[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1963 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1963

 To revoke the charters for the Federal National Mortgage Corporation 
and the Federal Home Loan Mortgage Corporation upon resolution of their 
     obligations, to create a new Mortgage Finance Agency for the 
  securitization of single family and multifamily mortgages, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            December 8, 2011

  Mr. Isakson introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To revoke the charters for the Federal National Mortgage Corporation 
and the Federal Home Loan Mortgage Corporation upon resolution of their 
     obligations, to create a new Mortgage Finance Agency for the 
  securitization of single family and multifamily mortgages, 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; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Mortgage Finance 
Act of 2011''.
    (b) Findings.--Congress finds that--
            (1) dependable, transparent, and liquid primary and 
        secondary markets for high-quality residential and multifamily 
        mortgages are critical to a safe and sound housing market;
            (2) Congress wishes to terminate the Congressional charters 
        and operations of the Federal National Mortgage Association and 
        the Federal Home Loan Mortgage Corporation, and to wind them 
        down through an orderly receivership process, without 
        disrupting the housing markets;
            (3) taxpayers have expended billions of dollars on behalf 
        of the Federal National Mortgage Association and the Federal 
        Home Loan Mortgage Corporation during the period of their 
        conservatorship, and such expenditures should be recouped;
            (4) increased participation by the private sector to 
        provide mortgage market liquidity and credit risk mitigation is 
        necessary and desirable to reduce dependence on Government 
        guarantees, and to make remote any future needs for taxpayer 
        assistance;
            (5) this Act creates a new transitional facility to 
        guarantee securitizations of high-quality residential 
        mortgages, to ensure a sound and stable housing market;
            (6) multiple layers of private capital and the creation of 
        an industry-funded Catastrophic Fund will make future risk to 
        taxpayers highly remote; and
            (7) this Act provides for the privatization of the 
        transitional facility after 10 years, with proceeds being paid 
        to the United States Treasury.

SEC. 2. DEFINITIONS.

    For purposes of this Act, unless the context otherwise requires, 
the following definitions shall apply:
            (1) Board of directors.--The term ``Board of Directors'' 
        means the Board of Directors of the MFA.
            (2) Charter.--The term ``charter'' means--
                    (A) with respect to the Federal National Mortgage 
                Association, the Federal National Mortgage Association 
                Charter Act (12 U.S.C. 1716 et seq.); and
                    (B) with respect to the Federal Home Loan Mortgage 
                Corporation, the Federal Home Loan Mortgage Corporation 
                Act (12 U.S.C. 1451 et seq.).
            (3) Director.--The term ``Director'', other than in the 
        context of the Director of the FHFA, means the director of the 
        Mortgage Finance Agency.
            (4) Enterprise.--The term ``enterprise'' means--
                    (A) the Federal National Mortgage Association; and
                    (B) the Federal Home Loan Mortgage Corporation.
            (5) FHFA.--The term ``FHFA'' means the Federal Housing 
        Finance Agency.
            (6) Mortgage finance agency; mfa.--The terms ``Mortgage 
        Finance Agency'' and ``MFA'' mean the agency established under 
        title II.
            (7) MFA certification date.--The term ``MFA certification 
        date'' means the date on which the Director certifies that the 
        MFA is operational and able to perform the guarantee function 
        for qualified mortgage-backed securities collateralized by 
        qualified residential mortgages, as provided in this Act, which 
        date shall be not later than 18 months after the date of 
        enactment of this Act.
            (8) Qualified issuer.--The term ``qualified issuer'' means 
        a person who originates or purchases, and services, a qualified 
        residential mortgage or a qualified multifamily mortgage, and 
        is approved to issue securities guaranteed by the MFA, in 
        accordance with this Act and with the guidelines issued by the 
        MFA under section 302.
            (9) Qualified mortgage-backed securities.--The term 
        ``qualified mortgage-backed securities'' means securities 
        collateralized by qualified residential mortgages or qualified 
        multifamily mortgages, as the case may be, issued by a 
        qualified issuer and guaranteed by the MFA with respect to the 
        timely payment of principal and interest, all in accordance 
        with this Act.
            (10) Qualified multifamily mortgage.--The term ``qualified 
        multifamily mortgage'' means a commercial real estate loan 
        secured by a property with 5 or more single family units, the 
        primary source of repayment for which is expected to be derived 
        from the proceeds of the sale, refinancing, or permanent 
        financing of the property, or rental income generated by the 
        property, that--
                    (A) has been originated with an initial loan to 
                value ratio of not more than 75 percent and with an 
                initial debt service coverage ratio of at least 1.25; 
                or
                    (B) with respect to which, the mortgage lender 
                retains a pro rata vertical slice of credit risk in an 
                amount to be determined by the MFA.
            (11) Qualified residential mortgage.--The term ``qualified 
        residential mortgage'' means a residential real estate loan 
        secured by a property with 1 to 4 single family units that has 
        been originated in compliance with the following underwriting 
        standards and product features:
                    (A) Documentation and verification of the financial 
                resources relied upon to qualify the mortgagor.
                    (B) Standards with respect to the income and 
                scheduled debt payments of the mortgagor, including--
                            (i) one or more of--
                                    (I) the residual income of the 
                                mortgagor after all monthly 
                                obligations;
                                    (II) the ratio of the housing 
                                payments of the mortgagor to the 
                                monthly income of the mortgagor; and
                                    (III) the ratio of total monthly 
                                installment payments of the mortgagor 
                                to the income of the mortgagor; and
                            (ii) mitigation of the potential for 
                        payment shock on adjustable rate mortgages.
                    (C) Downpayments which shall be equal to not less 
                than 5 percent of purchase price, and--
                            (i) in the case of such mortgages with 
                        downpayments equal to not less than 5 percent 
                        but less than 30 percent of the purchase price, 
                        the mortgage is covered by private mortgage 
                        insurance purchased at the time of origination 
                        in an amount sufficient to cover each loan to 
                        the equivalent of not less than a 30 percent 
                        downpayment; and
                            (ii) such mortgage insurance is issued by 
                        an entity that is subject to regulation as a 
                        mortgage guaranty insurer by the State of 
                        domicile of such entity or by the Federal 
                        Insurance Office (which regulation includes 
                        risk-based capital and reserve requirements).
                    (D) Prohibition of or restrictions on the use of 
                balloon payments, negative amortization, prepayment 
                penalties, interest-only payments, and other features 
                that have been demonstrated to exhibit a higher risk of 
                borrower default.
            (12) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.

      TITLE I--TERMINATION OF FANNIE MAE AND FREDDIE MAC CHARTERS

SEC. 101. RECEIVERSHIP OF THE ENTERPRISES.

    (a) Irrevocable Receivership.--
            (1) In general.--Effective on the MFA certification date, 
        the FHFA is appointed receiver of the enterprises, and the 
        enterprises shall be placed into irrevocable receivership by 
        the FHFA, in accordance with section 1367 of the Federal 
        Housing Enterprises Financial Safety and Soundness Act of 1992 
        (12 U.S.C. 4617), except that--
                    (A) paragraphs (1) through (5) of subsection (a) of 
                that section 1367 do not apply with respect to such 
                appointment; and
                    (B) prior to the MFA certification date, the 
                enterprises shall be permitted to engage in the 
                business of guaranteeing the timely payment of 
                principal and interest on qualified mortgage-backed 
                securities and to undertake all functions necessary to 
                carry out such business, to the extent that such 
                guarantees are necessary to provide a dependable, 
                transparent, and liquid market for high quality 
                mortgages for securitization.
            (2) Commencement of liquidation.--Immediately upon 
        placement of the enterprises into receivership, the FHFA shall 
        commence liquidation of the enterprises.
    (b) Repeal of GSE Charters.--
            (1) Fannie mae.--The charter of the Federal National 
        Mortgage Association, is repealed, effective 90 days after the 
        date on which liquidation thereof is complete, in accordance 
        with this Act.
            (2) Freddie mac.--The charter of the Federal Home Loan 
        Mortgage Corporation, is repealed, effective 90 days after the 
        date on which liquidation thereof is complete, in accordance 
        with this Act.
    (c) Rule of Construction.--For purposes of any provision of Federal 
law that refers to or relies on a decision by the Director of the FHFA 
to place an enterprise into receivership, such determination shall be 
deemed to have been made by operation of the placement of the 
enterprises into receivership under subsection (a).

SEC. 102. REPAYMENT OF GOVERNMENT ASSISTANCE; MAXIMIZING RETURN TO 
              TAXPAYERS.

    (a) In General.--After fully satisfying the outstanding obligations 
of the enterprises in a manner consistent with their receivership 
status, all remaining proceeds from the operations of the enterprises 
in receivership shall be paid by the FHFA to the General Fund of the 
United States Treasury in repayment of Government assistance provided 
in connection with ensuring the solvency and resolution of the 
enterprises prior to the date of enactment of this Act.
    (b) Maximum Return to Taxpayer.--The combined assets of the 
enterprises, including on-balance sheet portfolios, shall be managed by 
the FHFA as receiver to obtain resolutions that maximize the return for 
the taxpayer, to the extent that--
            (1) such resolutions are consistent with the goal of 
        supporting a sound, stable, and liquid housing market; and
            (2) such resolutions are consistent with applicable law.
    (c) Transfer of Proceeds of Privatization and Catastrophic Fund.--
The proceeds from privatization of the MFA upon termination of its 
authority in accordance with section 304 shall be deposited into the 
General Fund of the United States Treasury. Upon such termination of 
the authority of the MFA, the Catastrophic Fund shall be transferred to 
the General Fund of the United States Treasury, and the United States 
Treasury shall assume responsibility for and honor any remaining 
obligations of the MFA, of whatever nature and until such time as they 
are extinguished.

SEC. 103. REPORT TO CONGRESS.

    Upon the resolution of all valid claims of the enterprises, the 
Director of the FHFA shall submit a report by the FHFA as receiver of 
the enterprises to the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee Financial Services of the House of 
Representatives, certifying the completion of the receivership.

                   TITLE II--MORTGAGE FINANCE AGENCY

SEC. 201. ESTABLISHMENT OF MFA.

    There is established the Mortgage Finance Agency, which shall be an 
independent agency of the Federal Government.

SEC. 202. GOVERNANCE.

    (a) