[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3644 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 3644

 To increase standardization, transparency, and to ensure the rule of 
  law in the mortgage-backed security system, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           December 13, 2011

 Mr. Garrett (for himself, Mr. Bachus, Mr. Hensarling, Mr. Schweikert, 
Mr. Neugebauer, Mrs. Biggert, and Mrs. Capito) introduced the following 
    bill; which was referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To increase standardization, transparency, and to ensure the rule of 
  law in the mortgage-backed security system, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Private Mortgage 
Market Investment Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; Table of contents.
                TITLE I--STANDARDIZATION AND UNIFORMITY

Sec. 101. Facilitating continued standardization and uniformity.
Sec. 102. Repeal of credit risk retention provisions.
Sec. 103. Exemption from registration of certain securities conforming 
                            to standard securitization agreements.
Sec. 104. Judicial review.
Sec. 105. Liability for misleading statements.
Sec. 106. Unlawful representation.
Sec. 107. Penalties.
Sec. 108. Contrary stipulations void.
                         TITLE II--TRANSPARENCY

Sec. 201. Requirements for the disclosure of loan-level information to 
                            investors, rating agencies, and regulators.
Sec. 202. Mandatory period for review of loan-level information prior 
                            to investment.
Sec. 203. Dissemination of pricing information of asset-backed 
                            securities.
Sec. 204. Alphanumeric identification of residential mortgage loans in 
                            asset-backed securities.
                  TITLE III--ENSURING THE RULE OF LAW

Sec. 301. Ensure rule of law and legal certainty.
Sec. 302. Limitation on mortgages held by loan servicers.
Sec. 303. Clarification of qualified mortgage exception.
Sec. 304. FDIC safe harbor.
Sec. 305. Effective date.

                TITLE I--STANDARDIZATION AND UNIFORMITY

SEC. 101. FACILITATING CONTINUED STANDARDIZATION AND UNIFORMITY.

