advise the Administrator regarding overall strategies and policies to carry out the duties and purposes of this Act. (C) Removal The President may remove the Administrator for inefficiency, neglect of duty, or malfeasance in office. (3) Operations (A) Bylaws Within the limitations of law, the Board of Directors shall determine the general policies which shall govern the operations of the Association, and shall have power to adopt, amend and repeal bylaws governing the performance of the powers and duties granted to or imposed upon it by law. (B) Required votes At the first meeting of the Board of Directors, the Board shall determine by majority vote which actions of the Association shall require a majority vote of the Board. (4) Officers The Director shall select and effect the appointment of qualified persons to fill such offices of the Association as may be provided for in the bylaws. Persons appointed under the preceding sentence shall perform such executive functions, powers, and duties as may be prescribed by the bylaws or by the Board of Directors, and such persons shall be executive officers of the Association and shall discharge all such executive functions, powers, and duties. . (2) Compensation (A) Administrator Section 5314 of title 5, United States Code, is amended by adding at the end the following new item: Administrator, Government National Mortgage Association. . (B) Members of Board of Directors Section 5314 of title 5, United States Code, is amended— (i) by striking the item relating to the President of the Government National Mortgage Association, Department of Housing and Urban Development; and (ii) by adding at the end the following new item: Members, Board of Directors of the Government National Mortgage Association. . (d) Personnel Subsection (d) of section 309 of the National Housing Act ( 12 U.S.C. 1723a(d) ) is amended by striking (d)(1) and all that follows through the end of paragraph (1) and inserting the following: (d) Personnel (1) Ginnie Mae (A) In general The Administrator of the Association may appoint and fix the compensation of such officers and employees of the Association as the Administrator considers necessary to carry out the functions of the Association. Officers and employees may be paid without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5, United States Code, relating to classification and General Schedule pay rates. (B) Comparability of compensation with Federal banking agencies In fixing and directing compensation under subparagraph (A), the Administrator of the Association shall consult with, and maintain comparability with, compensation of officers and employees of the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation. (C) Personnel of other Federal agencies In carrying out the duties of the Association, the Administrator of the Association may use information, services, staff, and facilities of any executive agency, independent agency, or department on a reimbursable basis, with the consent of such agency or department. . (e) Transitional provision Notwithstanding this section and the amendments made by this section, during the period beginning on the date of the enactment of this Act, and ending on the date on which the Administrator of the Government National Mortgage Association is appointed and confirmed pursuant to section 308 of the National Housing Act, as amended by this section, the person serving as the President of the Government National Mortgage Association on that effective date shall act for all purposes as, and with the full powers of, the Administrator of the Association. (f) References On and after the date of the enactment of this Act, any reference in Federal law to the President of the Government National Mortgage Association or to such Association shall be deemed to be a reference to such Administrator of such Association or to such Association, as appropriate, as organized pursuant to this subsection and the amendments made by this section. 502. Guarantee fees Paragraph (3) of section 306(g) of the National Housing Act ( 12 U.S.C. 1721(g)(3) ) is amended— (1) by striking (3)(A) No fee or charge in excess of 6 basis points and inserting (3)(A)(i) Except as provided in clause (ii), no fee or charge ; (2) in subparagraph (A), by adding at the end the following new clause: (ii) The Association shall establish a fee of not less than 6 basis points for the guaranty of the timely payment of principal or interest on securities or notes based on or backed by mortgages described in clause (i), which shall be based on risks associated with issuer counterparties, market risks, and risk and cost of administering the program. The Association may adjust such fee annually but only to the extent necessary to conform such fee with such risks and costs and, before any such adjustment takes effect, shall submit to the Congress a report describing the justifications for the adjustment. ; (3) in subparagraph (B), by adding after the period at the end the following: The Association may adjust such fee annually but only to the extent necessary to conform such fee with such anticipated claims. ; (4) in subparagraph (C)— (A) by striking shall remain at the level set for such fees or charges as of September 30, 1985, except that ; (B) by striking increased and inserting adjusted pursuant subparagraph (D) (C) by inserting risk and before cost of administering ; and (D) by inserting or to the conditions of the market, after the program, ; and (5) in subparagraph (D)— (A) by striking increasing and inserting adjusting ; and (B) by striking increase and inserting adjustment; . B FHA 511. Definitions For purposes of this title, the following definitions shall apply: (1) Board The term Board means the Board of Directors of the FHA established under section 524. (2) Director The term Director means the Director of the Federal Housing Finance Agency. (3) FHA The term FHA means the Federal Housing Administration established under this title. (4) First-time homebuyer The term first-time homebuyer means an individual who meets any of the following criteria: (A) An individual, and his or her spouse, who has never had ownership in a principal residence, as evidenced by inclusion of such individual’s name on a mortgage, title, or deed in connection with such ownership. (B) A single parent (as such term is defined in section 956 of the Cranston-Gonzalez National Affordable Housing Act ( 42 U.S.C. 12713 )) who has only owned a principal residence with a former spouse while married. (C) An individual who is divorced, whose only ownership in a principal residence was together with a previous spouse, as evidenced by inclusion of such individual’s name on a mortgage, title, or deed in connection with such ownership. (D) An individual who is a displaced homemaker (as such term is defined in such section 956 of the Cranston-Gonzalez National Affordable Housing Act) and has only owned a principal residence with a spouse. (E) An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations. (F) An individual who has only owned a property that was not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure. (5) United States The term United States includes the States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, the Virgin Islands, American Samoa, and Native American governments. 1 Organization 521. Establishment (a) In General There is hereby established the Federal Housing Administration, which shall be a body corporate without capital stock and shall have succession until dissolved by Act of Congress. (b) Government Corporation The FHA shall be established as a wholly owned Government corporation subject to chapter 91 of title 31, United States Code (commonly referred to as the Government Corporation Control Act), except as otherwise provided in this subtitle. (c) Federal Agency (1) In general The FHA shall be an agency of the United States, except that the FHA shall not be considered an agency for purposes of holding, managing, and disposing of assets acquired by the FHA under the provisions of this title or the National Housing Act . (2) Holding, management, and disposal authority For purposes of this subsection, the term holding, managing, and disposing of assets includes the powers to— (A) deal with, complete, reconstruct, rent, renovate, modernize, insure, make contracts for the management of, establish suitable agencies for the management of, or exercise discretion to sell for cash or credit or lease, any acquired property; (B) pursue collection by way of compromise or otherwise all assigned and transferred claims; and (C) at any time, upon default, foreclose on any property secured by any assigned or transferred mortgage. (d) Self-Sufficient Entity The FHA shall operate and conduct its business as a self-sufficient self-sufficient entity in accordance with section 204(d). (e) Corporate Offices and Residency The FHA shall maintain its principal office in the District of Columbia and shall be deemed, for purposes of venue in civil actions, to be a resident of the District of Columbia. The FHA may establish other offices in such other places as the FHA considers appropriate in the conduct of its business. (f) Tax Status The FHA, including its franchise, activities, income, and assets, shall be exempt from all taxation now or hereafter imposed by any taxing authority in the United States, except that any real property of the FHA (other than real property that the FHA uses as an office) shall be subject to taxation to the same extent according to its value as any taxing authority taxes other real property. (g) Protection of Name (1) Prohibition No person shall, except the body corporate established under this section, after the date of the enactment of this Act, use the words Federal Housing Administration or the initials FHA as the name or part thereof under which such person shall do business. (2) Enforcement Violations of paragraph (1) may be enjoined by any court of general jurisdiction at the suit of the FHA. In any such suit, the FHA may recover any actual damages resulting from such violation, and, in addition, shall be entitled to punitive damages (regardless of the existence or nonexistence of actual damages) of not more than $100 for each day during which such violation is committed or repeated. 522. Purposes The FHA is established for the following purposes: (1) To provide mortgage insurance and other credit enhancement and related activities, for— (A) single family homeownership to first-time homebuyers, low- and moderate-income homebuyers, homebuyers in areas subject to counter-cyclical markets or Presidentially-declared disasters; (B) the financing of affordable rental housing; and (C) the provision of residential health care facilities. (2) To supplement private sector activity by serving hard-to-serve markets, developing new mortgage products, and filling gaps in the provision and delivery of mortgage credit. (3) To deliver housing mortgage insurance and credit enhancement and provide other services in a non-discriminatory manner. (4) To promote liquidity and provide stability to the single family and multifamily housing finance market, by continuing to provide mortgage insurance and credit enhancement on a sound basis during times of regional and national economic downturn. (5) To engage in research, development, and testing of new products designed to make single family and multifamily housing and residential health care facility credit available to hard-to-serve markets. (6) To establish uniformity in operations and risk management and loss mitigation in housing mortgage insurance and rural housing loan programs. (7) To administer the rural housing programs of the Rural Housing Service of the Department of Agriculture. 523. General powers To further the purposes of this subtitle, in accordance with chapter 91 of title 31 of the United States Code (relating to government corporations), the FHA— (1) may adopt, amend, and repeal by-laws, and other written administrative guidance; (2) may adopt, alter, and use a corporate seal, which shall be judicially noted; (3) may insure, and make commitments to insure mortgages, to the extent authorized under this title, and enhance and make commitments to otherwise enhance credit, and in providing such insurance may reinsure, advance, incur liabilities, pool loans, and risk share; (4) shall provide, among other mortgage insurance products, for the availability of a 30-year fixed-rate mortgage; (5) may acquire, hold, use, improve, deal in, or dispose of, by any means, any interests in any real property or any personal property; (6) may execute contracts, and make other agreements in its own name, with any agency, public or private entity, or other person, and carry out any lawful requirement of such contracts, grants, or other agreements; (7) may take any actions, including the restructuring of debt, that the FHA determines are necessary to manage any portfolio (including the portfolio of the FHA and the Rural Housing Service) of property, assets, and obligations; (8) may— (A) create and supply, alone or in cooperation with public or private entities or persons, any product or service consistent with its corporate purposes; and (B) assess fees and charges for such products, information, and services in amounts, as determined by the FHA, that— (i) do not exceed their value in the market; (ii) permit the FHA to recover its fully allocated long-term costs; and (iii) permit the FHA to maintain the level of capital determined by the FHA to be necessary and sufficient to carry out the public purposes of the FHA and as required under subtitle C; (9) may create distinct insurance funds or other devices to segregate or permit limitations on liability for business activities or accounts; (10) may qualify any person or entity to engage in business with the FHA and may enforce and impose penalties for the breach of any duties, obligations, and other commitments made by such persons or entities; (11) shall take actions necessary to administer its business in a nondiscriminatory manner; (12) may use the services or obtain the goods of any Federal agency, including the Department of Housing and Urban Development and the Rural Housing Service of the Department of Agriculture, under working or cooperation agreements or contracts with such agencies and make or receive payment for the cost of such activities; (13) shall have the power, in its corporate name, to sue and be sued, and to complain and defend, in any court of competent jurisdiction, State or Federal, but no attachment, garnishment, injunction, or other similar process, mesne or final, shall be issued against the property of the FHA or against the FHA with respect to its property, and the FHA shall not be liable for interest prior to judgment, for punitive or exemplary damages, for penalties, or for claims based upon unjust enrichment, quasi-contract, or contracts implied-in-law, nor shall the FHA be subject to trial by jury; (14) notwithstanding any other provision of law— (A) shall be an agency of the United States Government and the officers and employees of the FHA shall be officers and employees of the United States Government for purposes of part IV of title 28, United States Code; (B) shall have all civil actions to which the FHA is a party deemed to arise under the laws of the United States; and (C) may, at any time before trial and without bond or security, remove any civil or criminal action or proceeding in a State court to which the FHA is a party to the United States district court for the District of Columbia or to the United States district court with jurisdiction over the place where the civil action or proceeding is pending, by following any procedure for removal of actions in effect at the time of such removal; (15) may— (A) accept and use voluntary and uncompensated services and accept, hold, administer, and use gifts and bequests of property, both real and personal, for the purpose of aiding or facilitating the work of the FHA, and (B) hold gifts and bequests of money and the proceeds from sales of other property received as gifts or bequests in a separate account, and such amounts shall be disbursed as provided by the FHA; except that property accepted pursuant to this paragraph, and the proceeds thereof, shall be used as nearly as possible in accordance with the terms of the gift or bequest and, for the purpose of Federal income, estate, and gift taxes, property accepted under this paragraph shall be considered as a gift or bequest to or for the use of the United States; (16) shall have any transaction in which it participates be exempt from the terms of any State or other law or prohibition against payment of usurious interest; (17) may act as a fiduciary in connection with any of its undertakings; (18) may foreclose any single family mortgages held by the FHA pursuant to the same procedures and authority applicable to the Secretary of Housing and Urban Development under the Single Family Mortgage Foreclosure Act of 1994; (19) may foreclose any multifamily housing mortgages held by the FHA pursuant to the same procedures and authority applicable to the Secretary of Housing and Urban Development under the Multifamily Mortgage Foreclosure Act of 1981; (20) may foreclose mortgages pursuant to the same procedures and authority applicable to the Secretary of Agriculture under the Housing Act of 1949; (21) shall have the priority of the United States with respect to the payment of debts out of bankrupt, insolvent, and decedents’ estates; (22) may invest in the development of acquisition of systems, technology, or other capital resources, to enhance its ability to carry out the purposes of this title; and (23) shall have and exercise all powers necessary or appropriate to effect any of the purposes of this title and title II. 524. Board of Directors (a) In General The powers of the FHA, including direction over policy and operations, shall be vested in the Board of Directors of the FHA. (b) Members and Appointment The Board of Directors shall consist of 7 members, as follows: (1) Voting members 5 voting members appointed by the President, by and with the advice and consent of the