[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1508 Introduced in Senate (IS)]






108th CONGRESS
  1st Session
                                S. 1508

To address regulation of secondary mortgage market enterprises, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                July 31 (legislative day, July 21), 2003

Mr. Hagel (for himself, Mr. Sununu, and Mrs. Dole) introduced the 
        following bill; which was read twice and referred to the 
        Committee on Banking, Housing, and Urban AffairsYYYYYYYYYYYYYYY

_______________________________________________________________________

                                 A BILL


 
To address regulation of secondary mortgage market enterprises, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Federal Enterprise 
Regulatory Reform Act of 2003''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
      TITLE I--REFORM OF REGULATION OF FANNIE MAE AND FREDDIE MAC

                 Subtitle A--Improvement of Supervision

Sec. 101. Establishment of Office of Federal Enterprise Supervision in 
                            the Department of the Treasury.
Sec. 102. Duties and authorities of Director and HUD.
Sec. 103. Examiners and accountants.
Sec. 104. Regulations.
Sec. 105. Assessments.
Sec. 106. Independence of Director in congressional testimony and 
                            recommendations.
Sec. 107. Limitation on nonmission-related assets.
Sec. 108. Reports.
Sec. 109. Risk-based capital test for enterprises.
Sec. 110. Minimum and critical capital levels.
Sec. 111. Definitions.
                  Subtitle B--Prompt Corrective Action

Sec. 131. Capital classifications.
Sec. 132. Supervisory actions applicable to undercapitalized 
                            enterprises.
Sec. 133. Supervisory actions applicable to significantly 
                            undercapitalized enterprises.
                    Subtitle C--Enforcement Actions

Sec. 151. Cease-and-desist proceedings.
Sec. 152. Temporary cease-and-desist proceedings.
Sec. 153. Removal and prohibition authority.
Sec. 154. Enforcement and jurisdiction.
Sec. 155. Civil money penalties.
Sec. 156. Criminal penalty.
                    Subtitle D--Reports to Congress

Sec. 161. Studies and reports.
                     Subtitle E--General Provisions

Sec. 171. Conforming and technical amendments.
Sec. 172. Effective date.
        TITLE II--TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY

Sec. 201. Abolishment of OFHEO.
Sec. 202. Continuation and coordination of certain regulations.
Sec. 203. Transfer and rights of employees of OFHEO.
Sec. 204. Transfer of property and facilities.

      TITLE I--REFORM OF REGULATION OF FANNIE MAE AND FREDDIE MAC

                 Subtitle A--Improvement of Supervision

SEC. 101. ESTABLISHMENT OF OFFICE OF FEDERAL ENTERPRISE SUPERVISION IN 
              THE DEPARTMENT OF THE TREASURY.

    (a) In General.--Part 1 of Subtitle A of title XIII of the Housing 
and Community Development Act of 1992 is amended by striking sections 
1311 and 1312 (12 U.S.C. 4511, 4512) and inserting the following:

``SEC. 1311. ESTABLISHMENT OF OFFICE OF FEDERAL ENTERPRISE SUPERVISION.

    ``(a) Establishment.--
            ``(1) In general.--There is established the Office of 
        Federal Enterprise Supervision, which shall be an office in the 
        Department of the Treasury.
            ``(2) Authority.--The Office shall succeed to the authority 
        of the Director of the Office of Federal Housing Enterprise 
        Oversight of the Department of Housing and Urban Development 
        and the general regulatory and any other authority of the 
        Secretary of Housing and Urban Development with respect to the 
        enterprises (except as specifically provided otherwise in this 
        Act, the Federal National Mortgage Association Charter Act (12 
        U.S.C. 1716 et seq.), the Federal Home Loan Mortgage 
        Corporation Act (12 U.S.C. 1451 et seq.), and any other 
        provision of Federal law).
    ``(b) Prohibition of Merger of Office.--Notwithstanding any other 
provision of this law, the Secretary of the Treasury may not merge or 
consolidate the Office, or any of the functions or responsibilities of 
the Office, with any function or program administered by the Secretary.
    ``(c) Savings Provision.--The authority of the Director to take 
actions under subtitles B and C does not in any way limit the general 
supervisory and regulatory authority granted to the Director under 
subsection (a).

``SEC. 1312. DIRECTOR.

    ``(a) Establishment of Position.--There is established the position 
of the Director of the Office of Federal Enterprise Supervision, who 
shall be the head of the Office.
    ``(b) Appointment; Term.--
            ``(1) Appointment.--The Director shall be appointed by the 
        President, by and with the advice and consent of the Senate, 
        from among individuals who are citizens of the United States.
            ``(2) Term.--The Director shall be appointed for a term of 
        5 years.
            ``(3) Vacancy.--
                    ``(A) In general.--A vacancy in the position of 
                Director that occurs before the expiration of the term 
                for which a Director was appointed shall be filled in 
                the manner established under paragraph (1).
                    ``(B) Term.--The Director appointed to fill a 
                vacancy under subparagraph (A) shall be appointed only 
                for the remainder of such term.
            ``(4) Service after end of term.--An individual may serve 
        as Director after the expiration of the term for which the 
        individual was appointed until a successor Director has been 
        appointed.
            ``(5) Transitional provision.--Notwithstanding paragraphs 
        (1) and (2), the Director of the Office of Federal Housing 
        Enterprise Oversight of the Department of Housing and Urban 
        Development on the date of enactment of the Federal Enterprise 
        Regulatory Reform Act of 2003, shall be the Director until the 
        date on which that individual's term as Director of the Office 
        of Federal Housing Enterprise Oversight would have expired.
    ``(c) Prohibition on Financial Interests.--The Director shall not 
have a direct or indirect financial interest in any enterprise, nor 
hold any office, position, or employment in any enterprise.''.
    (b) Appointment of Director.--Notwithstanding the effective date 
under section 172 or any other provision of law, the President may, at 
any time after the date of enactment of this Act, appoint an individual 
to serve as the Director in accordance with the provisions of the 
amendment made by subsection (a) of this section.

SEC. 102. DUTIES AND AUTHORITIES OF DIRECTOR AND HUD.

    (a) In General.--Section 1313 of the Housing and Community 
Development Act of 1992 (12 U.S.C. 4513) is amended to read as follows:

``SEC. 1313. DUTIES AND AUTHORITIES OF DIRECTOR.

    ``(a) Duties.--
            ``(1) Principal duties.--The principal duties of the 
        Director shall be to ensure that the enterprises--
                    ``(A) operate in a financially safe and sound 
                manner;
                    ``(B) carry out their missions in a financially 
                safe and sound manner and only through activities that 
                have been authorized under, and are consistent with the 
                purposes of, the provisions of Federal law that charter 
                the enterprises; and
                    ``(C) remain adequately capitalized.
            ``(2) Other duties.--To the extent consistent with 
        paragraph (1), the duty of the Director shall be to exercise 
        general supervisory and regulatory authority over the 
        enterprises, in accordance with this title, the Federal 
        National Mortgage Association Charter Act (12 U.S.C. 1716 et 
        seq.), the Federal Home Loan Mortgage Corporation Act (12 
        U.S.C. 1451 et seq.), and any other provisions of law.
    ``(b) Authority Exclusive of Secretary.--Except as specifically 
provided under this Act, the Federal National Mortgage Association 
Charter Act, the Federal Home Loan Mortgage Corporation Act, or any 
other provision of Federal law, the authority of the Director with 
respect to the enterprises shall not be subject to the review, 
approval, or intervention of the Secretary of the Treasury.
    ``(c) Delegation of Authority.--The Director may delegate to 
officers and employees of the Director any of the functions, powers, 
and duties of the Director, with respect to supervision and regulation 
of the enterprises, as the Director considers appropriate.''.
    (b) Prior Approval Authority for New Programs.--Part 1 of Subtitle 
A of title XIII of the Housing and Community Development Act of 1992 
(12 U.S.C. 4501 et seq.) is amended by adding at the end the following:

``SEC. 1319H. PRIOR APPROVAL AUTHORITY FOR NEW PROGRAMS.

