An act to amend the Securities Exchange Act of 1934 with respect to the treatment of mortgage backed securities, to increase the authority of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, and for other purposes.
PL 98-440 (S.2040), enacted 10/03/1984

PUBLIC LAW 98-440—OCT. 3, 1984 
98 STAT. 1689 
Public Law 98-440 
98th Congress 
An Act 
To amend the Securities Exchange Act of 1934 with respect to the treatment of 
mortgage backed securities, to increase the authority of the Federal National 
Mortgage Association and the Federal Home Loan Mortgage Corporation, and for 
other purposes. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That this Act may 
be cited as the "Secondary Mortgage Market Enhancement Act of 
1984". 
TITLE I—SECURITIES LAWS AMENDMENTS 
MORTGAGE RELATED SECURITY 
SEC. 101. Section 3(a) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)) is amended by adding the following new paragraph at 
the end thereof: 
"(41) The term 'mortgage related security' means a security 
that is rated in one of the two highest rating categories by at 
least one nationally recognized statistical rating organization, 
and either: 
"(A) represents ownership of one or more promissory 
notes or certificates of interest or participation in such 
notes (including any rights designed to assure servicing of, 
or the receipt or timeliness of receipt by the holders of such 
notes, certificates, or participations of amounts payable 
under, such notes, certificates, or participations), which 
notes: 
"(i) are directly secured by a first lien on a single 
parcel of real estate, including stock allocated to a 
dwelling unit in a residential cooperative housing cor-
poration, upon which is located a dwelling or mixed 
residential and commercial structure, or on a residen-
tial manufactured home as defined in section 603(6) of 
the National Manufactured Housing Construction and 
Safety Standards Act of 1974, whether such manufac-
tured home is considered real or personal property 
under the laws of the State in which it is to be located; 
and 
"(ii) were originated by a savings and loan associa-
tion, savings bank, commercial bank, credit union, 
insurance company, or similar institution which is su-
pervised and examined by a Federal or State authority, 
or by a mortgagee approved by the Secretary of Hous-
ing and Urban Development pursuant to sections 203 
and 211 of the National Housing Act, or, where such 
notes involve a lien on the manufactured home, by any 
such institution or by any financial institution ap-
proved for insurance by the Secretary of Housing and 
Oct. 3, 1984 
[S. 2040] 
Secondary 
Mortgage 
Market 
Enhancement 
Act of 1984. 
12 u s e 1701 
note. 
Banks and 
banking. 
Real property. 
Personal 
property. 
42 u s e 5402. 
12 u s e 1709, 
1715b. 
98 STAT. 1690 
PUBLIC LAW 98-440—OCT. 3, 1984 
12 use 1703. 
Urban Development pursuant to section 2 of the Na-
tional Housing Act; or 
"(B) is secured by one or more promissory notes or certifi-
cates of interest or participations in such notes (with or 
without recourse to the issuer thereof) and, by its terms, 
provides for payments of principal in relation to payments, 
or reasonable projections of payments, on notes meeting the 
requirements of subparagraphs (A) (i) and (ii) or certificates 
of interest or participations in promissory notes meeting 
such requirements. 
For the purpose of this paragraph, the term 'promissory note', 
when used in connection with a manufactured home, shall also 
include a loan, advance, or credit sale as evidence by a retail 
installment sales contract or other instrument.". 
Credit. 
Prohibition. 
APPLICABILITY OF MARGIN REQUIREMENTS 
SEC. 102. Section 7 of the Securities Exchange Act of 1934 (15 
U.S.C. 78g) is amended by adding the following new subsection at 
the end thereof: 
"(g) Subject to such rules and regulations as the Board of Gover-
nors of the Federal Reserve System may adopt in the public interest 
and for the protection of investors, no member of a national securi-
ties exchange or broker or dealer shall be deemed to have extended 
or maintained credit or arranged for the extension or maintenance 
of credit for the purpose of purchasing a security, within the mean-
ing of this section, by reason of a bona fide agreement for delayed 
delivery of a mortgage related security against full payment of the 
purchase price thereof upon such delivery within one hundred and 
eighty days after the purchase, or within such shorter period as the 
Board of Governors of the Federal Reserve System may prescribe by 
rule or regulation.". 