Senate, who shall include— (A) not less than one individual who has experience in mortgage finance; and (B) not less than one individual who has experience in affordable housing serving low- and moderate-income populations. (2) Non-voting members Two non-voting members, who shall be— (A) a representative of Department of Housing and Urban Development, appointed by the Secretary of Housing and Urban Development; and (B) a representative of the Rural Housing Service, appointed by the Secretary of Agriculture (c) Chairperson The Board shall elect a chairperson from among its members. (d) Terms (1) In general Each member of the Board appointed under subsection (b)(1) shall be appointed for a term of 3 years, except as provided in paragraphs (2) and (3) of this subsection. (2) Terms of initial appointees As designated by the President at the time of appointment, of the members first appointed to the Board pursuant to paragraphs (3) and (4) of subsection (b)— (A) 1 shall be appointed for a term of 1 year; and (B) 2 shall be appointed for terms of 2 years. (3) Vacancies Any member appointed to fill a vacancy on the Board 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. A member may serve after the expiration of that member’s term until a successor has taken office. A vacancy on the Board shall be filled in the manner in which the original appointment was made. (e) Meetings and Quorum The Board shall meet at any time pursuant to the call of the Chairperson or a majority of its members and as provided by the bylaws of the FHA, but not less than quarterly. A majority of the members of the Board shall constitute a quorum. (f) Powers The Board shall be responsible for the general management of the FHA and shall have the same authority, privileges, and responsibilities as the board of directors of a private corporation incorporated under the District of Columbia Business Corporation Act. (g) Duties In performing its duties, the Board shall— (1) obtain guidance from participants in the mortgage markets served by the FHA; (2) assess the housing and mortgage insurance needs of consumers and providers of single family and multifamily housing and communities, and the mortgage insurance needs of providers of residential health care facilities; (3) obtain information concerning housing finance markets in order to better assess how the FHA can complement the roles of public and private participants in such markets; and (4) assist the Secretary of Housing and Urban Development and the Secretary of Agriculture in coordinating the roles of Federal housing, banking, and credit agencies generally, and particularly in the delivery of housing credit enhancement to families, communities, and hard-to-serve markets. (h) Compensation Members of the Board shall serve on a part-time basis and shall serve without pay. (i) Travel Expenses Each member shall receive travel expenses, including per diem in lieu of subsistence, in accordance with sections 5702 and 5703 of title 5, United States Code. 525. Officers and personnel (a) Administrator; Deputy administrator (1) Appointment The Board shall appoint a Administrator and Deputy Administrator of the FHA, and, except as provided in subsections (b) and (c), such other officers as are provided for in the bylaws of the FHA. (2) Executive officers The Administrator and Deputy Administrator of the FHA shall be executive officers of the FHA and shall discharge and perform all such executive functions, powers, and duties as may be prescribed by the bylaws of the FHA or by the Board of Directors. (b) Chief Risk Officer There shall be in the FHA a Chief Risk Officer, who— (1) shall be appointed by the Board of Directors of the FHA; (2) shall be selected from among individuals who possess demonstrated ability in the general management of, and knowledge of and extensive practical experience in, risk evaluation practices in large governmental or business entities; (3) shall be— (A) responsible for all matters relating to managing and mitigating risk to the mortgage insurance programs of the FHA and ensuring the performance of mortgages insured by the FHA; and (B) responsible for all matters relating to managing and mitigating risk to the housing loans made, insured, or guaranteed under title V of the Housing Act of 1949 ( 42 U.S.C. 1471 et seq.) and ensuring the performance of such housing loans; (4) shall not be subject to the review or approval of the Board of Directors of the FHA or the Secretary of Agriculture with respect to the exercise of the responsibilities under subparagraph (A) or (B), respectively, of paragraph (3); and (5) shall not be required to obtain the prior approval, comment, or review of any officer or agency of the United States before submitting to the Congress, or any committee or subcommittee thereof, any reports, recommendations, testimony, or comments if such submissions include a statement indicating that the views expressed therein are those of the Chief Risk Officer of the FHA and do not necessarily represent the views of the Board of Directors of the FHA or the Secretary of Agriculture. (c) Chief Technology Officer There shall be in the FHA a Chief Technology Officer, who— (1) shall be appointed by the Board of Directors of the FHA; (2) shall be selected from among individuals who possess demonstrated ability in the general management of, and knowledge of and extensive practical experience in, information technology management practices in, large governmental or business entities; (3) shall be— (A) responsible for all matters relating to information technology management relating to the mortgage insurance programs of the FHA; and (B) responsible for all matters relating to information technology management relating to the programs for making, insuring, and guaranteeing housing loans under title V of the Housing Act of 1949 ( 42 U.S.C. 1471 et seq.); including analysis and assessment of the information technology infrastructures, information technology strategy, and use of information technology, ensuring the security and privacy of information technology infrastructure and networks, and promoting technological innovation; (4) shall not be subject to the review or approval of the Board of Directors of the FHA or the Secretary of Agriculture with respect to the exercise of the responsibilities under subparagraph (A) or (B), respectively, of paragraph (3); and (5) shall not be required to obtain the prior approval, comment, or review of any officer or agency of the United States before submitting to the Congress, or any committee or subcommittee thereof, any reports, recommendations, testimony, or comments if such submissions include a statement indicating that the views expressed therein are those of the Chief Technology Officer of the FHA and do not necessarily represent the views of the Board of Directors of the FHA, the Secretary of Housing and Urban Development, or the Secretary of Agriculture. (d) Appointment of Employees Subject to subtitle D, the Board shall appoint such other employees of the FHA as the Board considers necessary for the transaction of the FHA’s business. (e) Compensation, Duties, and Removal (1) In general The Board shall fix the compensation of all officers and employees of the FHA and define their duties. Officers and employees shall be appointed, promoted, assigned, and removed on the basis of qualifications, and any such actions taken shall be consistent with the principles of fairness, nondiscrimination, and due process. (2) Considerations in fixing compensation In fixing and directing compensation for officers and employees of the FHA, the Board shall consult and maintain comparability with the compensation provided by the Government National Mortgage Association, the Federal Housing Finance Agency, the Comptroller of Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation to officers and employees of such entities. (f) Applicability of Certain Civil Service Laws The officers and employees of the FHA shall be appointed without regard to the provisions of title 5, United States Code, governing appointments in the competitive service, and may be paid without regard to the provisions of chapter 51 and subchapter III of chapter 53 of that title relating to classification and General Schedule pay rates. (g) Use of Federal Agencies In carrying out its purposes, the FHA may use information, services, staff, and facilities of any executive agency, independent agency, department (including the Department of Housing and Urban Development and the Department of Agriculture), or enterprise (as such term is defined in section 101 of the Protecting American Taxpayers and Homeowners Act of 2018 ) with the consent of the agency, department, or enterprise and shall reimburse the agency, department, or enterprise for the cost of such information, services, staff, and facilities. (h) Indemnification The FHA may provide for the indemnification of any officer, employee, contractor, or agent of the FHA on such terms as the FHA determines proper, except that, to the extent that the FHA self-insures for any indemnification— (1) the aggregate maximum amount of indemnification outstanding at any time shall not exceed 5 percent of the amount of capital required under section 216 to be maintained by the Mutual Mortgage Insurance Fund; and (2) not more than $1,000,000 may be paid as an indemnity for any single event. (i) Amendments to Housing Act of 1949 Section 501 of the Housing Act of 1949 ( 42 U.S.C. 1471 ) is amended by adding at the end the following new subsections: (k) Authority of Chief Risk Officer of FHA The Chief Risk Officer of the FHA appointed pursuant to section 525(b) of the Protecting American Taxpayers and Homeowners Act of 2018 shall be solely responsible for all matters relating to evaluating, managing, and mitigating risk to the programs under this title for making, insuring, and guaranteeing housing loans and ensuring the performance of such housing loans. (l) Authority of Chief Technology Officer of FHA The Chief Technology Officer of the FHA appointed pursuant to section 525(c) of the Protecting American Taxpayers and Homeowners Act of 2018 shall be solely responsible for all matters relating to information technology management relating to the programs under this title for making, insuring, and guaranteeing housing loans. . 