    (a) Establishment of Standard Mortgage Classifications.--
            (1) Establishment.--The Director of the Federal Housing 
        Finance Agency (hereinafter in this Act referred to as the 
        ``Director'') shall, for purposes of this section, prescribe 
        classifications for mortgages having various degrees of credit 
        risk, ranging from a classification of mortgages having little 
        to no credit risk to a classification of mortgages having 
        higher credit risk, with the goals of maximizing the pricing of 
        credit risk, allowing for the trading of securities 
        collateralized by the classifications of mortgages established 
        pursuant to this section in a forward market, and maintaining 
        well functioning liquid markets in securities collateralized by 
        each of the classifications of mortgages established pursuant 
        to this section.
            (2) Underwriting criteria standards.--
                    (A) Underwriting criteria.--For each of the 
                classifications of mortgages established under 
                paragraph (1), the Director shall establish standards 
                for each of the following underwriting criteria:
                            (i) Debt-to-income ratio.--The ratio of the 
                        amount of the total monthly debt of the 
                        mortgagor to the amount of the monthly income 
                        of the mortgagor.
                            (ii) Loan-to-value ratio.--The ratio of the 
                        original principal obligation under the 
                        mortgage to the original value of the residence 
                        subject to the mortgage.
                            (iii) Credit history.--Information on the 
                        credit history of the mortgagor, including the 
                        credit score of the mortgagor.
                            (iv) Loan documentation.--The extent of 
                        loan documentation and verification of the 
                        financial resources of the mortgagor used to 
                        qualify the mortgagor for the mortgage.
                            (v) Occupancy.--Whether the residence 
                        subject to the mortgage is occupied by the 
                        mortgagor.
                            (vi) Credit enhancement.--Whether any 
                        mortgage insurance or other type of insurance 
                        or credit enhancement was obtained at the time 
                        of origination.
                            (vii) Loan payment terms.--
                                    (I) In general.--The terms of the 
                                mortgage that determine the magnitude 
                                and timing of payments due from the 
                                mortgagor, including the term to 
                                maturity of the mortgage, the frequency 
                                of payment, the type of amortization, 
                                any prepayment penalties, and whether 
                                the interest rate is fixed or may vary.
                                    (II) Inclusion of 30-year fixed 
                                interest rate.--Terms established under 
                                subclause (I) shall include a 30-year 
                                fixed interest rate mortgage.
                            (viii) Other.--Such other underwriting 
                        criteria as the Director may establish 
                        consistent with the goals of this title.
                    (B) Objective.--In developing the underwriting 
                criteria standards under subparagraph (A), the Director 
                shall seek to ensure that such standards are readily 
                identifiable to sponsors of, and investors in, 
                securities collateralized by mortgages so that such 
                sponsors and investors can clearly determine the 
                classification to which a mortgage belongs.
            (3) Definitions.--The Director shall, for purposes of this 
        subsection, prescribe definitions for each of the following 
        terms:
                    (A) Mortgage.--The term ``mortgage'', which 
                definition shall include only mortgages on residential 
                properties.
                    (B) Default.--The term ``default'', with respect to 
                a mortgage.
                    (C) Delinquency.--The term ``delinquency'', with 
                respect to a mortgage.
                    (D) Loan documentation.--The term ``loan 
                documentation'', with respect to a mortgage.
                    (E) Additional terms.--Such other terms as the 
                Director may establish.
    (b) Standard Form Securitization Agreements.--
            (1) In general.--The Director shall develop, adopt, and 
        publish standard form securitization agreements for mortgages 
        established under subsection (a).
            (2) Required content.--The standard form securitization 
        agreements to be developed under paragraph (1) shall only 
        include terms relating to--
                    (A) pooling and servicing;
                    (B) purchase and sale;
                    (C) representations and warranties, including 
                representations and warranties as to compliance or 
                conformity with standards established by the Director 
                pursuant to subsections (c), (d), (e), and (f), as 
                appropriate;
                    (D) indemnification and remedies, including 
                principles of a repurchase program that will ensure an 
                appropriate amount of risk retention under the 
                representations and warranties set forth under 
                subparagraph (C); and
                    (E) the qualification, responsibilities, and duties 
                of trustees.
            (3) Public involvement.--In issuing rules and regulations 
        under this section, the Director shall allow appropriate notice 
        and comment in accordance with the chapter 5 of title 5, United 
        States Code (commonly referred to as the ``Administrative 
        Procedures Act''). The Director shall work with industry 
        groups, including servicers, originators, and mortgage 
        investors to develop the standards under this title.