    ``(a) In General.--The Director shall require each enterprise to 
obtain the approval of the Director for any new program of the 
enterprise before implementing the program.
    ``(b) Standard for Approval.--The Director shall approve any new 
program of an enterprise for purposes of subsection (a) unless--
            ``(1) in the case of a new program of the Federal National 
        Mortgage Association, the Director determines that the program 
        is not authorized under section 304 or paragraph (2), (3), (4), 
        or (5) of section 302(b) of the Federal National Mortgage 
        Association Charter Act (12 U.S.C. 1717(b));
            ``(2) in the case of a new program of the Federal Home Loan 
        Mortgage Corporation, the Director determines that the program 
        is not authorized under paragraph (1), (4), or (5) of section 
        305(a) of the Federal Home Loan Mortgage Corporation Act (12 
        U.S.C. 1451 et seq.); or
            ``(3) the Director determines that the new program is not 
        in the public interest.
    ``(c) Procedure for Approval.--
            ``(1) Submission of request.--An enterprise shall submit to 
        the Director a written request for approval of a new program 
        under subparagraph (A) that describes the program in such form 
        as prescribed by order or regulation of the Director.
            ``(2) Response.--
                    ``(A) In general.--Not later than 45 days after the 
                date of submission of a request for approval under 
                paragraph (1), the Director shall--
                            ``(i) approve the request; or
                            ``(ii) deny the request and submit a report 
                        explaining the reasons for the denial to the 
                        Committee on Financial Services of the House of 
                        Representatives and the Committee on Banking, 
                        Housing and Urban Affairs of the Senate.
                    ``(B) Extension.--The Director may extend the time 
                period under subparagraph (A) for a single additional 
                15 day period only if the Director requests additional 
                information from the enterprise.
            ``(3) Failure to respond.--If the Director fails to approve 
        the request or fails to submit a report under paragraph 
        (2)(A)(ii) during the period provided, the request shall be 
        considered to have been approved by the Director.
            ``(4) Review of disapproval.--
                    ``(A) Submission of new information.--If the 
                Director submits a report under paragraph (2)(A)(ii) 
                denying a request for reasons listed under paragraph 
                (1) or (2) of subsection (b), the Director shall allow 
                the enterprise to submit new information in support of 
                the request for approval.
                    ``(B) New programs not in the public interest.--If 
                the Director submits a report under paragraph 
                (2)(A)(ii) denying a request after finding that the 
                program is not in the public interest under subsection 
                (b)(3), the Director shall provide the enterprise with 
                notice and opportunity for a hearing on the record 
                regarding such denial.''.
    (c) Repeal of HUD Authority.--Part 2 of Subtitle A of title XIII of 
the Housing and Community Development Act of 1992 (12 U.S.C. 4501 et 
seq.) is amended by striking sections 1321 and 1322.
    (d) Authority of HUD for Housing Goals.--
            (1) In general.--Section 1331 of the Housing and Community 
        Development Act of 1992 (12 U.S.C. 4561) is amended--
                    (A) in the first sentence of subsection (a), by 
                inserting ``of Housing and Urban Development'' after 
                ``The Secretary''; and
                    (B) by adding at the end the following:
    ``(d) Definition.--For purposes of this part, the term `Secretary' 
means the Secretary of Housing and Urban Development.''.
            (2) Annual report on housing goals.--Section 1324 of the 
        Housing and Community Development Act of 1992 (12 U.S.C. 4544) 
        is amended by inserting ``of Housing and Urban Development'' 
        after ``Secretary'' each place such term appears.
    (e) Technical and Conforming Amendments.--
            (1) Fannie mae.--Section 302(b)(6) of the Federal National 
        Mortgage Association Charter Act (12 U.S.C. 1716(b)(6)) is 
        amended by striking ``Secretary under section 1322'' and 
        inserting ``Director under section 1319H''.
            (2) Freddie mac.--Section 305(c) of the Federal Home Loan 
        Mortgage Corporation Act (12 U.S.C. 1454(c)) is amended by 
        striking ``Secretary under section 1322'' and inserting 
        ``Director under section 1319H''.
            (3) Financial institutions examination council.--Section 
        1004(a) of the Federal Financial Institutions Examination 
        Council Act of 1978 (12 U.S.C. 3303(a)) is amended--
                    (A) in paragraph (5), by striking the period; and
                    (B) by adding at the end the following:
            ``(6) the Director of the Office of Federal Enterprise 
        Supervision.''.

SEC. 103. EXAMINERS AND ACCOUNTANTS.

    (a) Examinations.--Section 1317 of the Housing and Community 
Development Act of 1992 (12 U.S.C. 4517) is amended--
            (1) in the second sentence of subsection (c), by striking 
        ``The'' and inserting ``During the 3-year period that begins 
        upon the date of enactment of the Federal Enterprise Regulatory 
        Reform Act of 2003, the''; and
            (2) in subsection (d), by striking ``Federal Reserve 
        banks'' and inserting ``Director of the Office of Thrift 
        Supervision''.
    (b) Enhanced Authority To Hire Examiners and Accountants.--Section 
1317 of the Housing and Community Development Act of 1992 (12 U.S.C. 
4517) is amended by adding at the end the following:
    ``(g) Appointment of Accountants, Economists, and Examiners.--
            ``(1) Applicability.--This section applies with respect to 
        any position of examiner, accountant, and economist at the 
        Office, with respect to supervision and regulation of the 
        enterprises, that is in the competitive service.
            ``(2) Appointment authority.--
                    ``(A) In general.--The Director may appoint 
                candidates to any position described in paragraph (1)--
                            ``(i) in accordance with the statutes, 
                        rules, and regulations governing appointments 
                        in the excepted service; and
                            ``(ii) notwithstanding any statutes, rules, 
                        and regulations governing appointments in the 
                        competitive service.
                    ``(B) Rule of construction.--The appointment of a 
                candidate to a position under this paragraph shall not 
                be considered to cause such position to be converted 
                from the competitive service to the excepted service.
            ``(3) Reports.--
                    ``(A) In general.--Not later than 90 days after the 
                end of fiscal year 2003 (for fiscal year 2003) and 90 
                days after the end of fiscal year 2005 (for fiscal 
                years 2004 and 2005), the Director shall submit a 
                report with respect to its exercise of the authority 
                granted by paragraph (2) during such fiscal years to 
                the--
                            ``(i) Committee on Government Reform and 
                        the Committee on Financial Services of the 
                        House of Representatives; and
                            ``(ii) Committee on Governmental Affairs 
                        and the Committee on Banking, Housing, and 
                        Urban Affairs of the Senate.
                    ``(B) Contents.--The reports submitted under 
                subparagraph (A) shall describe the changes in the 
                hiring process authorized by paragraph (2), including 
                relevant information related to--
                            ``(i) the quality of candidates;
                            ``(ii) the procedures used by the Director 
                        to select candidates through the streamlined 
                        hiring process;
                            ``(iii) the numbers, types, and grades of 
                        employees hired under the authority;
                            ``(iv) any benefits or shortcomings 
                        associated with the use of the authority;
                            ``(v) the effect of the exercise of the 
                        authority on the hiring of veterans and other 
                        demographic groups; and
                            ``(vi) the way in which managers were 
                        trained in the administration of the 
                        streamlined hiring system.''.

SEC. 104. REGULATIONS.

    Section 1319G of the Housing and Community Development Act of 1992 
(12 U.S.C. 4526) is amended--
            (1) by striking subsection (a) and inserting the following:
    ``(a) Authority.--The Director shall issue any regulations and 
orders necessary to carry out the duties of the Director, with respect 
to supervision and regulation of the enterprises, under this title, the 
Federal National Mortgage Association Charter Act (12 U.S.C. 1716 et 
seq.), and the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 
1451 et seq.), and to ensure that the purposes of this title and such 
Acts are accomplished.''; and
            (2) in subsection (c), by striking ``Committee on Banking, 
        Finance and Urban Affairs'' and inserting ``Committee on 
        Financial Services''.

SEC. 105. ASSESSMENTS.

    Section 1316 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4516) is amended--
            (1) by striking subsection (a) and inserting the following:
    ``(a) Annual Assessments.--The Director shall establish and collect 
from the enterprises annual assessments in an amount not exceeding the 
amount sufficient to provide for all reasonable costs and expenses of 
the Office, including--
            ``(1) the expenses of any examinations under section 1317; 
        and
            ``(2) the expenses of obtaining any reviews and credit 
        assessments under subsection section 1319.'';
            (2) in subsection (b), in paragraph (2), by moving the 
        margin 2 ems to the right;
            (3) in subsection (c), by adding at the end the following: 
        ``The Director may adjust the amounts of any semiannual 
        assessments for an assessment under subsection (a) that are to 
        be paid pursuant to subsection (b) by an enterprise, as 
necessary in the discretion of the Director, to ensure that the costs 
of enforcement activities under subtitles B and C for an enterprise are 
borne only by that enterprise.'';
            (4) in subsection (f), by striking ``Any assessments 
        collected'' and all that follows and inserting the following: 
        ``Notwithstanding any other provision of law, any assessments 
        collected by the Director pursuant to this section shall be 
        deposited in the Fund in an account for the Director. Any 
        amounts in the Fund are hereby made available, without fiscal 
        year limitation, to the Director (to the extent of amounts in 
        the Director's account) for carrying out the supervisory and 
        regulatory responsibilities of the Director, with respect to 
        the enterprises, including any necessary administrative and 
        nonadministrative expenses of the Director in carrying out the 
        purposes of this title, the Federal National Mortgage 
        Association Charter Act (12 U.S.C. 1716 et seq.), and the 
        Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451 et 
        seq.).''; and
            (5) in subsection (g), by striking paragraphs (1) and (2) 
        and inserting the following:
            ``(1) Financial operating plans and forecasts.--Before the 
        beginning of each fiscal year, the Director shall submit a copy 
        of the financial operating plans and forecasts for the Office 
        to the Director of the Office of Management and Budget.
            ``(2) Reports of operations.--As soon as practicable after 
        the end of each fiscal year and each quarter thereof, the 
        Director shall submit a copy of the report of the results of 
        the operations of the Office during such period to the Director 
        of the Office of Management and Budget.''.