526. Financial, underwriting, and operations systems (a) In general The FHA shall develop, maintain, lease, or acquire such financial, underwriting, and operations systems as may be necessary to carry out the responsibilities of the FHA. Such systems shall be designed and developed in a manner so that such systems shall also be used for the financial, underwriting, and operations systems, respectively, of the programs under title V of the Housing Act of 1949 for making, guaranteeing, and insuring rural housing loan programs. (b) Use by Rural Housing Service programs (1) Availability All financial, underwriting, and operations systems of the FHA shall be available for use by the FHA to the extent necessary to ensure compliance with section 501(m) of the Housing Act of 1949 ( 42 U.S.C. 1471(l) ). (2) Use Section 501 of the Housing Act of 1949 ( 42 U.S.C. 1471 ), as amended by the preceding provisions of this title, is further amended by adding at the end the following new subsection: (m) Use of FHA systems The Administrator and Deputy Administrator of the FHA, the Chief Risk Officer of the FHA, and the Chief Technology Officer of the FHA shall utilize the financial, underwriting, and operations systems of the FHA in carrying out all financial, underwriting, and operations functions with respect to the programs under this title for making, insuring, or guaranteeing housing loans. . 527. Procurement (a) In General The FHA shall establish an economical and results-oriented system for the procurement, supply, and disposition by the FHA of personal property and services, which shall include performance measures and standards for determining the extent to which the FHA’s procurement of property and services satisfies the objective for which the procurement was undertaken. The system shall be consistent with the principles of impartiality and competitiveness. (b) Exemption from Federal Property and Administrative Service Act Requirements Section 113(e) of title 40, United States Code, is amended— (1) in paragraph (19), by striking or at the end; (2) in paragraph (20), by striking the period at the end and inserting ; or ; and (3) by adding at the end the following new paragraph: (21) The Federal Housing Administration. . (c) Exemption from Procurement Protest System Subchapter V of chapter 35 of title 31, United States Code, relating to the procurement protest system, shall not apply to the FHA. 528. Applicability of laws (a) Subsidy layering For purposes of section 102(d) of the Department of Housing and Urban Development Reform Act of 1989, mortgage insurance and other credit enhancement provided under this title shall not be considered assistance within the jurisdiction of the Department. (b) Government Corporation Control Act Section 9101(3) of title 31, United States Code, is amended by adding at the end the following new subparagraph: (S) the Federal Housing Administration. . (c) Tax Exempt Status of FHA Section 501(l) of the Internal Revenue Code of 1986 ( 26 U.S.C. 501(l) ) is amended by adding at the end the following new paragraph: (5) The Federal Housing Administration established under subtitle C of title V of the Protecting American Taxpayers and Homeowners Act of 2018. . 529. Evaluation (a) In General The Director shall conduct a study and submit a report to the President and the Congress on— (1) whether this title provides sufficient authority to permit the FHA to accomplish its public purposes efficiently and effectively, and in a safe and sound manner; (2) the impact of the limitations on business activities as to mortgage amounts and aggregate commitments, and any other statutory limitations, on the current and anticipated business activity of the FHA; and (3) whether the provisions of subtitle C appropriately provide that the FHA will be operated in a safe and sound manner and will fulfill the public purposes of its establishment. (b) Timing The report required by this section shall be submitted on the third January 1st occurring after the conclusion of the transition period under section 551. 530. Funding (a) Funding of salaries and expenses There is authorized to be appropriated for each fiscal year to the FHA, for salaries, expenses, and technology for the management and operations of the FHA an amount not exceeding the amount of the negative subsidy credited to the negative subsidy receipt account not needed for reserves of the funds of the FHA pursuant to sections 216 and 219. (b) Funding of Claims (1) Availability of funds Amounts credited to the financing account of the FHA, established pursuant to title V of the Congressional Budget Act of 1974, shall be permanently and indefinitely available for payment of any claim that the FHA approves under a contract of insurance or other credit enhancement instrument pursuant to this title. (2) Borrowing authority (A) In general To the extent that such amounts are insufficient for such purpose, the FHA may borrow from the Treasury pursuant to title V of the Congressional Budget Act of 1974. (B) Notice to Congress Upon exercising the authority referred to in subparagraph (A), the FHA shall submit to the Congress— (i) notice of such exercise of authority and the extent of the borrowing undertaken; (ii) a plan for repayment to the Treasury of the amounts borrowed, specifying the time and amounts of such payments; and (iii) if such borrowing is for the Mutual Mortgage Insurance Fund, how the FHA will comply with the capital restoration plan required under section 217(c). 2 Authority over Rural Housing Programs of Department of Agriculture 541. Authority over Rural Housing Service programs After the expiration of the transition period under section 551— (1) the FHA shall exercise (in addition to powers set forth in section 552) all authority and undertake all responsibilities of the Secretary of Agriculture under title V of the Housing Act of 1949 (as amended by this title), except as otherwise provided in this title and except that any authority that requires an appropriation may be conducted only to the extent that amounts are so appropriated; and (2) such authority shall not be subject to the review or approval of the Secretary of Agriculture. 542. Termination of Secretary of Agriculture’s rural housing authority After the expiration of the transition period under section 551, the Secretary of Agriculture may not exercise any authority under title V of the Housing Act of 1949 and any reference to the Secretary in such title shall be construed to refer to the FHA. 543. Continuation of Obligations This subtitle and section 552(4) may not be construed to affect the validity of any right, duty, or obligation of the United States or other person arising under or pursuant to any commitment or agreement lawfully entered into with the Secretary of Agriculture under title V of the Housing Act of 1949. 544. Status of employees This subtitle may not be construed to transfer or otherwise affect the status of any employee of the Department of Agriculture. 3 Transition 551. Transition period (a) In General For purposes of this subtitle, the term transition period means the period that— (1) begins on the date of the enactment of this Act; and (2) ends upon the earlier of— (A) the date that the Director publishes notice in the Federal Register that the Director has determined that all of the requirements under subsection (b) have been completed, except that the Director may not publish such notice before the expiration of the 2-year period beginning on the date of the enactment of this Act; or (B) the expiration of the 5-year period beginning on the date of the enactment of this Act. (b) Requirements for Ending Transition Period The requirements under this subsection are the following: (1) Approval of initial annual budget and business plan The FHA has submitted to the Director of the Federal Housing Finance Agency an initial annual budget and business plan and the Director has approved the budget and plan. (2) Determination of corporate capacity The Director of the Office of Management and Budget has determined, and notified the Director, that the staff, systems, and administrative infrastructure of the FHA are sufficient to permit the FHA to fully conduct the operation of its business. 