BORROWING IN THE COURSE OF BUSINESS 
Prohibition. 
SEC, 103. Section 8(a) of the Securities Exchange Act of 1934 (15 
U.S.C. 78h(a)) is amended by adding the following new sentence at 
the end thereof: "Subject to such rules and regulations as the Board 
of Governors of the Federal Reserve System may adopt in the public 
interest and for the protection of investors, no person shall be 
deemed to have borrowed within the ordinary course of business, 
within the meaning of this subsection, by reason of a bona fide 
agreement for delayed delivery of a mortgage related security 
against full payment of the purchase price thereof upon such deliv-
ery within one hundred and eighty days after the purchase, or 
within such shorter period as the Board of Governors of the Federal 
Reserve System may prescribe by rule or regulation.". 
MORTGAGE RELATED SECURITIES AS COLLATERAL 
SEC. 104. Section 11(d)(1) of the Securities Exchange Act of 1934 
(15 U.S.C. 78k(d)(l)) is amended by— 
(1) inserting "(i)" between "of and "any"; and 
(2) inserting the following immediately after "thirty-five days 
after such purchase": "or (ii) any mortgage related security 
against full payment of the entire purchase price thereof upon 
such delivery within one hundred and eighty days after such 
PUBLIC LAW 98-440—OCT. 3, 1984 
98 STAT. 1691 
purchase, or within such shorter period as the Commission may 
prescribe by rule or regulation". 
INVESTMENT BY DEPOSITORY INSTITUTIONS 
SEC. 105. (a) Section 5(c)(1) of the Home Owner's Loan Act of 1933 
(12 U.S.C. 1464(c)(1)) is amended by adding at the end thereof the 
following: 
"(S) MORTGAGE BACKED SECURITIES.—Investments in secu-
rities that— 
"(i) are offered and sold pursuant to section 4(5) of 
the Securities Act of 1933 (15 U.S.C. 77d(5)); or 
"(ii) are mortgage related securities (as that term is 
defined in section 3(a)(41) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(41))), subject to such regu- 
Ante, p. 1689. 
lations as the Board may prescribe, including regula-
tions prescribing minimum size of the issue (at the time 
of initial distribution) or minimum aggregate sales 
prices, or both.". 
(b) Section 107 of the Federal Credit Union Act (12 U.S.C. 1757) is 
amended— 
(1) by redesignating paragraph (15) as paragraph (16); and 
(2) by inserting after paragraph (14) the following: 
"(15) to invest in securities that— 
"(A) are offered and sold pursuant to section 4(5) of the 
Securities Act of 1933 (15 U.S.C. 77d(5)); or 
"(B) are mortgage related securities (as that term is 
defined in section 3(a)(41) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)(41))), subject to such regulations as 
the Board may prescribe, including regulations prescribing 
minimum size of the issue (at the time of initial distribu-
tion) or minimum aggregate sales prices, or both;". 
(c) Section 5136 of the Revised Statutes (12 U.S.C. 24) is amended 
by adding at the end of paragraph Seventh the following: "The 
limitations and restrictions contained in this paragraph as to an 
association purchasing for its own account investment securities 
shall not apply to securities that (A) are offered and sold pursuant to 
section 4(5) of the Securities Act of 1933 (15 U.S.C. 77d(5)); or (B) are 
mortgage related securities (as that term is defined in section 
3(a)(41) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(41))), 
subject to such regulations as the Comptroller of the Currency may 
prescribe, including regulations prescribing minimum size of the 
issue (at the time of initial distribution) or minimum aggregate sales 
prices, or both.". 