SEC. 106. INDEPENDENCE OF DIRECTOR IN CONGRESSIONAL TESTIMONY AND 
              RECOMMENDATIONS.

    Section 111 of Public Law 93-495 (12 U.S.C. 250) is amended by 
inserting ``the Director of the Office of Federal Enterprise 
Supervision of the Department of the Treasury,'' after ``the Federal 
Housing Finance Board,''.

SEC. 107. LIMITATION ON NONMISSION-RELATED ASSETS.

    Subtitle B of title XIII of the Housing and Community Development 
Act of 1992 (12 U.S.C. 4611 et seq.) is amended--
            (1) by striking the subtitle designation and heading and 
        inserting the following:

    ``Subtitle B--Required Capital Levels for Enterprises, Special 
   Enforcement Powers, and Limitation on Nonmission-Related Assets'';

        and
            (2) by adding at the end the following:

``SEC. 1369E. LIMITATION ON NONMISSION-RELATED ASSETS.

    ``(a) In General.--The Director may, by regulation, determine the 
type and amount of nonmission-related assets that an enterprise may 
hold at any time. The Director shall, in any such regulation, define 
the term `nonmission-related asset' for purposes of this section.
    ``(b) Rule of Construction.--Subsection (a) may not be construed to 
authorize an enterprise to engage in any new program relating to any 
nonmission-related asset without obtaining the prior approval of the 
Director in accordance with section 1319H.''.

SEC. 108. REPORTS.

    Sections 1327 and 1328 of the Housing and Community Development Act 
of 1992 (12 U.S.C. 4547, 4548) are amended by striking ``Secretary'' 
each place it appears and inserting ``Director''.

SEC. 109. RISK-BASED CAPITAL TEST FOR ENTERPRISES.

    Section 1361 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4611) is amended--
            (1) in subsection (a)(2)(A), by inserting ``, or change in 
        such other manner as the Director considers appropriate,'' 
        after ``subparagraph (C),'';
            (2) in subsection (b)(1), by adding at the end the 
        following: ``Notwithstanding subsection (a), the Director may, 
        in the sole discretion of the Director, make any assumptions 
        that the Director considers appropriate regarding interest 
        rates, home prices, and new business. Such assessment shall 
        ensure that enterprise risk-based capital standards are, to the 
        greatest extent feasible, comparable to those imposed by the 
        appropriate Federal banking agency (as defined in section 3 of 
        the Federal Deposit Insurance Act (12 U.S.C. 1813)) for 
        comparable risk. The risk-based assessment relating to new 
        business under this paragraph shall ensure that the enterprise 
        is able to remain a viable enterprise in full compliance with 
        all applicable risk-based capital and minimum capital 
        standards, and that it can fulfill its role of ensuring 
        appropriate secondary market liquidity throughout the stress 
        test.''; and
            (3) in subsection (c)(2), by inserting ``, or such other 
        percentage as the Director considers appropriate'' before the 
        period at the end.

SEC. 110. MINIMUM AND CRITICAL CAPITAL LEVELS.

    (a) Minimum Capital Level.--Section 1362 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4612) is amended--
            (1) by striking subsection (b);
            (2) by striking ``(a) In General.--''; and
            (3) in the matter preceding paragraph (1), by inserting 
        before ``the sum of'' the following: ``the amount established 
        by the Director, by regulation or order, as such amount may be 
        adjusted from time-to-time by the Director to achieve the 
        purposes of this title, that is not less than''.
    (b) Critical Capital Level.--Section 1363 of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4613) is amended, in the 
matter preceding paragraph (1), by inserting before ``the sum of'' the 
following: ``the amount established by the Director, by regulation or 
order, as such amount may be adjusted from time-to-time by the Director 
to achieve the purposes of this title, that is not less than''.

SEC. 111. DEFINITIONS.

    Section 1303 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4502) is amended--
            (1) in paragraph (5), by striking ``Federal Housing 
        Enterprise Oversight of the Department of Housing and Urban 
        Development'' and inserting ``Federal Enterprise Supervision of 
        the Department of the Treasury'';
            (2) in paragraphs (8), (9), (10), and (19), by inserting 
        ``of Housing and Urban Development'' after ``Secretary'' each 
        place such term appears;
            (3) in paragraph (14), by striking ``Federal Housing 
        Enterprise Oversight of the Department of Housing and Urban 
        Development'' and inserting ``Federal Enterprise Supervision of 
        the Department of the Treasury'';
            (4) by striking paragraph (15);
            (5) by redesignating paragraphs (7) through (14) (as 
        amended by the preceding provisions of this Act) as paragraphs 
        (8) through (15), respectively; and
            (6) by inserting after paragraph (6) the following:
            ``(7) Enterprise-affiliated party.--The term `enterprise-
        affiliated party' means--
                    ``(A) any director, officer, employee, or 
                controlling stockholder of, or agent for, an 
                enterprise;
                    ``(B) any shareholder, consultant, joint venture 
                partner, and any other person as determined by the 
                Director (by regulation or case-by-case) who 
                participates in the conduct of the affairs of an 
                enterprise; and
                    ``(C) any independent contractor (including any 
                attorney, appraiser, or accountant) who knowingly or 
                recklessly participates in--
                            ``(i) any violation of any law or 
                        regulation;
                            ``(ii) any breach of fiduciary duty; or
                            ``(iii) any unsafe or unsound practice,
                which caused or is likely to cause more than a minimal 
                financial loss to, or a significant adverse effect on, 
                the enterprise.''.

                  Subtitle B--Prompt Corrective Action

SEC. 131. CAPITAL CLASSIFICATIONS.

    Section 1364 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4614) is amended--
            (1) by striking subsection (b) and inserting the following:
    ``(b) Discretionary Classification.--
            ``(1) Grounds for reclassification.--The Director may 
        reclassify an enterprise under paragraph (2) if--
                    ``(A) at any time, the Director determines in 
                writing that an enterprise is engaging in conduct that 
                could result in a rapid depletion of core capital or 
                that the value of the property subject to mortgages 
                held or securitized by the enterprise has decreased 
                significantly;
                    ``(B) after notice and an opportunity for hearing, 
                the Director determines that an enterprise is in an 
                unsafe or unsound condition; or
                    ``(C) pursuant to section 1371(b), the Director 
                deems an enterprise to be engaging in an unsafe or 
                unsound practice.
            ``(2) Reclassification.--In addition to any other action 
        authorized under this title, including the reclassification of 
        an enterprise for any reason not specified in this subsection, 
        if the Director takes any action described in paragraph (1) the 
        Director may classify an enterprise--
                    ``(A) as undercapitalized, if the enterprise is 
                otherwise classified as adequately capitalized;
                    ``(B) as significantly undercapitalized, if the 
                enterprise is otherwise classified as undercapitalized; 
                and
                    ``(C) as critically undercapitalized, if the 
                enterprise is otherwise classified as significantly 
                undercapitalized.'';
            (2) by redesignating subsection (d) as subsection (e); and
            (3) by inserting after subsection (c) the following:
    ``(d) Restriction on Capital Distributions.--
            ``(1) In general.--An enterprise shall make no capital 
        distribution if, after making the distribution, the enterprise 
        would be undercapitalized.
            ``(2) Exception.--Notwithstanding paragraph (1), the 
        Director may permit an enterprise to repurchase, redeem, 
        retire, or otherwise acquire shares or ownership interests if 
        the repurchase, redemption, retirement, or other acquisition--
                    ``(A) is made in connection with the issuance of 
                additional shares or obligations of the enterprise in 
                at least an equivalent amount; and
                    ``(B) will reduce the financial obligations of the 
                enterprise or otherwise improve the financial condition 
                of the enterprise.''.

SEC. 132. SUPERVISORY ACTIONS APPLICABLE TO UNDERCAPITALIZED 
              ENTERPRISES.

    (a) Effective Date for Supervisory Actions.--Section 1365(c) of the 
Housing and Community Development Act of 1992 (12 U.S.C. 4615(c)) is 
amended by striking ``1-year'' and inserting ``6-month''.
    (b) Supervisory Actions.--Section 1365 of the Housing and Community 
Development Act of 1992 (12 U.S.C. 4615) is amended--
            (1) in subsection (a)--
                    (A) by redesignating paragraphs (1) and (2) as 
                paragraphs (2) and (3), respectively;
                    (B) by inserting before paragraph (2) the 
                following:
            ``(1) Required monitoring.--The Director shall--
                    ``(A) closely monitor the condition of any 
                undercapitalized enterprise;
                    ``(B) closely monitor compliance with the capital 
                restoration plan, restrictions, and requirements 
                imposed under this section; and
                    ``(C) periodically review the plan, restrictions, 
                and requirements applicable to the undercapitalized 
                enterprise to determine whether the plan, restrictions, 
                and requirements are achieving the purpose of this 
                section.''; and
                    (C) by inserting at the end the following:
            ``(4) Restriction of asset growth.--An undercapitalized 
        enterprise shall not permit its average total assets during any 
        calendar quarter to exceed its average total assets during the 
        preceding calendar quarter unless--
                    ``(A) the Board has accepted the enterprise's 
                capital restoration plan;
                    ``(B) any increase in total assets is consistent 
                with the plan; and
                    ``(C) the ratio of tangible equity to assets of the 
                enterprise increases during the calendar quarter at a 
                rate sufficient to enable the enterprise to become 
                adequately capitalized within a reasonable time.
            ``(5) Prior approval of acquisitions and issuance of new 
        products.--An undercapitalized enterprise shall not, directly 
        or indirectly, acquire any interest in any entity or issue a 
        new product unless--
                    ``(A) the Director has accepted the capital 
                restoration plan of the enterprise, the enterprise is 
                implementing the plan, and the Director determines that 
                the proposed action is consistent with and will further 
                the achievement of the plan; or
                    ``(B) the Director determines that the proposed 
                action will further the purpose of this section.''; and
            (2) in the subsection heading for subsection (b), by 
        striking ``From Undercapitalized to Significantly 
        Undercapitalized'';
            (3) by redesignating subsection (c) (as amended by 
        subsection (a)) as subsection (d); and
            (4) by inserting after subsection (b) the following:
    ``(c) Other Discretionary Safeguards.--The Director may take, with 
respect to an undercapitalized enterprise, any of the actions 
authorized to be taken under section 1366 with respect to a 
significantly undercapitalized enterprise, if the Director determines 
that such actions are necessary to carry out the purpose of this 
subtitle.''.