552. Authority during transition period During the transition period the FHA may— (1) carry out any power or responsibility of the Secretary of the Housing and Urban Development relating to mortgage insurance programs under the National Housing Act that the Secretary delegates to the FHA, using the staff, systems, and administrative infrastructure that the FHA engages or acquires during the transition period, or the personnel and other resources of the Secretary; (2) incur any obligation consistent with— (A) the carrying out of a power or responsibility delegated under paragraph (1); or (B) the acquisition, engagement, or development of staff, systems (including technology to enhance the ability of the FHA to engage in the business authorized by the title), and administrative structure; (3) engage in any activity or undertake any responsibility (not including entering into, or making any commitment to enter into, any contract of insurance under this title) that the FHA determines to be consistent with the establishment of the FHA; and (4) carry out any power or responsibility of the Secretary of Agriculture under title V of the Housing Act of 1949 that the Secretary delegates to the FHA, using the staff, systems, and administrative infrastructure that the FHA engages or acquires during the transition period, and the personnel and other resources of the Rural Housing Service. 553. Advisory Board (a) Establishment The Secretary of Housing and Urban Development and the Secretary of Agriculture shall jointly establish an advisory board to provide advice to the Board of Directors of the FHA regarding establishing and organizing the FHA and creating the business plan, premium structure, and product lines of the FHA. (b) Functions In carrying out its responsibilities under subsection (a) the advisory board may— (1) obtain guidance from participants in the mortgage markets to be served by the FHA; (2) assess the housing and mortgage credit needs; (3) obtain information concerning single family housing finance markets to assess how the FHA can complement the roles of public and private participants in such markets; and (4) consult with the relevant Federal agencies generally regarding how the FHA can improve the delivery of single family housing credit enhancement to families, communities, and hard-to-serve markets. (c) Membership The advisory board shall consist of— (1) the Assistant Secretary of Housing and Urban Development who is the Federal Housing Commissioner; (2) the Administrator of the Rural Housing Service of the Department of Agriculture; (3) not less than 5 individuals appointed by the Secretary of Housing and Urban Development who are representatives of the mortgage finance industry; and (4) not less than 2 individuals who have expertise in affordable housing serving low- and moderate-income populations. Members of the advisory board shall serve at the joint pleasure of the Secretary of Housing and Urban Development and the Secretary of Agriculture. (d) Termination The advisory board shall terminate upon the expiration of the transition period under section 551. 554. Transfer of HUD authority (a) Transfer Except as provided in subsections (c) and (d), effective upon the expiration of the transition period, the functions of, authority provided to, and the responsibilities of the Secretary of Housing and Urban Development and the Department of Housing and Urban Development under the following provisions of law are transferred to the FHA: (1) Titles II and V of the National Housing Act ( 12 U.S.C. 1707 et seq., 1735a et seq.). (2) Section 3 of Public Law 99–289 ( 12 U.S.C. 1721 note; relating to estimates of use of insuring authority), except that this paragraph shall not terminate or transfer any authority of the Secretary under such section relating to section 306(g) of the National Housing Act ( 12 U.S.C. 1721(g) ). (3) Section 801 of the Housing Act of 1954 ( 12 U.S.C. 1701j–1 ; relating to builders warranties). (4) Section 424 of the Housing and Community Development Act of 1987 (12 U.S.C. 1715z–1c; relating to residential water treatment). (5) Section 328 of the Cranston-Gonzalez National Affordable Housing Act ( 12 U.S.C. 1713 note; relating to delegation of processing). (6) Section 106 of the Energy Policy Act of 1992 ( 12 U.S.C. 1701z–16 ; relating to energy efficient mortgages pilot program). (7) Section 542 of the Housing and Community Development Act of 1992 ( 12 U.S.C. 1715z–22 ; relating to multifamily mortgage credit programs). (8) Section 103(h) of the Multifamily Housing Property Disposition Reform Act of 1994 (12 U.S.C. 1715z–1a note; relating to alternative uses of multifamily projects to prevent default). (b) Repeal of Assignment Provisions Effective upon the date of the enactment of this Act, section 204(a)(1)(B) of the National Housing Act ( 12 U.S.C. 1710(a) ) is amended by striking the last sentence. (c) Applicability The repeals under subsections (a) and (b) shall not affect any legally binding obligations entered into pursuant to the provisions repealed before the applicable effective date under such subsections. Any mortgage insurance, funds, or activities subject, before repeal, to a provision of law repealed by such subsections shall continue to be governed by the provision as it existed immediately before repeal, except that the FHA may exercise any authority under such provision otherwise transferred to the FHA by this title. (d) References After the expiration of the transition period, any reference in Federal law to the Secretary of Housing and Urban Development, in connection with any function of the Secretary transferred under subsection (a) or any other provision of this subtitle, shall be deemed to be a reference to the FHA. 555. Wind-up of HUD affairs (a) Abolishment of positions Effective upon the expiration of the transition period, any offices of the Department of Housing and Urban Development responsible for functions transferred pursuant to section 554(a), to the extent of such functions, and the position of the Federal Housing Commissioner in the Department of Housing and Urban Development, are abolished. (b) Disposition of Affairs During the transition period, the Secretary of Housing and Urban Development, solely for the purpose of winding up the affairs of the Department relating to the functions transferred under section 554— (1) shall manage the employees of the Department responsible for such functions and provide for the payment of the compensation and benefits of any such employee which accrue before the effective date of the transfer of such employee under section 557; and (2) may take any other action necessary for the purpose of winding up the affairs of the Department relating to such functions. (c) Status of Employees Before Transfer The provisions of and amendments made by this title and the abolishments under subsection (a) of this section may not be construed to affect the status of any employee of the Department as an employee of an agency of the United States for purposes of any other provision of law before the effective date of the transfer of any such employee under section 557. (d) Use of Property and Services (1) Property The FHA may use the property of the Department of Housing and Urban Development to perform functions which have been transferred to the FHA for such time as is reasonable to facilitate the orderly transfer of functions transferred under any other provision of this title or any amendment made by this title to any other provision of law. (2) Agency services Any agency, department, or other instrumentality of the United States, and any successor to any such agency, department, or instrumentality, which was providing supporting services to the Department of Housing and Urban Development before the expiration of the transition period under subsection (a) in connection with functions that are transferred under 554 to the FHA shall— (A) continue to provide such services, on a reimbursable basis, until the transfer of such functions is complete; and (B) consult with the FHA to coordinate and facilitate a prompt and reasonable transition. (e) Continuation of Services The FHA may use the services of employees and other personnel of the Department of Housing and Urban Development relating to the functions transferred under section 554, on a reimbursable basis, to perform functions which have been transferred to the FHA for such time as is reasonable to facilitate the orderly transfer of functions pursuant to any other provision of this title or any amendment made by this title to any other provision of law. (f) Savings Provisions (1) Existing rights, duties, and obligations not affected Subsection (a) shall not affect the validity of any right, duty, or obligation of the United States, the Secretary of Housing and Urban Development, or any other person, which— (A) arises under— (i) the National Housing Act; or (ii) any other provision of law applicable with respect to the functions of the Department of Housing and Urban Development transferred under section 554; and (B) existed on the day before the date of abolishment under subsection (a). (2) Continuation of suits No action or other proceeding commenced by or against the Secretary of Housing and Urban Development in connection with functions transferred to the FHA under section 554 shall abate by reason of the enactment of this title, except that the FHA shall be substituted for the Secretary as a party to any such action or proceeding. 