            (4) Qualified security.--For purposes of this title, the 
        term ``qualified security'' means a security that--
                    (A) is issued in accordance with a standard form 
                securitization agreement;
                    (B) is issued by a qualified sponsor;
                    (C) is collateralized by a class, or multiple 
                classes, of mortgages established under this title; and
                    (D) is not guaranteed, in whole or in part, by the 
                United States Government.
    (c) Standards for Servicer Reporting.--The Director shall develop, 
adopt, and publish standards for the reporting obligations of servicers 
of any mortgage that serves as collateral for a qualified security.
    (d) Standards for Servicing.--The Director shall develop, adopt, 
and publish--
            (1) servicing standards, including for the modification, 
        restructuring, or work-out of any mortgage that serves as 
        collateral for a qualified security; and
            (2) a servicer succession plan which may include provisions 
        for--
                    (A) a specialty servicer that can replace the 
                existing servicer if the performance of the mortgage 
                pool deteriorates to specified levels; and
                    (B) a plan to achieve consistency in servicing 
                systems related to systematic note-taking, consistent 
                mailing addresses, and other points of contact for 
                borrowers to use, among other items.
    (e) Standards for Documentation.--The Director shall develop, adopt 
and publish standards for documentation used to verify the financial 
resources of a mortgagor and to qualify the mortgagor for any mortgage 
that may become collateral for any qualified security, including the 
form, content, and method of documentation of any such mortgage. Such 
standards shall also address any custodial or delivery obligations 
related to such documents.
    (f) Standards for Qualified Sponsors.--
            (1) In general.--The Director shall develop, adopt, and 
        publish standards for a sponsor to qualify as a qualified 
        sponsor. Such standards shall only include--
                    (A) the experience and integrity of the sponsor and 
                its principals, including compliance history with 
                Federal and State laws;
                    (B) the adequacy of insurance and fidelity coverage 
                of the sponsor with respect to errors and omissions; 
                and
                    (C) a requirement that the sponsor submit audited 
                financial statements to the Director, who shall make 
                such statements publicly available through the Federal 
                Housing Finance Agency's website.
            (2) Application process.--
                    (A) In general.--The Director shall establish an 
                application process for the qualification of sponsors, 
                in such form and manner and requiring such information 
                as the Director may require, in accordance with 
                standards adopted under paragraph (1).
                    (B) Approval.--The Director shall approve any 
                application made pursuant to subparagraph (A) unless 
                the sponsor does not meet the standards adopted under 
                paragraph (1).
                    (C) Publication.--The Director shall publish a list 
                of newly qualified sponsors in the Federal Register and 
                maintain an updated list of qualified sponsors on the 
                Federal Housing Finance Agency's website.
            (3) Review and revocation of qualified status.--
                    (A) In general.--The Director may only review the 
                status of a qualified sponsor if the Director is 
                notified that a claim has been made against the sponsor 
                by a trustee with respect to a violation of a 
                contractual term in a securitization document of the 
                sponsor.
                    (B) Revocation.--
                            (i) In general.--Subject to subparagraph 
                        (C), if the Director determines, in a review 
                        pursuant to subparagraph (A), that a sponsor no 
                        longer meets the standards for qualification, 
                        the Director shall revoke the sponsor's 
                        qualified status.
                            (ii) Construction.--The revocation of a 
                        sponsor's qualified status under this 
                        subparagraph shall--
                                    (I) have no effect on the qualified 
                                status of any security; and
                                    (II) not relieve the sponsor of any 
                                representations, warranties, or 
                                repurchase obligations related to any 
                                qualified security issued before such 
                                revocation.
                    (C) Grace period.--The Director shall issue 
                regulations that permit a qualified sponsor who no 
                longer meets the standards for qualification to have a 
                grace period during which the sponsor can work to meet 
                such standards without losing the sponsor's qualified 
                status.
                    (D) Publication.--The Director shall publish a list 
                of sponsors who lost their qualified status in the 
                Federal Register and maintain an updated list of such 
                sponsors on the Federal Housing Finance Agency's 
                website.
    (g) Standards for Trustees.--
            (1) In general.--There shall at all times be one or more 
        trustee for each pool of mortgages that acts as collateral for 
        a qualified security.
            (2) Rulemaking.--The Director shall issue regulations 
        regarding the qualifications of trustees under paragraph (1) 
        that shall, to the extent practicable, be the same as the 
        qualification provisions applicable to trustees under section 
        310(a) of the Trust Indenture Act of 1934 (15 U.S.C. 77jjj(a)).
            (3) Conflicts of interest.--The Director shall issue 
        conflict of interest regulations that apply to a qualified 