SEC. 133. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFICANTLY 
              UNDERCAPITALIZED ENTERPRISES.

    Section 1366 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4616) is amended--
            (1) in subsection (b)--
                    (A) in the subsection heading, by striking 
                ``Discretionary Supervisory Actions'' and inserting 
                ``Specific Actions'';
                    (B) in the matter preceding paragraph (1), by 
                striking ``may, at any time, take any'' and inserting 
                ``shall carry out this section by taking, at any time, 
                1 or more'';
                    (C) by redesignating paragraphs (5) and (6) as 
                paragraphs (6) and (7), respectively;
                    (D) by inserting after paragraph (4) the following:
            ``(5) Improvement of management.--Take one or more of the 
        following actions:
                    ``(A) New election of board.--Order a new election 
                for the board of directors of the enterprise.
                    ``(B) Dismissal of directors or executive 
                officers.--Require the enterprise to dismiss from 
                office any director or executive officer who had held 
                office for more than 180 days immediately before the 
                enterprise became undercapitalized. Dismissal under 
                this subparagraph shall not be construed to be a 
                removal pursuant to the Director's enforcement powers 
                under section 1377.
                    ``(C) Employ qualified executive officers.--Require 
                the enterprise to employ qualified executive officers 
                (who, if the Director so specifies, shall be subject to 
                approval by the Director).''; and
                    (E) by inserting at the end the following:
            ``(8) Other action.--Require the enterprise to take any 
        other action that the Director determines will better carry out 
        the purpose of this section than any of the actions specified 
        in this paragraph.'';
            (2) by redesignating subsection (c) as subsection (d); and
            (3) by inserting after subsection (b) the following:
    ``(c) Restriction on Compensation of Executive Officers.--An 
enterprise that is classified as significantly undercapitalized may 
not, without prior written approval by the Director--
                    ``(A) pay any bonus to any executive officer; or
                    ``(B) provide compensation to any executive officer 
                at a rate exceeding that officer's average rate of 
                compensation (excluding bonuses, stock options, and 
                profit sharing) during the 12 calendar months preceding 
                the calendar month in which the enterprise became 
                undercapitalized.''.

                    Subtitle C--Enforcement Actions

SEC. 151. CEASE-AND-DESIST PROCEEDINGS.

    Section 1371 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4631) is amended--
            (1) by striking subsections (a) and (b) and inserting the 
        following:
    ``(a) Issuance for Unsafe or Unsound Practices and Violations of 
Rules or Laws.--
            ``(1) In general.--If, in the opinion of the Director, an 
        enterprise or any enterprise-affiliated party is engaging or 
        has engaged, or the Director has reasonable cause to believe 
        that the enterprise or any enterprise-affiliated party is about 
        to engage, in an unsafe or unsound practice in conducting the 
        business of the enterprise or is violating or has violated, or 
        the Director has reasonable cause to believe that the 
        enterprise or any enterprise-affiliated party is about to 
        violate, a law, rule, or regulation, or any condition imposed 
in writing by the Director in connection with the granting of any 
application or other request by the enterprise or any written agreement 
entered into with the Director, the Director may issue and serve upon 
the enterprise or such party a notice of charges in respect thereof.
            ``(2) Limitations.--The Director may not enforce compliance 
        with--
                    ``(A) any housing goal established under subpart B 
                of part 2 of subtitle A of this title;
                    ``(B) section 1336 or 1337 of this title;
                    ``(C) subsection (m) or (n) of section 309 of the 
                Federal National Mortgage Association Charter Act (12 
                U.S.C. 1723a(m), (n)); or
                    ``(D) subsection (e) or (f) of section 307 of the 
                Federal Home Loan Mortgage Corporation Act (12 U.S.C. 
                1456(e), (f)).
    ``(b) Issuance for Unsatisfactory Rating.--If an enterprise 
receives, in its most recent report of examination, a less-than-
satisfactory rating for asset quality, management, earnings, or 
liquidity, the Director may (if the deficiency is not corrected) deem 
the enterprise to be engaging in an unsafe or unsound practice for 
purposes of this subsection.''; and
            (2) in subsection (c)(2), by striking ``or director'' and 
        inserting ``director, or enterprise-affiliated party''.

SEC. 152. TEMPORARY CEASE-AND-DESIST PROCEEDINGS.

    Section 1372 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4632) is amended--
            (1) by striking subsection (a) and inserting the following:
    ``(a) Grounds for Issuance.--Whenever the Director determines that 
the violation or threatened violation or the unsafe or unsound practice 
or practices specified in the notice of charges served upon the 
enterprise or any enterprise-affiliated party under section 1371(a), or 
the continuation thereof, is likely to cause insolvency or significant 
dissipation of assets or earnings of the enterprise, or is likely to 
weaken the condition of the enterprise prior to the completion of the 
proceedings conducted pursuant to sections 1371 and 1373, the Director 
may issue a temporary order requiring the enterprise or such party to 
cease and desist from any such violation or practice and to take 
affirmative action to prevent or remedy such insolvency, dissipation, 
condition, or prejudice pending completion of such proceedings. Such 
order may include any requirement authorized under subsection 
1371(d).'';
            (2) in subsection (b), by striking ``or director'' and 
        inserting ``director, or enterprise-affiliated party'';
            (3) in subsection (d), by striking ``or director'' and 
        inserting ``director, or enterprise-affiliated party''; and
            (4) by striking subsection (e) and inserting the following:
    ``(e) Enforcement.--In the case of violation or threatened 
violation of, or failure to obey, a temporary cease-and-desist order 
issued under this section, the Director may apply to the United States 
District Court for the District of Columbia or the United States 
district court within the jurisdiction of which the headquarters of the 
enterprise is located, for an injunction to enforce such order, and, if 
the court determines that there has been such violation or threatened 
violation or failure to obey, it shall be the duty of the court to 
issue such injunction.''.

SEC. 153. REMOVAL AND PROHIBITION AUTHORITY.

    (a) In General.--Subtitle C of title XIII of the Housing and 
Community Development Act of 1992 is amended--
            (1) by redesignating sections 1377 through 1379B (12 U.S.C. 
        4637-41) as sections 1379 through 1379D, respectively; and
            (2) by inserting after section 1376 (12 U.S.C. 4636) the 
        following:

``SEC. 1377. REMOVAL AND PROHIBITION AUTHORITY.