556. Continuation and coordination of certain actions (a) In general All regulations, orders, and determinations described in subsection (b) shall remain in effect according to the terms of such regulations, orders, and determinations, and shall be enforceable by or against the FHA, until modified, terminated, set aside, or superseded in accordance with applicable law by the FHA, as the case may be, any court of competent jurisdiction, or operation of law. (b) Applicability A regulation, order, or determination is described in this subsection if it— (1) was issued, made, prescribed, or allowed to become effective by— (A) the Secretary of Housing and Urban Development and relates to a function of the Secretary transferred under section 554; or (B) a court of competent jurisdiction, and relates to functions transferred under section 554; and (2) is in effect upon the expiration of the transition period. 557. Transfer and rights of HUD employees (a) Transfer Each employee of the Department of Housing and Urban Development who performs functions transferred under section 554 shall be transferred to the FHA for employment, not later than the date of the expiration of the transition period, and such transfer shall be deemed a transfer of function for purposes of section 3503 of title 5, United States Code. (b) Guaranteed Positions (1) In general Each employee transferred under subsection (a) shall be guaranteed a position with the same status, tenure, grade, and pay as the position held by such employee on the day immediately preceding the transfer. (2) No involuntary separation or reduction An employee transferred under subsection (a) holding a permanent position on the day immediately preceding the transfer may not be involuntarily separated or reduced in grade or compensation during the 12-month period beginning on the date of transfer, except for cause, or, in the case of a temporary employee, separated in accordance with the terms of the appointment of the employee. (c) Appointment Authority for Excepted and Senior Executive Service Employees (1) In general In the case of an employee occupying a position in the excepted service or the Senior Executive Service, any appointment authority established under law or by regulations of the Office of Personnel Management for filling such position shall be transferred, subject to paragraph (2). (2) Decline of transfer The FHA may decline a transfer of authority under paragraph (1) to the extent that such authority relates to— (A) a position excepted from the competitive service because of its confidential, policymaking, policy-determining, or policy-advocating character; or (B) a noncareer position in the Senior Executive Service (within the meaning of section 3132(a)(7) of title 5, United States Code). (d) Reorganization If the FHA determines, after the end of the 1-year period beginning on the expiration of the transition period, that a reorganization of the combined workforce is required, that reorganization shall be deemed a major reorganization for purposes of affording affected employee retirement under section 8336(d)(2) or 8414(b)(1)(B) of title 5, United States Code. (e) Employee benefit programs (1) In general Any employee of the Department of Housing and Urban Development accepting employment with the FHA as a result of a transfer under subsection (a) may retain, for 12 months after the date on which such transfer occurs, membership in any employee benefit program of the FHA or the Department of Housing and Urban Development, as applicable, including insurance, to which such employee belongs on the date of the expiration of the transition period, if— (A) the employee does not elect to give up the benefit or membership in the program; and (B) the benefit or program is continued by the FHA. (2) Cost differential (A) In general The difference in the costs between the benefits which would have been provided by the Department of Housing and Urban Development and those provided by this section shall be paid by the FHA. (B) Health insurance If any employee elects to give up membership in a health insurance program or the health insurance program is not continued by the FHA, the employee shall be permitted to select an alternate Federal health insurance program not later than 30 days after the date of such election or notice, without regard to any other regularly scheduled open season. 558. Transfer of property and facilities Upon the expiration of the transition period, all property of the Department of Housing and Urban Development relating to the functions transferred under section 554 shall transfer to the FHA. 559. Effective Date This subtitle shall take effect on the date of the enactment of this Act. VI Miscellaneous Provisions 601. Preservation of attorney-client privilege for information provided to FHFA Section 1317 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C.4517) is amended by adding at the end the following new subsection: (j) Privileges not affected by disclosure to Agency (1) In general The submission by any person of any information to the Agency for any purpose in the course of any supervisory or regulatory process of the Agency shall not be construed as waiving, destroying, or otherwise affecting any privilege such person may claim with respect to such information under Federal or State law as to any person or entity other than such Agency. (2) Rule of construction No provision of paragraph (1) may be construed as implying or establishing that— (A) any person waives any privilege applicable to information that is submitted or transferred under any circumstance to which paragraph (1) does not apply; or (B) any person would waive any privilege applicable to any information by submitting the information to the Agency, but for this subsection. . 602. FHFA Liaison Membership in Federal Financial Institutions Examination Council Section 1007 of the Federal Financial Institutions Examination Council Act of 1978 ( 12 U.S.C. 3306 ) is amended— (1) in the section heading, by inserting after state the following: and Federal Housing Finance Agency ; (2) in the first sentence, by inserting after financial institutions the following: , and one representative of the Federal Housing Finance Agency, ; and (3) in the last sentence, by inserting State after among the . 603. Recognition of FHFA enforcement authority with regard to regulated entities Section 1125(c) of the Financial Institution Reform, Recovery and Enforcement Act of 1989 ( 12 U.S.C. 3354(c) ; as added by section 1473(q) of the Dodd Frank Wall Street Reform and Consumer Protection Act) is amended— (1) in paragraph (1), by striking and at the end; (2) by redesignating paragraph (2) as paragraph (3); and (3) by inserting after paragraph (1) the following new paragraph: (2) with respect to any regulated entity (as such term is defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4502 )), the Federal Housing Finance Agency; and . 604. Exception from Right to Financial Privacy Act for FHFA as conservator or receiver Section 1113(o) of the Right to Financial Privacy Act of 1978 ( 12 U.S.C. 3413(o) ) is amended— (1) by striking (o) and inserting (o)(1) ; and (2) by adding at the end the following new paragraph: (2) This title shall not apply to the examination by or disclosure to the Federal Housing Finance Agency or its employees or agents of financial records or information in the exercise of its supervisory or regulatory functions, including conservatorship and receivership functions, with respect to any regulated entity or other person participating in the conduct of the affairs thereof. . 605. Technical amendment to Federal Housing Enterprises Financial Safety and Soundness Act of 1992 Section 1368(d) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4618(d) ) is amended by striking Committee on Banking, Finance and Urban Affairs and inserting Committee on Financial Services . 606. Application of presumption to enterprise streamlined refinancings Section 129C(b)(3)(B)(ii) of the Truth in Lending Act ( 15 U.S.C. 1639c(b)(3)(B)(ii) ; as added by section 1412 of the Dodd Frank Wall Street Reform and Consumer Protection Act) is amended— (1) by inserting after administer, the following: or that are owned or guaranteed by an entity regulated or supervised by such agency, ; and (2) by adding at the end the following new subclause: (V) The Federal Housing Finance Agency, with regard to mortgages owned or guaranteed by an entity regulated or supervised by such agency. . 