PREEMPTION OF STATE LAW 
SEC. 106. (a)(1) Any person, trust, corporation, partnership, asso- 
15 USC 77r-l. 
ciation, business trust, or business entity created pursuant to or 
existing under the laws of the United States or any State shall be 
authorized to purchase, hold, and invest in securities that are— 
(A) offered and sold pursuant to section 4(5) of the Securities 
Act of 1933, 
(B) mortgage related securities (as that term is defined in 
section 3(a)(41) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(41))), or 
98 STAT. 1692 
PUBLIC LAW 98-440—OCT. 3, 1984 
15 use lid. 
Ante, p. 1689. 
Prohibitions. 
Exemption. 
(C) securities issued or guaranteed by the Federal Home Loan 
Mortgage Corporation or the Federal National Mortgage 
Association, 
to the same extent that such person, trust, corporation, partnership, 
association, business trust, or business entity is authorized under 
any applicable law to purchase, hold or invest in obligations issued 
by or guaranteed as to principal and interest by the United States or 
any agency or instrumentality thereof. 
(2) Where State law limits the purchase, holding, or investment in 
obligations issued by the United States by such a person, trust, 
corporation, partnership, association, business trust, or business 
entity, such securities that are— 
(A) offered and sold pursuant to section 4(5) of the Securities 
Act of 1933, 
(B) mortgage related securities (as that term is defined in 
section 3(a)(41) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(41))), or 
(C) securities issued or guaranteed by the Federal Home Loan 
Mortgage Corporation or the Federal National Mortgage 
Association, 
shall be considered to be obligations issued by the United States for 
purposes of the limitation. 
(b) The provisions of subsection (a) shall not apply with respect to 
a particular person, trust, corporation, partnership, association, 
business trust, or business entity or class thereof in any State that, 
prior to the expiration of seven years after the date of the enact-
ment of this Act, enacts a statute that specifically refers to this 
section and either prohibits or provides for a more limited authority 
to purchase, hold, or invest in such securities by any person, trust, 
corporation, partnership, association, business trust, or business 
entity or class thereof than is provided in subsection (a). The enact-
ment by any State of any statute of the type described in the 
preceding sentence shall not affect the validity of any contractual 
commitment to purchase, hold, or invest that was made prior there-
to and shall not require the sale or other disposition of any securi-
ties acquired prior thereto. 
(c) Any securities that are offered and sold pursuant to section 4(5) 
of the Securities Act of 1933 or that are mortgage related securities 
(as that term is defined in section 3(a)(41) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(41))) shall be exempt from any law of 
any State with respect to or requiring registration or qualification of 
securities or real estate to the same extent as any obligation issued 
by or guaranteed as to principal and interest by the United States or 
any agency or instrumentality thereof. Any State may, prior to the 
expiration of seven years after the date of the enactment of this Act, 
enact a statute that specifically refers to this section and requires 
registration or qualification of any such security on terms that differ 
from those applicable to any obligation issued by the United States. 
TITLE II—SECONDARY MORTGAGE MARKET PROGRAMS 
LIMITATIONS ON PARTICIPATION AGREEMENTS 
SEC. 201. (a) The sixth sentence of section 302(b)(2) of the Federal 
12 use 1717. 
National Mortgage Association Charter Act is amended to read as 
follows: "The corporation shall establish limitations governing the 
mgiximum original principal obligation of conventional mortgages 
PUBLIC LAW 98-440—OCT. 3, 1984 
98 STAT. 1693 
that are purchased by it; in any case in which the corporation 
purchases a participation interest in such a mortgage, the limitation 
shall be calculated with respect to the total original principal 
obligation of the mortgage and not merely with respect to the 
interest purchased by the corporation.". 
(b) The fifth sentence of section 305(a)(2) of the Federal Home 
Loan Mortgage Corporation Act is amended to read as follows: "The 
Corporation shall establish limitations governing the maximum 
original principal obligation of conventional mortgages that are 
purchased by it; in any case in which the Corporation purchases a 
participation interest in such a mortgage, the limitation shall be 
calculated with respect to the total original principal obligation of 
the mortgage and not merely with respect to the interest purchased 
by the Corporation.". 