    ``(a) Authority To Issue Order.--Whenever the Director determines 
that--
            ``(1) any enterprise-affiliated party has, directly or 
        indirectly--
                    ``(A) violated--
                            ``(i) any law or regulation;
                            ``(ii) any cease-and-desist order which has 
                        become final;
                            ``(iii) any condition imposed in writing by 
                        the Director in connection with the grant of 
                        any application or other request by such 
                        enterprise; or
                            ``(iv) any written agreement between such 
                        enterprise and the Director;
                    ``(B) engaged or participated in any unsafe or 
                unsound practice in connection with any enterprise; or
                    ``(C) committed or engaged in any act, omission, or 
                practice which constitutes a breach of such party's 
                fiduciary duty;
            ``(2) by reason of the violation, practice, or breach 
        described in any subparagraph of paragraph (1)--
                    ``(A) such enterprise has suffered or will probably 
                suffer financial loss or other damage; or
                    ``(B) such party has received financial gain or 
                other benefit by reason of such violation, practice, or 
                breach; and
            ``(3) such violation, practice, or breach--
                    ``(A) involves personal dishonesty on the part of 
                such party; or
                    ``(B) demonstrates willful or continuing disregard 
                by such party for the safety or soundness of such 
                enterprise,
the Director may serve upon such party a written notice of the 
Director's intention to remove such party from office or to prohibit 
any further participation by such party, in any manner, in the conduct 
of the affairs of any enterprise.
    ``(b) Suspension Order.--
            ``(1) Suspension or prohibition authority.--If the Director 
        serves written notice under subsection (a) to any enterprise-
        affiliated party of the Director's intention to issue an order 
        under, the Director may suspend such party from office or 
prohibit such party from further participation in any manner in the 
conduct of the affairs of the enterprise, if the Director--
                    ``(A) determines that such action is necessary for 
                the protection of the enterprise; and
                    ``(B) serves such party with written notice of the 
                suspension order.
            ``(2) Effective period.--Any suspension order issued under 
        subsection (a)--
                    ``(A) shall become effective upon service; and
                    ``(B) unless a court issues a stay of such order 
                under subsection (g) of this section, shall remain in 
                effect and enforceable until--
                            ``(i) the date the Director dismisses the 
                        charges contained in the notice served under 
                        subsection (a) with respect to such party; or
                            ``(ii) the effective date of an order 
                        issued by the Director to such party under 
                        subsection (a).
            ``(3) Copy of order.--If the Director issues a suspension 
        order under subsection (a) to any enterprise-affiliated party, 
        the Director shall serve a copy of such order on any enterprise 
        with which such party is affiliated at the time such order is 
        issued.
    ``(c) Notice, Hearing, and Order.--A notice of intention to remove 
an enterprise-affiliated party from office or to prohibit such party 
from participating in the conduct of the affairs of an enterprise shall 
contain a statement of the facts constituting grounds for such action, 
and shall fix a time and place at which a hearing will be held on such 
action. Such hearing shall be fixed for a date not earlier than 30 days 
nor later than 60 days after the date of service of such notice, unless 
an earlier or a later date is set by the Director at the request of (1) 
such party, and for good cause shown, or (2) the Attorney General of 
the United States. Unless such party shall appear at the hearing in 
person or by a duly authorized representative, such party shall be 
deemed to have consented to the issuance of an order of such removal or 
prohibition. In the event of such consent, or if upon the record made 
at any such hearing the Director shall find that any of the grounds 
specified in such notice have been established, the Director may issue 
such orders of suspension or removal from office, or prohibition from 
participation in the conduct of the affairs of the enterprise, as it 
may deem appropriate. Any such order shall become effective at the 
expiration of 30 days after service upon such enterprise and such party 
(except in the case of an order issued upon consent, which shall become 
effective at the time specified therein). Such order shall remain 
effective and enforceable except to such extent as it is stayed, 
modified, terminated, or set aside by action of the Director or a 
reviewing court.
    ``(d) Prohibition of Certain Specific Activities.--Any person 
subject to an order issued under this section shall not--
            ``(1) participate in any manner in the conduct of the 
        affairs of any enterprise;
            ``(2) solicit, procure, transfer, attempt to transfer, 
        vote, or attempt to vote any proxy, consent, or authorization 
        with respect to any voting rights in any enterprise;
            ``(3) violate any voting agreement previously approved by 
        the Director; or
            ``(4) vote for a director, or serve or act as an 
        enterprise-affiliated party.
    ``(e) Industry-Wide Prohibition.--
            ``(1) In general.--Except as provided in subparagraph (2), 
        any person who, pursuant to an order issued under subsection 
        (h), has been removed or suspended from office in an enterprise 
        or prohibited from participating in the conduct of the affairs 
        of an enterprise may not, while such order is in effect, 
        continue or commence to hold any office in, or participate in 
        any manner in the conduct of the affairs of any enterprise.
            ``(2) Exception if director provides written consent.--If, 
        on or after the date an order is issued under this section 
        which removes or suspends from office any enterprise-affiliated 
        party or prohibits such party from participating in the conduct 
        of the affairs of an enterprise, such party receives the 
        written consent of the Director, the order shall, to the extent 
        of such consent, cease to apply to such party with respect to 
        the enterprise described in the written consent. If the 
        Director grants such a written consent, it shall publicly 
        disclose such consent.
            ``(3) Violation of paragraph (1) treated as violation of 
        order.--Any violation of paragraph (1) by any person who is 
        subject to an order described in such subsection shall be 
        treated as a violation of the order.
    ``(f) Applicability.--This section shall only apply to a person who 
is an individual, unless the Director specifically finds that it should 
apply to a corporation, firm, or other business enterprise.
    ``(g) Stay of Suspension and Prohibition of Enterprise-Affiliated 
Party.--Within 10 days after any enterprise-affiliated party has been 
suspended from office or prohibited from participation in the conduct 
of the affairs of an enterprise under this section, such party may 
apply to the United States District Court for the District of Columbia, 
or the United States district court for the judicial district in which 
the headquarters of the enterprise is located, for a stay of such 
suspension or prohibition pending the completion of the administrative 
proceedings pursuant to the notice served upon such party under this 
section, and such court shall have jurisdiction to stay such suspension 
or prohibition.
    ``(h) Suspension or Removal of Enterprise-Affiliated Party Charged 
With Felony.--
            ``(1) Suspension or prohibition.--
                    ``(A) In general.--Whenever any enterprise-
                affiliated party is charged in any information, 
                indictment, or complaint, with the commission of or 
                participation in a crime involving dishonesty or breach 
                of trust which is punishable by imprisonment for a term 
                exceeding one year under State or Federal law, the 
                Director may, if continued service or participation by 
                such party may pose a threat to the enterprise or 
                impair public confidence in the enterprise, by written 
                notice served upon such party, suspend such party from 
                office or prohibit such party from further 
                participation in any manner in the conduct of the 
                affairs of any enterprise.
                    ``(B) Provisions applicable to notice.--
                            ``(i) Copy.--A copy of any notice under 
                        paragraph (1)(A) shall also be served upon the 
                        enterprise.
                            ``(ii) Effective period.--A suspension or 
                        prohibition under subparagraph (A) shall remain 
                        in effect until the information, indictment, or 
                        complaint referred to in such subparagraph is 
                        finally disposed of or until terminated by the 
                        Director.
            ``(2) Removal or prohibition.--
                    ``(A) In general.--If a judgment of conviction or 
                an agreement to enter a pretrial diversion or other 
                similar program is entered against an enterprise-
                affiliated party in connection with a crime described 
                in paragraph (1)(A), at such time as such judgment is 
                not subject to further appellate review, the Director 
                may, if continued service or participation by such 
party may pose a threat to the enterprise or impair public confidence 
in the enterprise, issue and serve upon such party an order removing 
such party from office or prohibiting such party from further 
participation in any manner in the conduct of the affairs of the 
enterprise without the prior written consent of the Director.
                    ``(B) Provisions applicable to order.--
                            ``(i) Copy.--A copy of any order under 
                        paragraph (2)(A) shall also be served upon the 
                        enterprise, whereupon the enterprise-affiliated 
                        party who is subject to the order (if a 
                        director or an officer) shall cease to be a 
                        director or officer of such enterprise.
                            ``(ii) Effect of acquittal.--A finding of 
                        not guilty or other disposition of the charge 
                        shall not preclude the Director from 
                        instituting proceedings after such finding or 
                        disposition to remove such party from office or 
                        to prohibit further participation in enterprise 
                        affairs under subsection (a), (d), or (e).
                            ``(iii) Effective period.--Any notice of 
                        suspension or order of removal issued under 
                        this subsection shall remain effective and 
                        outstanding until the completion of any hearing 
                        or appeal authorized under paragraph (4) unless 
                        terminated by the Director.
            ``(3) Authority of remaining board members.--
                    ``(A) In general.--If at any time, because of the 
                suspension of one or more directors pursuant to this 
                section, there shall be on the board of directors of an 
                enterprise less than a quorum of directors not so 
                suspended, all powers and functions vested in or 
                exercisable by such board shall vest in and be 
                exercisable by the director or directors on the board 
                not so suspended, until such time as there shall be a 
                quorum of the board of directors.
                    ``(B) Suspension of all directors.--In the event 
                all of the directors of an enterprise are suspended 
                pursuant to this section, the Director shall appoint 
                persons to serve temporarily as directors in their 
                place and stead pending the termination of such 
                suspensions, or until such time as those who have been 
                suspended, cease to be directors of the enterprise and 
                their respective successors take office.
            ``(4) Hearing regarding continued participation.--Within 30 
        days from service of any notice of suspension or order of 
        removal issued pursuant to paragraph (1) or (2) of this 
        subsection, the enterprise-affiliated party concerned may 
        request in writing an opportunity to appear before the Director 
        to show that the continued service to or participation in the 
        conduct of the affairs of the enterprise by such party does 
        not, or is not likely to, pose a threat to the interests of the 
        enterprise or threaten to impair public confidence in the 
        enterprise. Upon receipt of any such request, the Director 
        shall fix a time (not more than 30 days after receipt of such 
        request, unless extended at the request of such party) and 
        place at which such party may appear, personally or through 
        counsel, before one or more members of the Director or 
        designated employees of the Director to submit written 
        materials (or, at the discretion of the Director, oral 
        testimony) and oral argument. Within 60 days of such hearing, 
        the Director shall notify such party whether the suspension or 
        prohibition from participation in any manner in the conduct of 
        the affairs of the enterprise will be continued, terminated, or 
        otherwise modified, or whether the order removing such party 
        from office or prohibiting such party from further 
        participation in any manner in the conduct of the affairs of 
        the enterprise will be rescinded or otherwise modified. Such 
        notification shall contain a statement of the basis for the 
        Director's decision, if adverse to such party. The Director is 
        authorized to prescribe such rules as may be necessary to 
        effectuate the purposes of this subsection.
    ``(i) Hearings and Judicial Review.--
            ``(1) Venue and procedure.--Any hearing provided for in 
        this section shall be held in the District of Columbia or in 
        the Federal judicial district in which the headquarters of the 
        enterprise is located, unless the party afforded the hearing 
        consents to another place, and shall be conducted in accordance 
        with the provisions of chapter 5 of title 5, United States 
        Code. After such hearing, and within 90 days after the Director 
        has notified the parties that the case has been submitted to 
        the court for final decision, the court shall render its 
        decision (which shall include findings of fact upon which its 
        decision is predicated) and shall issue and serve upon each 
        party to the proceeding an order or orders consistent with the 
        provisions of this section. Judicial review of any such order 
        shall be exclusively as provided in this subsection. Unless a 
        petition for review is timely filed in a court of appeals of 
        the United States, as provided in paragraph (2), and thereafter 
        until the record in the proceeding has been filed as so 
        provided, the Director may at any time, upon such notice and in 
        such manner as it shall deem proper, modify, terminate, or set 
        aside any such order. Upon such filing of the record, the 
        Director may modify, terminate, or set aside any such order 
        with permission of the court.
            ``(2) Review of order.--Any party to any proceeding under 
        paragraph (1) may obtain a review of any order served pursuant 
        to paragraph (1) (other than an order issued with the consent 
        of the enterprise or the enterprise-affiliated party concerned, 
        or an order issued under subsection (h) of this section) by the 
        filing in the United States Court of Appeals for the District 
        of Columbia Circuit or court of appeals of the United States 
        for the circuit in which the headquarters of the enterprise is 
        located, within 30 days after the date of service of such 
        order, a written petition praying that the order of the 
Director be modified, terminated, or set aside. A copy of such petition 
shall be transmitted by the clerk of the court to the Director, and 
thereupon the Director shall file in the court the record in the 
proceeding, as provided in section 2112 of title 28, United States 
Code. Upon the filing of such petition, such court shall have 
jurisdiction, which upon the filing of the record shall (except as 
provided in the last sentence of paragraph (1)) be exclusive, to 
affirm, modify, terminate, or set aside, in whole or in part, the order 
of the Director. Review of such proceedings shall be had as provided in 
chapter 7 of title 5, United States Code. The judgment and decree of 
the court shall be final, except that the same shall be subject to 
review by the Supreme Court upon certiorari, as provided in section 
1254 of title 28, United States Code.
            ``(3) Proceedings not treated as stay.--The commencement of 
        proceedings for judicial review under paragraph (2) shall not, 
        unless specifically ordered by the court, operate as a stay of 
        any order issued by the Director.''.
    (b) Conforming Amendments.--
            (1) 1992 act.--Section 1317(f) of the Housing and Community 
        Development Act of 1992 (12 U.S.C. 4517(f)) is amended by 
        striking ``section 1379B'' and inserting ``section 1379D''.
            (2) Fannie mae charter act.--The second sentence of 
        subsection (b) of section 308 of the Federal National Mortgage 
        Association Charter Act (12 U.S.C. 1723(b)) is amended by 
        striking ``The'' and inserting ``Except to the extent that 
        action under section 1377 of the Housing and Community 
        Development Act of 1992 temporarily results in a lesser number, 
        the''.
            (3) Freddie mac act.--The second sentence of subparagraph 
        (A) of section 303(a)(2) of the Federal Home Loan Mortgage 
        Corporation Act (12 U.S.C. 1452(a)(2)(A)) is amended by 
        striking ``The'' and inserting ``Except to the extent action 
        under section 1377 of the Housing and Community Development Act 
        of 1992 temporarily results in a lesser number, the''.

SEC. 154. ENFORCEMENT AND JURISDICTION.

    Section 1375 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4635) is amended--
            (1) by striking subsection (a) and inserting the following:
    ``(a) Enforcement.--The Director may, in the discretion of the 
Director, apply to the United States District Court for the District of 
Columbia, or the United States district court within the jurisdiction 
of which the headquarters of the enterprise is located, for the 
enforcement of any effective and outstanding notice or order issued 
under this subtitle or subtitle B, or request that the Attorney General 
of the United States bring such an action. Such court shall have 
jurisdiction and power to order and require compliance with such notice 
or order.''; and
            (2) in subsection (b), by striking ``or 1376'' and 
        inserting ``1376, or 1377''.

SEC. 155. CIVIL MONEY PENALTIES.

    Section 1376 of the Housing and Community Development Act of 1992 
(12 U.S.C. 4636) is amended--
            (1) in subsection (a), in the matter preceding paragraph 
        (1), by striking ``or any executive officer or'' and inserting 
        ``any executive officer of an enterprise, any enterprise-
        affiliated party, or any'';
            (2) by striking subsection (b) and inserting the following:
    ``(b) Amount of Penalty.--
            ``(1) First tier.--Any enterprise which, or any enterprise-
        affiliated party who--
                    ``(A) violates any provision of this title, the 
                Federal National Mortgage Association Charter Act (12 
                U.S.C. 1716 et seq.), the Federal Home Loan Mortgage 
                Corporation Act (12 U.S.C. 1451 et seq.), or any order, 
                condition, rule, or regulation under any such title or 
                Act, except that the Director may not enforce 
                compliance 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, with subsection (m) 
                or (n) of section 309 of the Federal National Mortgage 
                Association Charter Act (12 U.S.C. 1723a(m), (n)), or 
                with subsection (e) or (f) of section 307 of the 
                Federal Home Loan Mortgage Corporation Act (12 U.S.C. 
                1456(e), (f));
                    ``(B) violates any final or temporary order or 
                notice issued pursuant to this title;
                    ``(C) violates any condition imposed in writing by 
                the Director in connection with the grant of any 
                application or other request by such enterprise;
                    ``(D) violates any written agreement between the 
                enterprise and the Director; or
                    ``(E) engages in any conduct the Director 
                determines to be an unsafe or unsound practice,
        shall forfeit and pay a civil penalty of not more than $10,000 
        for each day during which such violation continues.
            ``(2) Second tier.--Notwithstanding paragraph (1)--
                    ``(A) if an enterprise, or an enterprise-affiliated 
                party--
                            ``(i) commits any violation described in 
                        any subparagraph of paragraph (1);
                            ``(ii) recklessly engages in an unsafe or 
                        unsound practice in conducting the affairs of 
                        such enterprise; or
                            ``(iii) breaches any fiduciary duty; and
                    ``(B) the violation, practice, or breach--
                            ``(i) is part of a pattern of misconduct;
                            ``(ii) causes or is likely to cause more 
                        than a minimal loss to such enterprise; or
                            ``(iii) results in pecuniary gain or other 
                        benefit to such party,
        the enterprise or enterprise-affiliated party shall forfeit and 
        pay a civil penalty of not more than $50,000 for each day 
        during which such violation, practice, or breach continues.
            ``(3) Third tier.--Notwithstanding paragraphs (1) and (2), 
        any enterprise which, or any enterprise-affiliated party who--
                    ``(A) knowingly--
                            ``(i) commits any violation described in 
                        any subparagraph of paragraph (1);
                            ``(ii) engages in any unsafe or unsound 
                        practice in conducting the affairs of such 
                        enterprise; or
                            ``(iii) breaches any fiduciary duty; and
                    ``(B) knowingly or recklessly causes a substantial 
                loss to such enterprise or a substantial pecuniary gain 
                or other benefit to such party by reason of such 
                violation, practice, or breach,
        shall forfeit and pay a civil penalty in an amount not to 
        exceed the applicable maximum amount determined under paragraph 
        (4) for each day during which such violation, practice, or 
        breach continues.
            ``(4) Maximum amounts of penalties for any violation 
        described in paragraph (3).--The maximum daily amount of any 
        civil penalty which may be assessed pursuant to paragraph (3) 
        for any violation, practice, or breach described in such 
        paragraph is--
                    ``(A) in the case of any person other than an 
                enterprise, an amount not to exceed $2,000,000; and
                    ``(B) in the case of any enterprise, $2,000,000.''; 
                and
            (3) in subsection (d)--
                    (A) by striking ``or director'' each place such 
                term appears and inserting ``director, or enterprise-
                affiliated party'';
                    (B) by striking ``request the Attorney General of 
                the United States to'';
                    (C) by inserting ``, or the United States district 
                court within the jurisdiction of which the headquarters 
                of the enterprise is located,'' after ``District of 
                Columbia''; and
                    (D) by striking ``, or may, under the direction and 
                control of the Attorney General, bring such an 
                action''.

SEC. 156. CRIMINAL PENALTY.

    Subtitle C of title XIII of the Housing and Community Development 
Act of 1992 (12 U.S.C. 4631 et seq.) is amended by inserting after 
section 1377 (as added by this Act) the following:

``SEC. 1378. CRIMINAL PENALTY.