607. FHFA authority to regulate and examine contractual counterparties Section 1317 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the preceding provisions of this Act, is further amended ( 12 U.S.C. 4517 ) by adding at the end the following new subsection: (k) Regulation and examination of contractual counterparties (1) Authority When a regulated entity or the Office of Finance causes to be performed for itself, by contract or otherwise and whether on or off its premises, any services authorized to that regulated entity or the Office of Finance by its authorizing statute or the Federal Housing Enterprises Financial Safety and Soundness Act of 1992— (A) such performance shall be subject to regulation and examination by the Federal Housing Finance Agency to the same extent as if such services were being performed by the regulated entity or the Office of Finance itself on its own premises, and (B) the regulated entity or the Office of Finance shall notify the Director of the existence of the service relationship within thirty days after the making of such service contract or the performance of the service, whichever occurs first. (2) Regulations and orders The Director may issue such regulations and orders as may be necessary to enable the Agency to administer and to carry out the purposes of this subsection and to prevent evasions thereof. . 608. Election of directors of a merged Federal Home Loan Bank Section 7 of the Federal Home Loan Bank Act ( 12 U.S.C. 1427 ) is amended— (1) in subsection (a)(1), by inserting and subsection (d) after paragraphs (2) through (4) ; (2) in subsection (b)— (A) in the matter preceding paragraph (2)— (i) by striking Each and inserting (1)(A) Except as provided in subsection (d), each ; (ii) by inserting (B) before No person ; (iii) by inserting (C) before As used ; and (iv) in the third sentence— (I) by striking this subsection and inserting subparagraph (A) ; and (II) by striking home loan bank and inserting Home Loan Bank ; and (B) in paragraph (2)(A)(ii), by inserting or subsection (d)(4), if applicable, after paragraph (1) ; (3) by striking subsections (c), (d), and (h); (4) by redesignating subsections (d), (e), (f), and (g) as subsections (e), (f), (g), and (h), respectively; and (5) by inserting after subsection (b) the following: (c) Allocation of member directorships among States in bank district (1) Designation of member location The Director shall designate the State in which each member of each Federal Home Loan Bank shall be deemed to be located for the purposes of this subsection and subsections (b) and (d), and may from time to time change any such designation. If the principal place of business of any Bank member is located in a State within the district of the Bank of which it is a member, the Director shall designate that State as the State in which the member shall be deemed to be located for those purposes. (2) Stock-based allocation of designated member directorships The number of member directorships designated as representing the members located in each separate State in a Federal Home Loan Bank district shall be determined by the Director in the approximate ratio of the percentage of the required stock, as prescribed by regulation of the Director, of the members located in that State at the end of the calendar year next preceding the date of the election to the total required stock, as so determined, of all members of the Bank as of that same date. (3) Limitations on stock-based allocations Except as provided in subsection (d), the following provisions shall apply to the allocation of member directorships among the States of a Bank district, notwithstanding the requirements of paragraph (2): (A) In the case of each State, the number of member directorships designated as representing the members located in that State shall not be less than one and shall not be more than six. (B) If at any time the number of member directorships designated as representing the members located in any State would not be at least equal to the total number of member directorships which, on December 31, 1960, were filled by officers or directors of members whose principal places of business were located in that State, the Director shall add to the board of directors of the Bank of the district in which that State is located such number of member directorships, and shall so designate the directorship or directorships thus added, that the number of member directorships designated as representing the members located in that State will equal said total number. Any member directorship so added shall exist only until the expiration of its first term. (d) Board size, composition, and elections for combined Banks Notwithstanding any other provision of this section, the following requirements shall apply to the size and composition of, and the election of directors to, the board of any Bank created as result of the combination of two or more Banks under section 26: (1) Board size The management of a combined Bank shall be vested in a board of 15 directors, or such lesser number as the Director determines appropriate, consistent with the safe and sound operation of the combined Bank. (2) Board makeup The Director shall establish the respective number of member directorships and independent directorships for the board of the combined Bank such that— (A) member directors shall comprise at least the majority of the members of the board of directors; and (B) independent directors shall comprise not fewer than 2/5 of the members of the board of directors. (3) Allocation of member directorships The Director shall allocate the member directorships of the board of a combined Bank among the States of the Bank district in accordance with the requirements of subsection (c)(2), except that— (A) no State shall be allocated more than two member directorships until every state has been allocated at least one member directorship; and (B) if, after the Director has allocated all but one of the member directorships, there remain any States to which no member directorship has yet been allocated, then the Director shall allocate the remaining member directorship to represent the members located in all of the States that have not otherwise been allocated a member directorship. (4) Election of directors The directors of a combined Bank shall be nominated and elected as provided in subsection (b), except that, in the case of a member directorship that has been designated as representing the members of two or more States pursuant to paragraph (3)(B), the following requirements shall apply in lieu of those set forth in subsection (b)(1)(A): (A) The directorship shall be filled by a person who is an officer or director of a member located in one of the States represented. (B) Each member located in each State represented shall be entitled to nominate an eligible person to fill the directorship, and the member director shall be elected from persons so nominated by a plurality of the votes that those members may cast under subparagraph (C). (C) Each member located in each State represented may cast a number of votes equal to the number of shares of stock in the Bank required to be held by the member at the end of the calendar year next preceding the election, but not in excess of the average number of shares of stock in the Bank required to be held at the end of that year by the respective members of the Bank located in those States. (5) Initial directors for newly combined Banks The following requirements shall apply to the selection of the individuals to serve as the initial directors of a combined Bank as of the effective date of the combination: (A) The terms of office of any directors of the combining Banks who do not become directors of the combined Bank shall terminate as of the effective date of the combination. (B) The individuals to serve as the initial directors of a newly combined Bank shall be chosen from among the incumbent directors of the predecessor Banks serving immediately prior to the effective date of the combination of those Banks and shall be— (i) as designated by the Director in the case of a Bank created from a combination of two or more Banks pursuant to a reorganization under section 26(a); and (ii) as agreed upon among the merging Banks and approved by the Director in the case of a Bank created from a voluntary merger of two or more Banks pursuant to section 26(b). (C) Each initial director of the combined Bank shall be entitled to serve for the remainder of the term of office that the director had with the predecessor Bank. Terms served as a director of a predecessor Bank shall be counted as being served as a director of the combined Bank for purposes of determining term limits under subsection (e)(3). (D) Beginning with the first election of directors occurring after the combination of the predecessor Banks, the Director shall adjust the term of any directorship of the combined Bank as necessary to achieve and maintain the staggering of terms that is required under subsection (e)(2). (e) Terms; rules and regulations governing nominations and elections (1) Terms Except as provided in paragraph (2), the term of each Federal Home Loan Bank director shall be 4 years. (2) Adjustment of terms The Director shall adjust the terms of members from time to time as necessary to ensure that the terms of the members of the board of directors are staggered with approximately 1/4 of the terms expiring each year. (3) Term limits If any person has been elected to each of three consecutive full terms as a director of a Federal Home Loan Bank and has served for all or part of each of those terms, that person shall not be eligible for election to a directorship of that Bank for a term which begins earlier than two years after the expiration of the last expiring of the three terms. (4) Rules and regulations governing nominations and elections The Director is hereby authorized to prescribe such rules and regulations as the Director may deem necessary or appropriate for the nomination and election of directors of Federal Home Loan Banks, including, without limitation on the generality of the foregoing, rules and regulations with respect to the breaking of ties and with respect to the inclusion of more than one directorship on a single ballot and the methods of voting and of determining the results of voting in such cases. ; (6) in subsection (f), as so redesignated, by striking the first and second sentences; (7) in subsection (h), as so redesignated— (A) by striking home loan bank each place such term appears and inserting Home Loan Bank ; and (B) in paragraph (1), by striking such bank and the bank and inserting such Bank and the Bank , respectively; (8) in subsection (i)(1)— (A) by striking bank and inserting Bank ; and (B) by striking board and inserting Director ; (9) in subsection (j), by striking bank and inserting Bank ; and (10) by striking the second subsection (l), as added by section 1202(8) of the Housing and Economic Recovery Act of 2008. 609. Home equity conversion mortgage program (a) Establishment of separate mortgage insurance fund Section 255 of the National Housing Act ( 12 U.S.C. 1715–20 ) is amended by adding at the end the following new subsection: (s) Home Equity Conversion Mortgage Insurance Fund (1) Establishment There is hereby created a Home Equity Conversion Mortgage Insurance Fund (in this section referred to as the Fund ), which shall be used by the Secretary as a revolving fund for carrying out the mortgage insurance obligations of this section and for mortgages and commitments transferred pursuant to paragraph (2). (2) Transfer of insurance and commitments The Secretary shall transfer to the Fund all commitments for insurance issued under this section before the date of the enactment of this subsection and the insurance of any mortgage insured under this section before such date of enactment. (3) Transfer of amounts The Secretary shall transfer to the Fund from the Mutual Mortgage Insurance Fund an amount equal to the total of the premium payments previously made with respect to the insurance of mortgages transferred to the Fund pursuant to paragraph (2) minus the total of any administrative expenses previously incurred in connection with such mortgages, plus such other amounts as the Secretary determines to be necessary and appropriate. (4) Credits Premium charges, adjusted premium charges, inspection and other fees, service charges, and any other income received by the Secretary under this section, together with all earnings on the assets of the Fund, shall be credited to the Fund. (5) Payments All payments made pursuant to claims of mortgagees with respect to mortgages insured under this section, cash adjustments, the principal of and interest paid on debentures which are the obligation of the Fund, expenses incurred in connection with or as a consequence of the acquisition and disposal of property acquired under such this section, and all administrative expenses in connection with the mortgage insurance operations under this section shall be paid out of the Fund. (6) Investments Moneys in the Fund not needed for current operations of the Fund shall be deposited with the Treasurer of the United States to the credit of the Fund or invested in bonds or other obligations of, or in bonds or other obligations guaranteed by, the United States or any agency of the United States, except that such moneys shall to the maximum extent feasible be invested in such bonds or other obligations the proceeds of which will be used to directly support the residential mortgage market. The Secretary, with the approval of the Secretary of the Treasury, may purchase in the open market debentures which are the obligation of the Fund. Such purchases shall be made at a price which will provide an investment yield of not less than the yield obtained from other investments authorized by this subsection. Debentures so purchased shall be canceled and not reissued. . (b) Disbursement of funds To protect homeowner and lender Subparagraph (A) of section 255(i)(2) of the National Housing Act ( 12 U.S.C. 1715z–20(i)(2)(A) ) is amended by striking Mutual Mortgage Insurance Fund and inserting Home Equity Conversion Mortgage Insurance Fund established under subsection (s) . 610. FHA-related conforming amendments (a) Penalties for equity skimming Paragraph (1) of section 912 of the Housing and Urban Development Act of 1970 ( 12 U.S.C. 1709–2(1) ) is amended by inserting or Federal Housing Administration after Housing and Urban Development . (b) Fraudulently misappropriated mortgage proceeds Section 819 of the Housing and Community Development Act of 1974 ( 12 U.S.C. 1701l–1 ) is amended— (1) by inserting or the Federal Housing Administration after Secretary of Housing and Urban Development ; and (2) by inserting or such Administration, as appropriate, before has reason . (c) Unauthorized use of multifamily housing assets and income Section 421 of the Housing and Community Development Act of 1987 ( 12 U.S.C. 1715z–4a ) is amended— (1) in subsection (a)— (A) in paragraph (1)— (i) by inserting or the FHA, as applicable, after Secretary’) ; (ii) by inserting or by the FHA pursuant to title II of the Protecting American Taxpayers and Homeowners Act of 2018 after National Housing Act ; and (iii) in the last sentence, by inserting or the FHA after Secretary each place such term appears; (B) in paragraph (2), by inserting or title II of the Protecting American Taxpayers and Homeowners Act of 2018 before the first comma; and (2) in subsections (b) through (e)— (A) by inserting or the FHA, as applicable, after Secretary, each place such term appears; and (B) by inserting or the FHA, as applicable, after Secretary each place such term appears (except the penultimate occurrence in subsection (c)). (d) Single family mortgage foreclosure The Single Family Mortgage Foreclosure Act of 1994 ( 12 U.S.C. 3751 et seq.) is amended— (1) in section 802(b)(1) ( 12 U.S.C. 3751(b)(1) ), by inserting or by the FHA pursuant to subtitle B of title V of the Protecting American Taxpayers and Homeowners Act of 2018 before the semicolon; (2) in section 803(10)(A) ( 12 U.S.C. 3752(10)(A) )— (A) in subparagraph (A), by striking or at the end; (B) by redesignating subparagraph (B) as subparagraph (C); and (C) by inserting after subparagraph (A) the following new subparagraph: (B) is held by the FHA pursuant to subtitle B of title V of the Protecting American Taxpayers and Homeowners Act of 2018 ; or ; and (3) by adding at the end the following new section: 820. Authority of FHA After the expiration of the transition period under section 551 of the Protecting American Taxpayers and Homeowners Act of 2018 , any reference in sections 804 through 819 of this Act to the Secretary shall be considered to also refer to the FHA (as established pursuant to subtitle B of title V of such Act), but only with respect to single family mortgages described in section 803(10)(B). . (e) Multifamily mortgage foreclosure The Multifamily Mortgage Foreclosure Act of 1981 ( 12 U.S.C. 3701 et seq.) is amended— (1) in section 363(2) ( 12 U.S.C. 3702(2) ), by adding after and below subparagraph (E) the following: Such term includes a mortgage on a property consisting of 5 or more dwelling units that is held by the FHA pursuant to subtitle B of title V of the Protecting American Taxpayers and Homeowners Act of 2018 . . (2) by adding at the end the following new section: 369J. Authority of FHA After the expiration of the transition period under section 551 of the Protecting American Taxpayers and Homeowners Act of 2018 , any reference in sections 364 through 369I of this Act to the Secretary shall be considered to also refer to the FHA (as established pursuant to subtitle B of such Act), but only with respect to multifamily mortgages described in the last sentence of section 363(2). . (f) Effective date The amendment made by this section shall be made, and shall apply beginning on, the expiration of the transition period under section 551.