12 u s e 1454. 
AUTHORITY OF FEDERAL HOME LOAN MORTGAGE CORPORATION TO 
PURCHASE LOANS ON MANUFACTURED HOMES 
SEC. 202. (a) Section 302(d) of the Federal Home Loan Mortgage 
Corporation Act is amended by inserting after "located" the follow-
ing: "or a manufactured home that is personal property under the 
laws of the State in which the manufactured home is located". 
(b) Section 302(h) of the Federal Home Loan Mortgage Corporation 
Act is amended by adding at the end thereof the following new 
sentence: "The term 'residential mortgage' also includes a loan or 
advance of credit secured by a mortgage or other lien on a manufac-
tured home that is the principal residence of the borrower, without 
regard to whether the security property is real, personal, or mixed.". 
(c) Section 302 of the Federal Home Loan Mortgage Corporation 
Act is amended by adding at the end thereof the following new 
subsection: 
"(1) The term 'mortgage insurance program' includes, in the case 
of a residential mortgage secured by a manufactured home, any 
manufactured home lending program under title I of the National 
Housing Act.". 
PURCHASE OF SECOND MORTGAGES 
SEC. 203. (a) Section 302(b) of the Federal National Mortgage 
Association Charter Act is amended by adding at the end thereof the 
following new paragraph: 
"(5)(A) The corporation is authorized to purchsise, service, sell, 
lend on the security of, and otherwise deal in (i) until October 1, 
1987, conventional mortgages that are secured by a subordinate lien 
against a one- to four-family residence that is the principal resi-
dence of the mortgagor; and (ii) until October 1, 1985, conventional 
mortgages that are secured by a subordinate lien against a property 
comprising five or more family dwelling units. If the corporation, 
pursuant to paragraphs (1) through (4), shall have purchased, serv-
iced, sold, or otherwise dealt with any other outstanding mortgage 
secured by the same residence, the aggregate original amount of 
such other mortgage and the mortgage authorized to be purchased, 
serviced, sold, or otherwise dealt with under this paragraph shall 
not exceed the applicable limitation determined under paragraph 
(2). 
"(B) The corporation shall establish limitations governing the 
maximum original principal obligation of conventional mortgages 
12 u s e 1451. 
12 u s e 1702. 
Loans. 
12 u s e 1717. 
Expiration 
dates. 
98 STAT. 1694 
PUBLIC LAW 98-440—OCT. 3, 1984 
Prohibitions. 
12 u s e 1451. 
Expiration 
dates. 
12 u s e 1454. 
described in subparagraph (A). In any case in which the corporation 
purchases a participation interest in such a mortgage, the Umitation 
shall be calculated with respect to the total original principal 
obligation of such mortgage described in subparagraph (A) and not 
merely with respect to the interest purchased by the corporation. 
Such limitations shall not exceed (i) with respect to mortgages 
described in subparagraph (A)(i), 50 per centum of the single-family 
residence mortgage limitation determined under paragraph (2); and 
(ii) with respect to mortgages described in subparagraph (A)(ii), the 
applicable limitation determined under paragraph (2). 
"(C) No subordinate mortgage against a one- to four-family resi-
dence shall be purchased by the corporation if the total outstanding 
indebtedness secured by the property as a result of such mortgage 
exceeds 80 per centum of the value of such property unless (i) that 
portion of such total outstanding indebtedness that exceeds such 80 
per centum is guaranteed or insured by a qualified insurer as 
determined by the corporation; (ii) the seller retains a participation 
of not less than 10 per centum in the mortgage; or (iii) for such 
period and under such circumstances as the corporation may re-
quire, the seller agrees to repurchase or replace the mortgage upon 
demand of the corporation in the event that the mortgage is in 
default. The corporation shall not issue a commitment to purchase a 
subordinate mortgage prior to the date the mortgage is originated, if 
such mortgage is eligible for purchase under the preceding sentence 
only by reason of compliance with the requirements of clause (ii) of 
such sentence.". 
(b)(1) Section 302(h) of the Federal Home Loan Mortgage Corpora-
tion Act is amended— 
(A) in the first sentence, by striking out "first"; and 
(B) by striking out "The maximum principal obligation" and 
all that follows through "associations." and inserting in lieu 
thereof the following: "Such term shall also include other se-
cured loans that are secured by a subordinate lien against a 
property as to which the Corporation may purchase a resi-
dential mortgage as defined under the first sentence of this 
subsection.". 
(2) Section 305(a) of such Act is amended by adding at the end 
thereof the following new paragraph: 
"(4)(A) The Corporation is authorized to purchase, service, sell, 
lend on the security of, and otherwise deal in (i) until October 1, 
1987, residential mortgages that are secured by a subordinate lien 
against a one- to four-family residence that is the principal resi-
dence of the mortgagor; and (ii) until October 1, 1985, residential 
mortgages that are secured by a subordinate lien against a property 
comprising five or more family dwelling units. If the Corporation 
shall have purchased, serviced, sold, or otherwise dealt with any 
other outstanding mortgage secured by the same residence, the 
aggregate original amount of such other mortgage and the mortgage 
authorized to be purchased, serviced, sold, or otherwise dealt with 
under this paragraph shall not exceed the applicable limitation 
determined under paragraph (2). 
"(B) The Corporation shall establish limitations governing the 
maximum original principal obligation of such mortgages. In any 
case in which the Corporation purchases a participation interest in 
such a mortgage, the limitation shall be calculated with respect to 
the total original principal obligation of such mortgage secured by a 
subordinate lien and not merely with respect to the interest pur-
PUBLIC LAW 98-440—OCT. 3, 1984 
98 STAT. 1695 
chased by the Corporation. Such limitations shall not exceed (i) with 
respect to mortgages described in subparagraph (A)(i), 50 per centum 
of the single-family residence mortgage limitation determined under 
paragraph (2); and (ii) with respect to mortgages described in sub-
paragraph (A)(ii), the applicable limitation determined under para-
graph (2). 
"(C) No subordinate mortgage against a one- to four-family resi- 
Prohibitions. 
dence shall be purchased by the Corporation if the total outstanding 
indebtedness secured by the property as a result of such mortgage 
exceeds 80 per centum of the value of such property unless (i) that 
portion of such total outstanding indebtedness that exceeds such 80 
per centum is guaranteed or insured by a qualified insurer as 
determined by the Corporation; (ii) the seller retains a participation 
of not less than 10 per centum in the mortgage; or (iii) for such 
period and under such circumstances as the Corporation may re-
quire, the seller agrees to repurchase or replace the mortgage upon 
demand of the Corporation in the event that the mortgage is in 
default. The Corporation shall not issue a commitment to purchase 
a subordinate mortgage prior to the date the mortgage is originated, 
if such mortgage is eligible for purchase under the preceding sen-
tence only by reason of compliance with the requirements of clause 
(iii) of such sentence.". 
AUTHORITY OF FEDERAL HOME LOAN MORTGAGE CORPORATION TO 
PURCHASE STATE AGENCY INSURED MORTGAGE LOANS 
SEC. 204. Section 302(i) of the Federal Home Loan Mortgage 
Corporation Act is amended by striking out "a State or any agency 
12 USC 1451. 
or instrumentality of either" and inserting in lieu thereof "any of its 
agencies or instrumentalities". 
MULTIFAMILY MORTGAGE LOAN-TO-VALUE RATIO 
SEC. 205. (a) The second sentence of section 302(b)(2) of the Federal 
National Mortgage Association Charter Act is amended by inserting 
12 usC 1717. 
after "mortgage" the first place it appears the following: "secured 
by a property comprising one- to four-family dwelling units". 
(b) The first sentence of section 305(a)(2) of the Federal Home 
Loan Mortgage Corporation Act is amended by inserting after 
12 USC 1454. 
"mortgages" the first place it appears the following: "secured by a 
property comprising one- to four-family dwelling units". 
UMITATIONS ON PURCHASE OF CONVENTIONAL MORTGAGES ON 
MULTIFAMILY PROPERTIES 
SEC. 206. (a) Section 302flD)(2) of the Federal National Mortgage 
Association Charter Act is amended by striking out the penultimate 
Ante, p. 1692. 
sentence and inserting in lieu thereof the following: "With respect 
to mortgages secured by property comprising five or more family 
dwelling units, such limitations shall not exceed 125 per centum of 
the dollar amounts set forth in section 207(c)(3) of this Act, except 
12 USC 1713. 
that such limitations may be increased by the corporation (taking 
into account construction costs) to not to exceed 240 per centum of 
such dollar amounts in any geographical area for which the Secre-
tary of Housing and Urban Development determines under such 
section that cost levels require any increase in the dollar amount 
limitations under such section.". 
98 STAT. 1696 
PUBLIC LAW 98-440—OCT. 3, 1984 
12 u s e 1454. 
12 u s e 1713. 
(b) Section 80r)(a)(2) of the Federal Home Loan Mortgage Corpora-
tion Act is amended by striking out the penultimate sentence and 
inserting in lieu thereof the following: "With respect to mortgages 
secured by property comprising five or more family dwelling units, 
such limitations shall not exceed 125 per centum of the dollar 
amounts set forth in section 207(c)(3) of the National Housing Act, 
except that such limitations may be increased by the Corporation 
(taking into account construction costs) to not to exceed 240 per 
centum of such dollar amounts in any geographical area for which 
the Secretary of Housing and Urban Development determines under 
such section that cost levels require any increase in the dollar 
amount limitations under such section.". 
BOARD OF DIRECTORS OF FEDERAL NATIONAL MORTGAGE ASSOCIATION 
President of U.S. 
SEC. 207. The first sentence of section 308(b) of the Federal 
12 use 1723. 
National Mortgage Association Charter Act is amended to read as 
follows: "The Federal National Mortgage Association shall have a 
board of directors, which shall consist of eighteen persons, five of 
whom shall be appointed annually by the President of the United 
States, and the remainder of whom shall be elected annually by the 
common stockholders.". 
ANNUAL REPORT OF SECRETARY OF HOUSING AND URBAN DEVELOP-
MENT ON ACTIVITIES OF FEDERAL NATIONAL MORTGAGE ASSOCIATION 
SEC. 208. Section 309(h) of the Federal National Mortgage Associa-
12 use 1723a. 
tion Charter Act is amended by striking out the last two sentences 
and inserting in lieu thereof the following: "Pursuant to the author-
ity provided in this subsection, the Secretary shall, not later than 
June 30 of each year, report to the Congress on the activities of the 
corporation under this title.". 
PERIOD FOR APPROVAL OF ACTIONS OF FEDERAL NATIONAL MORTGAGE 
ASSOCIATION 
SEC. 209. Section 309 of the Federal National Mortgage Associa-
12 use 1723a. 
tion Charter Act is amended by adding at the end thereof the 
following new subsection: 
Report. 
"(i) If the Federal National Mortgage Association submits to the 
Secretary of Housing and Urban Development, after the date of the 
enactment of the Secondary Mortgage Market Enhancement Act of 
Ante, p. 1689. 
1984, a request for approval or other action under this title, the 
Secretary shall, not later than the expiration of the forty-five-day 
period following the submission of such request, approve such re-
quest or transmit to the Congress a report explaining why such 
Extension. 
request has not been approved. Such period may be extended for an 
additional fifteen-day period if the Secretary requests additional 
information from the corporation. If the Secretary fails to transmit 
such report to the Congress within such forty-five-day period or 
sixty-day period, as the case may be, the corporation may proceed as 
if such request had been approved.". 
PUBLIC LAW 98-440—OCT. 3, 1984 
98 STAT. 1697 
FEDERAL HOME LOAN MORTGAGE CORPORATION GUARANTEE OF 
MORTGAGE-BACKED SECURITIES ISSUED BY OTHERS 
SEC. 210. Section 306 of the Federal Home Loan Mortgage Corpo-
ration Act is amended by adding at the end thereof the following 
new subsection: 
"(h) The Corporation may not guarantee mortgage-backed securi-
ties or mortgage related payment securities backed by mortgages 
not purchased by the Corporation.". 
PREFERRED STOCK OF FEDERAL HOME LOAN MORTGAGE CORPORATION 
SEC. 211. Section 306(0 of the Federal Home Loan Mortgage 
Corporation Act is amended— 
(1) by inserting before the period at the end of the last 
sentence the following: ", and shall not be entitled to vote with 
respect to the election of any member of the Board of Direc-
tors"; and 
(2) by adding at the end thereof the following new sentence: 
"Such preferred stock, or any class thereof, may have such 
terms as would be required for listing of preferred stock on the 
New York Stock Exchange, except that this sentence does not 
apply to any preferred stock, or class thereof, the initial sale of 
which is made directly or indirectly by the Corporation exclu-
sively to any Federal Home Loan Bank or Banks.". 
STUDY OF PREPAYMENT PENALTIES AND THE SECONDARY MORTGAGE 
MARKET 
SEC 212. Not later than one hundred and eighty days after the 
date of the enactment of this Act, the Secretary of Housing and 
Urban Development, following consultation with the Board of Direc-
tors of the Federal National Mortgage Association, the Board of 
Directors of the Federal Home Loan Mortgage Corporation, the 
President of the Government National Mortgage Association, the 
Board of Governors of the Federal Reserve System, the Federal 
Home Loan Bank Board, the Comptroller of the Currency, and the 
National Credit Union Administration Board, shall submit to the 
Congress a report regarding mortgage prepayment penalties and 
their impact on secondary mortgage market activities. Such report 
shall include— 
(Da review of State laws and regulations regarding prepay-
ment penalties; 
(2) an evaluation of the impact of prepayment penalties on 
the ability to attract investors to the secondary mortgage 
market; 
(3) an analysis of existing authority for lenders to offer mort-
gage instruments containing prepayment penalties; and 
(4) a proposal for federally standardized mortgage instru-
ments that would contain prepayment penalties in combination 
with features that would be attractive to prospective purchasers 
of homes, including below-market interest rates and prohibi-
tions on nonrisk related settlement charges normally incurred 
by homeowners upon refinancing. 
97 Stat. 198. 
12 u s e 1455. 
Prohibition. 
12 u s e 1455. 
Report. 
98 STAT. 1698 
PUBLIC LAW 98-440—OCT. 3, 1984 
AUTHORITY OF SECRETARY OF HOUSING AND URBAN DEVELOPMENT 
REGARDING FEDERAL NATIONAL MORTGAGE ASSOCIATION OBLIGATIONS 
SEC. 213. (a) The second sentence of section 309(h) of the Federal 
Ante, p. 1696. 
National Mortgage Association Charter Act is amended by inserting 
"before October 1,1985," after "corporation". 
(b) The last sentence of section 311 of the Federal National 
1
2 use 1723c. 
Mortgage Association Charter Act is amended by inserting after 
"issuances" the following: "by the Association and all issuances of 
stock, and debt obligations convertible into stock, by the 
corporation". 
Approved October 3, 1984. 
LEGISLATIVE HISTORY—S. 2040 (H.R. 4557): 
HOUSE REPORT No. 98-994, Pt. 1, accompanying H.R. 4557 (Comm. on Energy and 
Commerce). 
SENATE REPORT No. 98-293 (Comm. on Banking, Housing, and Urban Affairs). 
CONGRESSIONAL RECORD: 
VoL 129 (1983): Nov. 17, considered and passed Senate. 
Vol. 130 (1984): Feb. 9, earlier passage vitiated; considered and passed Senate. 
Sept. 11, considered and passed House, amended. 
Sept. 26, Senate concurred in House amendment.