    ``Whoever, being subject to an order in effect under section 1377, 
without the prior written approval of the Director, knowingly 
participates, directly or indirectly, in any manner (including by 
engaging in an activity specifically prohibited in such an order) in 
the conduct of the affairs of any enterprise shall, notwithstanding 
section 3571 of title 18, be fined not more than $1,000,000, imprisoned 
for not more than 5 years, or both.''.

                    Subtitle D--Reports to Congress

SEC. 161. STUDIES AND REPORTS.

    (a) Insured Depository Institution Holdings of Enterprise Debt and 
Mortgage-Backed Securities.--Not later than 180 days after the date of 
enactment of the Federal Enterprise Regulatory Reform Act of 2003, the 
Secretary of the Treasury, the Board of Governors of the Federal 
Reserve System, the Board of Directors of the Federal Deposit Insurance 
Corporation, and the National Credit Union Administration Board shall 
jointly submit a report to Congress regarding--
            (1) the extent to which obligations issued or guaranteed by 
        the enterprises (including mortgage-backed securities) are held 
        by federally insured depository institutions, including such 
        extent by type of institution and such extent relative to the 
        capital of the institution;
            (2) the extent to which the unlimited holdings by federally 
        insured depository institutions of the obligations of the 
        enterprises could produce systemic risk issues, particularly 
        for the safety and soundness of the banking system in the 
        United States, in the event of default or failure by an 
        enterprise; and
            (3) the effects on the enterprises, the banking industry, 
        and mortgage markets, if prudent limits on the holdings of 
        enterprise obligations were placed on federally insured 
        depository institutions.
    (b) Portfolio Operations, Risk Management, and Mission.--
            (1) In general.--Not later than one year after the date of 
        enactment of the Federal Enterprise Regulatory Reform Act of 
        2003, the Director shall submit a report to Congress--
                    (A) describing the holdings of the enterprises in 
                retained mortgages and repurchased mortgage-backed 
                securities and the use of derivatives for hedging 
                purposes;
                    (B) describing the extent of such holdings relative 
                to other assets and the risk implications of such 
                holdings;
                    (C) containing an analysis of such holdings for 
                safety and soundness or mission compliance purposes; 
                and
                    (D) containing an assessment of whether such 
                holdings and other assets of the enterprises fulfill 
                the mission purposes of the enterprises under the 
                Federal National Mortgage Association Charter Act (12 
                U.S.C. 1716 et seq.) and the Federal Home Loan Mortgage 
                Corporation Act (12 U.S.C. 1451 et seq.).
            (2) Consultation.--The Director shall consult with the 
        Comptroller General of the United States in preparing the 
        report under this subsection and in conducting any research, 
        analyses, and assessments for the report.
    (c) Study of Merger of FHFB With OFES.--
            (1) In general.--The Secretary of the Treasury, after 
        consultation with the Secretary of Housing and Urban 
        Development and the Board of Governors of the Federal Reserve 
        System, shall study the feasibility and advisability of merging 
        the Federal Housing Finance Board and the Office of Federal 
        Enterprise Supervision of the Department of the Treasury.
            (2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary of the Treasury shall 
        submit a report to Congress on the results of the study 
        conducted under paragraph (1).
    (d) Study of Consolidation of OTS With OFES.--
            (1) Study.--The Secretary of the Treasury shall study the 
        feasibility and efficacy of consolidating the Office of Thrift 
        Supervision with the Office of Federal Enterprise Supervision 
        of the Department of the Treasury.
            (2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary of the Treasury shall 
        submit a report to Congress on the results of the study 
        conducted under paragraph (1).
    (e) Recommendations.--Each report submitted pursuant to this 
section shall include specific recommendations of appropriate policies, 
limitations, regulations, legislation, or other actions to deal 
appropriately and effectively with the issues addressed by such report.
    (f) Definitions.--As used in this section, the terms ``Director'' 
and ``enterprise'' have the meanings given those terms under section 
1303 of the Housing and Community Development Act of 1992 (42 U.S.C. 
4502).
    (g) Clerical Amendments.--Part 3 of subtitle A of title XIII the 
Housing and Community Development Act of 1992 (106 Stat. 3969) is 
amended--
            (1) by striking sections 1351, 1352, and 1353 (Public Law 
        102-550; 106 Stat. 3969), except that the provisions of law 
        amended by such sections repealed shall not be affected by such 
        repeal; and
            (2) by striking sections 1354, 1355, and 1356 (12 U.S.C. 
        4601-3).

                     Subtitle E--General Provisions

SEC. 171. CONFORMING AND TECHNICAL AMENDMENTS.

    (a) Amendments to 1992 Act.--Title XIII of the Housing and 
Community Development Act of 1992 (12 U.S.C. 4501 et seq.), as amended 
this Act, is further amended--
            (1) in section 1315 (12 U.S.C. 4515)--
                    (A) in subsection (a)--
                            (i) in the subsection heading, by striking 
                        ``Office Personnel'' and inserting ``In 
                        General''; and
                            (ii) by striking ``The'' and inserting 
                        ``Subject to title II of the Federal Enterprise 
                        Regulatory Reform Act of 2003, the'';
                    (B) in subsection (d)--
                            (i) in the subsection heading, by striking 
                        ``HUD'' and inserting ``Department of the 
                        Treasury''; and
                            (ii) by striking ``Housing and Urban 
                        Development'' and inserting ``the Department of 
                        the Treasury''; and
                    (C) by striking subsection (f);
            (2) in section 1319A (12 U.S.C. 4520)--
                    (A) by striking ``(a) In General.--''; and
                    (B) by striking subsection (b);
            (3) in section 1319F (12 U.S.C. 4525), by striking 
        paragraph (2);
            (4) in the section heading for section 1328, by striking 
        ``secretary'' and inserting ``director'';
            (5) in section 1361 (12 U.S.C. 4611)--
                    (A) in subsection (e)(1), by striking the first 
                sentence and inserting the following: ``The Director 
                shall establish the risk-based capital test under this 
                section by regulation.''; and
                    (B) in subsection (f), by striking ``the 
                Secretary,'';
            (6) in section 1364(c) (12 U.S.C. 4614(c)), by striking the 
        last sentence;
            (7) in section 1367(a)(2) (12 U.S.C. 4617(a)(2)), by 
        striking ``with the written concurrence of the Secretary of the 
        Treasury,'';
            (8) by striking section 1383;
            (9) by striking ``Committee on Banking, Finance and Urban 
        Affairs'' and inserting ``Committee on Financial Services'' 
        each place such term appears in sections 1319B, 1319G(c), 
        1328(a), 1336(b)(3)(C), 1337, and 1369(a)(3); and
            (10) by striking ``Secretary'' and inserting ``Director'' 
        each place such term appears in--
                    (A) subpart A of part 2 of subtitle A (except in 
                sections 1322, 1324, and 1325); and
                    (B) subtitle B (except in section 1361(d)(1) and 
                1369E); and
    (b) Amendments to Fannie Mae Charter Act.--The Federal National 
Mortgage Association Charter Act (12 U.S.C. 1716 et seq.) is amended--
            (1) by striking ``Director of the Office of Federal Housing 
        Enterprise Oversight of the Department of Housing and Urban 
        Development'' each place such term appears, and inserting 
        ``Director of the Office of Federal Enterprise Supervision of 
        the Department of the Treasury'', in--
                    (A) section 303(c)(2) (12 U.S.C. 1718(c)(2));
                    (B) section 309(d)(3)(B) (12 U.S.C. 
                1723a(d)(3)(B)); and
                    (C) section 309(k)(1); and
            (2) in section 309(n)--
                    (A) in paragraph (1), by inserting ``the Director 
                of the Office of Federal Enterprise Supervision of the 
                Department of the Treasury,'' after ``Senate,''; and
                    (B) in paragraph (3)(B), by striking ``Secretary'' 
                and inserting ``Director of the Office of Federal 
                Enterprise Supervision of the Department of the 
                Treasury''.
    (c) Amendments to Freddie Mac Act.--The Federal Home Loan Mortgage 
Corporation Act (12 U.S.C. 1451 et seq.) is amended--
            (1) by striking ``Director of the Office of Federal Housing 
        Enterprise Oversight of the Department of Housing and Urban 
        Development'' each place such term appears, and inserting 
        ``Director of the Office of Federal Enterprise Supervision of 
        the Department of the Treasury'', in--
                    (A) section 303(b)(2) (12 U.S.C. 1452(b)(2));
                    (B) section 303(h)(2) (12 U.S.C. 1452(h)(2)); and
                    (C) section 307(c)(1) (12 U.S.C. 1456(c)(1));
            (2) in section 306(i) (12 U.S.C. 1455(i))--
                    (A) by striking ``section 1316(c)'' and inserting 
                ``section 306(c)''; and
                    (B) by striking ``section 106'' and inserting 
                ``section 1316''; and
            (3) in section 307 (12 U.S.C. 1456)--
                    (A) in subsection (f)--
                            (i) in paragraph (1), by inserting ``the 
                        Director of the Office of Federal Enterprise 
                        Supervision of the Department of the 
                        Treasury,'' after ``Senate,''; and
                            (ii) in paragraph (3)(B), by striking 
                        ``Secretary'' and inserting ``Director of the 
                        Office of Federal Enterprise Supervision of the 
                        Department of the Treasury''.
    (d) Amendment to Title 18, United States Code.--Section 1905 of 
title 18, United States Code, is amended by striking ``Office of 
Federal Housing Enterprise Oversight'' and inserting ``Office of 
Federal Enterprise Supervision of the Department of the Treasury''.
    (e) Amendments to Flood Disaster Protection Act of 1973.--Section 
102(f)(3)(A) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 
4012a(f)(3)(A)) is amended by striking ``Director of the Office of 
Federal Housing Enterprise Oversight of the Department of Housing and 
Urban Development'' and inserting ``Director of the Office of Federal 
Enterprise Supervision of the Department of the Treasury''.
    (f) Amendment to Department of Housing and Urban Development Act.--
Section 5 of the Department of Housing and Urban Development Act (42 
U.S.C. 3534) is amended by striking subsection (d).
    (g) Amendment to Title 5, United States Code.--Section 5315 of 
title 5, United States Code, is amended by striking the item relating 
to the Director of the Office of Federal Housing Enterprise Oversight, 
Department of Housing and Urban Development and inserting the following 
new item:
            ``Director of the Office of Federal Enterprise Oversight, 
        Department of the Treasury.''.

