Principal reduction of mortgages owned or guaranteed by Fannie Mae and Freddie Mac

(a)

Program authority

The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall each carry out a program under this section to provide for the reduction of the interest rates on qualified mortgages on single-family housing owned or guaranteed by such enterprises, in accordance with this section and policies and procedures that the Director of the Federal Housing Finance Agency shall establish. (b)

Timing

Each enterprise shall commence the program required under subsection (a) upon the expiration of the 90-day period beginning upon the date of the enactment of this Act and shall complete all reductions of the interest rates of qualified mortgages required under the program not later than the expiration of the 12-month period beginning upon the commencement of such program. (c)

Interest rate reduction

In reducing the interest rate on a qualified mortgage under a program of an enterprise required under this section, the enterprise shall reduce the annual rate of interest charged with respect to the outstanding principal obligation of the mortgage for the remainder of the term of the mortgage, notwithstanding whether the interest rate under the mortgage is otherwise subject to adjustment during such mortgage term, to a fixed interest rate that is the lesser of— (1)4 percent annually; or (2)the rate for a 30-year fixed rate mortgage, as most recently published in the Weekly Primary Mortgage Market Survey of the Federal Home Loan Mortgage Corporation, as of the time of such interest rate reduction for such qualified mortgage. (d)

Exempt mortgages

The Director shall provide that the following qualified mortgages shall not be subject to reduction of the interest rate under a program under this section: (1)

Fixed-rate mortgages

In the case of a qualified mortgage having a rate of interest that is fixed for the entire term of the mortgage, any mortgage having such an interest rate that is a lower than the interest rate determined for the mortgage under subsection (c). (2)

Adjustable-rate mortgages

In the case of a mortgage having a rate of interest that is subject to adjustment during the term of the mortgage, any mortgage for which the interest rate cannot, as a result of the terms of the terms and conditions of the mortgage, exceed the interest rate determined for the mortgage under subsection (c) at any time during the term of the mortgage. (e)

Option to opt-Out

Each program of an enterprise required under this section shall provide for the enterprise to— (1)notify the mortgagor under a qualified mortgage in writing, before the proposed reduction of the interest rate on qualified mortgage of the mortgagor, of— (A)such proposed reduction and the interest rate applicable to the mortgage upon such reduction; and (B)the opportunity, in accordance with paragraph (2), for the mortgagor to request that no such interest rate reduction be applied with respect to such mortgage; and (2)forego such interest rate reduction with respect to the qualified mortgage of a mortgagor upon receipt by the enterprise of a request by the mortgagor that no such interest rate reduction be applied with respect to such mortgage. (f)

Maintenance of loan status

Any reduction of the interest rate on a qualified mortgage under a program under this section shall not result in the treatment of the modified mortgage as a new mortgage. (g)

Definitions

For purposes of this section, the following definitions shall apply: (1)

Director

The term Director means the Director of the Federal Housing Finance Agency. (2)

Enterprise

The term enterprise means the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. (3)

Qualified Mortgage

The term qualified mortgage means a mortgage, without regard to whether the mortgagor is current or in default on payments due under the mortgage, that— (A)is an existing first mortgage that was made for purchase of, or refinancing another first mortgage on, a one- to four-family dwelling, including a condominium or a share in a cooperative ownership housing association, that is occupied by the mortgagor as the principal residence of the mortgagor; (B)is owned or guaranteed by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; and (C)was originated on or before the date of the enactment of this Act. (h)

Regulations

The Director shall issue any regulations or guidance necessary to carry out the programs required under this section not later than the expiration of the 90-day period that begins on the date of the enactment of this Act.