        trustee. Such regulations shall, to the extent practicable, be 
        the same as those conflict of interest provisions applicable to 
        an indenture trustee under section 310(b) of the Trust 
        Indenture Act of 1934 (15 U.S.C. 77jjj(b)).
            (4) Reporting of claims.--Any time a trustee brings a claim 
        against a qualified sponsor on behalf of investors with respect 
        to a standard form securitization agreement, the trustee shall 
        notify the Director of such claim.
            (5) Protection of investor rights.--For the purpose of 
        protecting investor rights, each trustee shall--
                    (A) maintain a list of all investors (beneficial 
                owners) in a qualified security;
                    (B) update such list from time to time;
                    (C) not make such list available to investors 
                (beneficial owners); and
                    (D) act as a means to communicate information about 
                the qualified security to investors (beneficial owners) 
                and act as a means for investors (beneficial owners) to 
                communicate with each other.
            (6) No liability for certain communications.--A trustee 
        shall not be liable for the content of any information provided 
        to the trustee by an investor (beneficial owner) that the 
        trustee communicates to another investor (beneficial owner).
            (7) Investor (beneficial owner) notification of trustee.--A 
        person who becomes an investor (beneficial owner) in a 
        qualified security shall promptly notify the trustee of such 
        security of the change in ownership.
    (h) Independent Third Party.--If the majority of investors in a 
pool of qualified securities choose to hire an independent third party 
to act on behalf of the best interests of the investors (beneficial 
owners), such party shall--
            (1) be granted access to the loan documents for the 
        mortgage loans backing such security and all servicing reports 
        the servicer provides to investors (beneficial owners) or the 
        trustee;
            (2) be granted access to the list of investors (beneficial 
        owners) maintained by the trustee, on the condition that the 
        independent third party will not make the list available to the 
        investors (beneficial owners); and
            (3) have the right, on behalf of the investors (beneficial 
        owners), to inform the trustee of such securities of any breach 
        of the securitization agreement identified by the third party.
    (i) Timing; Authority To Revise Standards.--
            (1) Timing.--The Director shall develop, adopt, and publish 
        the standards required under this title, not later than the 
        expiration of the 12-month period beginning upon the date of 
        the enactment of this title.
            (2) Authority to revise.--
                    (A) In general.--The Director may review, revise 
                and, if revised, re-publish any standard form 
                securitization agreement or other standard required to 
                be developed under this section if the Director 
                determines review or revision to be necessary or 
                appropriate to satisfy the goals of this title.
                    (B) Application of revisions.--Any revision made 
                pursuant to subparagraph (A) shall only apply to 
                securitizations made after the date of such revision.
    (j) Mandatory Arbitration.--
            (1) In general.--All disputes between an owner of a 
        qualified security and the qualified sponsor of such security 
        relating to representations and warranties shall be subject to 
        mandatory arbitration procedures established by the Director, 
        in accordance with current market practices.
            (2) Selection of arbitrator.--Investors (beneficial owners) 
        and sponsors subject to a dispute described under paragraph (1) 
        shall have the right to agree on an independent arbitrator. If 
        the parties cannot agree on an independent arbitrator, the 
        Director shall select an independent arbitrator for the 
        parties.
            (3) Reporting duty of arbitrator.--
                    (A) Upon commencement.--The arbitrator shall 
                provide the Federal Housing Finance Agency with notice 
                upon the commencement of any arbitration under this 
                subsection.
                    (B) Upon conclusion.--Upon the conclusion of any 
                arbitration under this subsection, the arbitrator shall 
                provide the Federal Housing Finance Agency with--
                            (i) the decision reached by the arbitrator; 
                        and
                            (ii) the basis for the arbitrator's 
                        decision, including any evidence or testimony 
                        received during the arbitration process.
    (k) Disclosure of Information.--
            (1) In general.--
                    (A) In general.--Not later than 6 months after the 
                date of the enactment of this Act, the Director shall, 
                by rule--
                            (i) require sponsors of qualified 
                        securities to disclose all pertinent 
                        information relating to the residential 
                        mortgage loans that comprise such securities, 
                        including information set forth in the 
                        underwriting standards established under 
                        subsection (a); and
                            (ii) allow for the trading of qualified 
                        securities under this title in a forward 
                        market.
                    (B) Privacy protections.--In prescribing the rules 
                required under this paragraph, the Director shall take 
                into consideration issues of consumer privacy and all 
                statutes, rules, and regulations related to privacy of 
                consumer credit information and personally identifiable 
                information. Such rules shall expressly prohibit the 
                identification of specific borrowers.
            (2) Consultation.--In issuing any rules or regulations 
        under this subsection, the Director shall consult with the 
        Securities and Exchange Commission.

SEC. 102. REPEAL OF CREDIT RISK RETENTION PROVISIONS.

    (a) In General.--Section 15G of the Securities Exchange Act of 1934 
(15 U.S.C. 78o-11) is repealed and any regulations promulgated under 
such section shall have no force or effect.
    (b) Conforming Amendment.--Section 27B of the Securities Act of 
1933 is amended by striking subsection (d).
    (c) Prohibition.--The Office of the Comptroller of the Currency, 
the Board of Governors of the Federal Reserve System, the Federal 
Deposit Insurance Corporation, the Bureau of Consumer Financial 
Protection, and the Securities and Exchange Commission shall not issue 
any rule or regulation to require risk retention, any premium capture 
cash reserve account, or any similar mechanism, unless directly 
authorized by an Act of Congress.

SEC. 103. EXEMPTION FROM REGISTRATION OF CERTAIN SECURITIES CONFORMING 
              TO STANDARD SECURITIZATION AGREEMENTS.

    Section 3(a) of the Securities Act of 1933 (15 U.S.C. 77c(a)) is 
amended by adding at the end the following:
            ``(14) Any qualified security, as such term is defined 
        under section 101(b)(4) of the Private Mortgage Market 
        Investment Act.''.

SEC. 104. JUDICIAL REVIEW.

    (a) In General.--Orders of the Federal Housing Finance Agency under 
this title shall be subject to review in the same manner, upon the same 
conditions, and to the same extent, as provided in section 9 of the 
Securities Act of 1933, with respect to orders of the Securities and 
Exchange Commission under such title.
    (b) Jurisdiction.--Jurisdiction of offenses and violations under, 
and jurisdiction and venue of suits and actions brought to enforce any 
liability or duty created by, this Act, or any rules or regulations or 
orders prescribed under the authority thereof, shall be as provided in 
section 22(a) of the Securities Act of 1933.

SEC. 105. LIABILITY FOR MISLEADING STATEMENTS.

    (a) In General.--Any person who shall make or cause to be made any 
statement in any application, report, or document filed with the 
Federal Housing Finance Agency pursuant to any provisions of this 
title, or any rule, regulation, or order thereunder, which statement 
was at the time and in the light of the circumstances under which it 
was made false or misleading with respect to any material fact, or who 
shall omit to state any material fact required to be stated therein or 
necessary to make the statements therein not misleading, shall be 
liable to any person (not knowing that such statement was false or 
misleading or of such omission) who, in reliance upon such statement or 
omission, shall have purchased or sold a security issued under the 
indenture to which such application, report, or document relates, for 
damages caused by such reliance, unless the person sued shall prove 
that he acted in good faith and had no knowledge that such statement 
was false or misleading or of such omission. A person seeking to 
enforce such liability may sue at law or in equity in any court of 
competent jurisdiction. In any such suit the court may, in its 
discretion, require an undertaking for the payment of the costs of such 
suit and assess reasonable costs, including reasonable attorneys' fees, 
against either party litigant, having due regard to the merits and good 
faith of the suit or defense. No action shall be maintained to enforce 
any liability created under this section unless brought within one year 
after the discovery of the facts constituting the cause of action and 
within three years after such cause of action accrued.
    (b) Rights and Remedies Under Other Law.--The rights and remedies 
provided by this title shall be in addition to any and all other rights 
and remedies that may exist under the Securities Act of 1933 or the 
Securities Exchange Act of 1934 or otherwise at law or in equity; but 
no person permitted to maintain a suit for damages under the provisions 
of this title shall recover, through satisfaction of judgment in one or 
more actions, a total amount in excess of his actual damages on account 
of the act complained of.

SEC. 106. UNLAWFUL REPRESENTATION.

    It shall be unlawful for any person in offering, selling, or 
issuing any security pursuant to this title to represent or imply in 
any manner whatsoever that any action or failure to act by the Federal 
Housing Finance Agency in the administration of this title means that 
the Federal Housing Finance Agency has in any way passed upon the 
merits of, or given approval to, any trustee, indenture, or security, 
or any transaction or transactions therein, or that any such action or 
failure to act with regard to any statement or report filed with or 
examined by the Federal Housing Finance Agency pursuant to this title 
or any rule, regulation, or order thereunder, has the effect of a 
finding by the Federal Housing Finance Agency that such statement or 
report is true and accurate on its face or that it is not false or 
misleading.

SEC. 107. PENALTIES.

    Any person who willfully violates any provision of this title or 
any rule, regulation, or order thereunder, or any person who willfully, 
in any application, report, or document filed or required to be filed 
under the provisions of this title or any rule, regulation, or order 
thereunder, makes any untrue statement of a material fact or omits to 
state any material fact required to be stated therein or necessary to 
make the statements therein not misleading, shall be subject to the 
penalties set forth under section 325 of the Trust Indenture Act of 
1934 (15 U.S.C. 77yyy).

SEC. 108. CONTRARY STIPULATIONS VOID.

    Any condition, stipulation, or provision binding any person to 
waive compliance with any provision of this title or with any rule, 
regulation, or order thereunder shall be void.

                         TITLE II--TRANSPARENCY

SEC. 201. REQUIREMENTS FOR THE DISCLOSURE OF LOAN-LEVEL INFORMATION TO 
              INVESTORS, RATING AGENCIES, AND REGULATORS.

    (a) Rules.--Not later than 6 months after the date of the enactment 
of this title, the Securities and Exchange Commission shall, by rule, 
require sponsors of residential mortgage-backed securities to disclose 
all pertinent information relating to the residential mortgage loans 
that comprise such securities, including information regarding the 
income and credit score of borrowers, the loan to value ratios, the 
remaining term to maturity of the loans, and require loan-level data to 
be updated on a monthly basis. Such rules shall apply to residential 
mortgage-backed securities that--
            (1) are registered pursuant to section 6 of the Securities 
        Act of 1933 (15 U.S.C. 77f); and
            (2) are offered or sold in reliance on Regulation D (17 CFR 
        230.506) and Rule 144A (17 CFR 230.144A) of the Commission.
    (b) Privacy Protections.--In prescribing the rules required under 
subsection (a), the Commission shall take into consideration issues of 
consumer privacy and all statutes, rules, and regulations related to 
privacy of consumer credit information and personally identifiable 
information. Such rules shall expressly prohibit the identification of 
specific borrowers.
    (c) Rules Not Applicable to Qualified Securities.--The rules 
prescribed under subsection (a) shall not apply to any qualified 
security, as such term is defined under section 101(b)(4).

SEC. 202. MANDATORY PERIOD FOR REVIEW OF LOAN-LEVEL INFORMATION PRIOR 
              TO INVESTMENT.

    Not later than 6 months after the date of the enactment of this 
title, the Securities and Exchange Commission shall revise its rules 
and regulations to require sponsors of asset-backed securities under 
section 5 of the Securities Act of 1933 (15 U.S.C. 77e) to file a 
preliminary prospectus containing all material terms of the transaction 
at least 5 days before investors make an investment decision.

SEC. 203. DISSEMINATION OF PRICING INFORMATION OF ASSET-BACKED 
              SECURITIES.

    Not later than 6 months after the date of the enactment of this 
title, the Securities and Exchange Commission shall, by rule, require 
the dissemination of transaction, volume, and pricing information of 
trades in asset-backed securities. Such rules shall require the 
dissemination of such information, with exceptions as may be prescribed 
by the Commission in the public interest, while taking into 
consideration the effect of such dissemination on market liquidity, 
through the Financial Industry Regulatory Authority's fixed income 
transparency facility, referred to as Trade Reporting and Compliance 
Engine (TRACE), or through a similar vehicle.

SEC. 204. ALPHANUMERIC IDENTIFICATION OF RESIDENTIAL MORTGAGE LOANS IN 
              ASSET-BACKED SECURITIES.

    Not later than 6 months after the date of the enactment of this 
title, the Securities and Exchange Commission shall, by rule, require 
that each mortgage loan comprising a residential mortgage-backed 
security be assigned and carry with it a unique alphanumeric code that 
identifies the loan in order to facilitate ascertaining relevant 
information about the loan.

                  TITLE III--ENSURING THE RULE OF LAW

SEC. 301. ENSURE RULE OF LAW AND LEGAL CERTAINTY.

    (a) Junior Mortgage or Lien.--With respect to the dwelling of a 
borrower that serves as security for a securitized senior mortgage 
loan, if the borrower enters into any credit transaction that would 
result in the creation of a new mortgage or other lien on such dwelling 
where the loan-to-value ratio of such credit transaction amount is 80 
percent or more, the servicer of the senior mortgage loan shall have 
the right to charge the borrower an additional monthly fee in an amount 
sufficient to offset the increased risk to repayment of such loan 
because of the creation of the new mortgage or other lien.
    (b) Notice of Junior Mortgage or Lien.--With respect to the 
dwelling of a borrower that serves as security for a securitized senior 
mortgage loan, if the borrower enters into any credit transaction that 
would result in the creation of a new mortgage or other lien on such 
dwelling, the creditor of such new mortgage or other lien shall notify 
the servicer of the senior mortgage loan of the existence of the new 
mortgage or other lien.
    (c) Prevention of Forced Principal Write-Downs.--With respect to a 
securitized mortgage loan, no Federal department or agency, including 
the Board of Governors of the Federal Reserve System and the Bureau of 
Consumer Financial Protection, may require a reduction in the principal 
amount owed on such mortgage loan.

SEC. 302. LIMITATION ON MORTGAGES HELD BY LOAN SERVICERS.

    (a) Limitation.--Neither the servicer of a residential mortgage 
loan, nor any affiliate of such servicer, may own, or hold any interest 
in, any other residential mortgage loan that is secured by a mortgage, 
deed of trust, or other equivalent consensual security interest on the 
same dwelling or residential real property that is subject to the 
mortgage, deed of trust, or other security interest that secures the 
residential mortgage loan serviced by the servicer.
    (b) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Affiliate.--The term ``affiliate'' means, with respect 
        to a servicer, any person or entity that controls, is 
        controlled by, or is under common control with such servicer, 
        as the Director shall prescribe by regulation.
            (2) Residential mortgage loan.--The term ``residential 
        mortgage loan'' means any consumer credit transaction that is 
        secured by a mortgage, deed of trust, or other equivalent 
        consensual security interest on a dwelling or on residential 
        real property that includes a dwelling, other than a consumer 
        credit transaction under an open end credit plan or an 
        extension of credit relating to a plan described in section 
        101(53D) of title 11, United States Code.
            (3) Servicer.--The term ``servicer'' has the meaning 
        provided in section 129A of the Truth in Lending Act, except 
        that such term includes a person who makes or holds a 
        residential mortgage loan (including a pool of residential 
        mortgage loans) if such person also services the loan.
    (c) Interests.--For purposes of subsection (a), ownership of, or 
holding an interest in a residential mortgage loan includes ownership 
of, or holding an interest in--
            (1) a pool of residential mortgage loans that contains such 
        residential mortgage loan; or
            (2) any security based on or backed by a pool of 
        residential mortgage loans that contains such residential 
        mortgage loan.
    (d) Effective Date.--This section shall apply--
            (1) with respect to the servicer (or affiliate of the 
        servicer) of a residential mortgage loan that is originated 
        after the date of the enactment of this Act, on such date of 
        enactment; and
            (2) with respect to the servicer (or affiliate of the 
        servicer) of a residential mortgage loan that is originated on 
        or before the date of the enactment of this Act, upon the 
        expiration of the 12-month period beginning upon such date of 
        enactment.

SEC. 303. CLARIFICATION OF QUALIFIED MORTGAGE EXCEPTION.

    Subsection (b) of section 129C of the Truth in Lending Act is 
amended--
            (1) in the heading of such subsection, by striking 
        ``Presumption of Ability To Repay'' and inserting ``Exception 
        for Qualified Mortgages'';
            (2) by amending paragraph (1) to read as follows:
            ``(1) In general.--Subsection (a) shall not apply to a 
        residential mortgage loan that is a qualified mortgage.''; and
            (3) in paragraph (3), by amending subparagraph (B) to read 
        as follows:
                    ``(B) Loan definition.--The following agencies 
                shall, in consultation with the Bureau, prescribe rules 
                defining the types of loans they insure, guarantee, or 
                administer, as the case may be, that are qualified 
                mortgages for purposes of paragraph (2)(A):
                            ``(i) The Department of Housing and Urban 
                        Development, with regard to mortgages insured 
                        under the National Housing Act (12 U.S.C. 1707 
                        et seq.).
                            ``(ii) The Department of Veterans Affairs, 
                        with regard to a loan made or guaranteed by the 
                        Secretary of Veterans Affairs.
                            ``(iii) The Department of Agriculture, with 
                        regards to loans guaranteed by the Secretary of 
                        Agriculture pursuant to section 502(h) of the 
                        Housing Act of 1949 (42 U.S.C. 1472(h)).
                            ``(iv) The Rural Housing Service, with 
                        regards to loans insured by the Rural Housing 
                        Service.''.

SEC. 304. FDIC SAFE HARBOR.

    If a pool of mortgages meets the standards set forth by the Federal 
Housing Finance Agency pursuant to title I and is securitized in 
accordance with the standards set forth under title I, then the Federal 
Deposit Insurance Corporation safe harbor rule under section 360.6 of 
title 12, Code of Federal Regulations, shall apply to the pool of 
mortgages.

SEC. 305. EFFECTIVE DATE.

    Except as otherwise specifically provided, this title and the 
amendments made by this title shall take effect on the date of the 
enactment of this Act.
                                 <all>