SEC. 172. EFFECTIVE DATE.

    Except as specifically provided otherwise in this title, the 
amendments made by this title shall take effect on, and shall apply 
beginning on, the expiration of the 1-year period beginning on the date 
of enactment of this Act.

        TITLE II--TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY

SEC. 201. ABOLISHMENT OF OFHEO.

    (a) In General.--Effective at the end of the 1-year period 
beginning on the date of enactment of this Act, the Office of Federal 
Housing Enterprise Oversight of the Department of Housing and Urban 
Development and the positions of the Director and Deputy Director of 
such Office are abolished.
    (b) Disposition of Affairs.--During the 1-year period beginning on 
the date of enactment of this Act, the Director of the Office of 
Federal Housing Enterprise Oversight shall, solely for the purpose of 
winding up the affairs of the Office of Federal Housing Enterprise 
Oversight--
            (1) manage the employees of such Office and provide for the 
        payment of the compensation and benefits of any such employee 
        which accrue before the effective date of any transfer of such 
        employee pursuant to section 203; and
            (2) may take any other action necessary for the purpose of 
        winding up the affairs of the Office.
    (c) Status of Employees as Federal Agency Employees.--The 
amendments made by title I and the abolishment of the Office of Federal 
Housing Enterprise Oversight under subsection (a) of this section may 
not be construed to affect the status of any employee of such Office as 
employees of an agency of the United States for purposes of any other 
provision of law during any time such employee is so employed.
    (d) Use of Property and Services.--
            (1) Property.--The Director of the Office of Federal 
        Enterprise Supervision of the Department of the Treasury may 
        use the property of the Office of Federal Housing Enterprise 
        Oversight to perform functions that have been transferred to 
        the Director of the Office of Federal Enterprise Supervision 
        for such time as is reasonable to facilitate the orderly 
        transfer of functions under any other provision of this Act, or 
        any amendment made by this Act 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 Office of Federal Housing 
        Enterprise Oversight before the expiration of the period under 
        subsection (a) in connection with functions that are 
        transferred to the Director of the Office of Federal Enterprise 
        Supervision of the Department of the Treasury shall--
                    (A) continue to provide such services, on a 
                reimbursable basis, until the transfer of such 
                functions is complete; and
                    (B) consult with any such agency to coordinate and 
                facilitate a prompt and reasonable transition.
    (e) 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 Director 
        of the Office of Federal Housing Enterprise Oversight, or any 
        other person, which--
                    (A) arises under or pursuant to the title XIII of 
                the Housing and Community Development Act of 1992 (12 
                U.S.C. 4501 et seq.), the Federal National Mortgage 
                Association Charter Act (12 U.S.C. 1716 et seq.), the 
                Federal Home Loan Mortgage Corporation Act (12 U.S.C. 
                1451 et seq.), or any other provision of law applicable 
                with respect to such Office; and
                    (B) existed on the day before the abolishment under 
                subsection (a) of this section.
            (2) Continuation of suits.--No action or other proceeding 
        commenced by or against the Director of the Office of Federal 
        Housing Enterprise Oversight shall abate by reason of the 
        enactment of this Act, except that the Director of the Office 
        of Federal Enterprise Supervision of the Department of the 
        Treasury shall be substituted for the Director of the Office of 
        Federal Housing Enterprise Oversight as a party to any such 
        action or proceeding.

SEC. 202. CONTINUATION AND COORDINATION OF CERTAIN REGULATIONS.

    All regulations, orders, determinations, and resolutions that--
            (1) were issued, made, prescribed, or allowed to become 
        effective by--
                    (A) the Office of Federal Housing Enterprise 
                Oversight;
                    (B) the Secretary of Housing and Urban Development 
                and that relate to the Secretary's authority under--
                            (i) title XIII of the Housing and Community 
                        Development Act of 1992 (12 U.S.C. 4501 et 
                        seq.);
                            (ii) under the Federal National Mortgage 
                        Association Charter Act (12 U.S.C. 1716 et 
                        seq.), with respect to the Federal National 
                        Mortgage Association; or
                            (iii) the Federal Home Loan Mortgage 
                        Corporation Act (12 U.S.C. 1451 et seq.); or
                    (C) a court of competent jurisdiction and that 
                relate to functions transferred by this Act; and
            (2) are in effect on the date of the abolishment under 
        section 201(a) of this Act,
shall remain in effect according to the terms of such regulations, 
orders, determinations, and resolutions, and shall be enforceable by or 
against the Director of the Office of Federal Enterprise Supervision of 
the Department of the Treasury until modified, terminated, set aside, 
or superseded in accordance with applicable law by such Board, any 
court of competent jurisdiction, or operation of law.

SEC. 203. TRANSFER AND RIGHTS OF EMPLOYEES OF OFHEO.

    (a) Authority to Transfer.--The Director of the Office of Federal 
Enterprise Supervision of the Department of the Treasury may transfer 
employees of the Office of Federal Housing Enterprise Oversight to the 
Office of Federal Enterprise Supervision for employment no later than 
the date of the abolishment under section 201(a) of this Act, as the 
Director considers appropriate. This Act and the amendments made by 
this Act shall not be considered to result in the transfer of any 
function from one agency to another or the replacement of one agency by 
another, for purposes of section 3505 of title 5, United States Code, 
except to the extent that the Director of the Office of Federal 
Enterprise Supervision specifically provides so.
    (b) Appointment Authority for Excepted and Senior Executive Service 
Employees.--
            (1) In general.--Subject to paragraph (2), in the case of 
        employees occupying positions in the excepted service or the 
        Senior Executive Service, any appointment authority established 
        pursuant to law or regulations of the Office of Personnel 
        Management for filling such positions shall be transferred.
            (2) Decline of transfer.--The Director of the Office of 
        Federal Enterprise Supervision of the Department of the 
        Treasury may decline a transfer of authority under paragraph 
        (1) (and the employees appointed pursuant thereto) to the 
        extent that such authority relates to positions excepted from 
        the competitive service because of their confidential, policy-
        making, policy-determining, or policy-advocating character, and 
        noncareer positions in the Senior Executive Service (within the 
        meaning of section 3132(a)(7) of title 5, United States Code).
    (c) Reorganization.--If the Director of the Office of Federal 
Enterprise Supervision of the Department of the Treasury determines, 
after the end of the 1-year period beginning on the date of the 
abolishment under section 201(a), that a reorganization of the combined 
work force is required, that reorganization shall be deemed a major 
reorganization for purposes of affording affected employees retirement 
under section 8336(d)(2) or 8414(b)(1)(B) of title 5, United States 
Code.
    (d) Employee Benefit Programs.--
            (1) In general.--Any employee of the Office of Federal 
        Housing Enterprise Oversight accepting employment with the 
        Director of the Office of Federal Enterprise Supervision of the 
        Department of the Treasury as a result of a transfer under 
        subsection (a) may retain for 18 months after the date such 
        transfer occurs membership in any employee benefit program of 
        the Director of the Office of Federal Enterprise Supervision of 
        the Department of the Treasury or the Office of Federal Housing 
        Enterprise Oversight, as applicable, including insurance, to 
        which such employee belongs on the date of the abolishment 
        under section 201(a) 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 
                Director of the Office of Federal Enterprise 
                Supervision.
            (2) Payment of differential.--The difference in the costs 
        between the benefits which would have been provided by such 
        agency and those provided by this section shall be paid by the 
        Director of the Office of Federal Enterprise Supervision. If 
        any employee elects to give up membership in a health insurance 
        program or the health insurance program is not continued by 
        such Director, the employee shall be permitted to select an 
        alternate Federal health insurance program within 30 days of 
        such election or notice, without regard to any other regularly 
        scheduled open season.

SEC. 204. TRANSFER OF PROPERTY AND FACILITIES.

    Upon the abolishment under section 201(a), all property of the 
Office of Federal Housing Enterprise Oversight shall transfer to the 
Director of the Office of Federal Enterprise Supervision of the 
Department of the Treasury.
                                 <all>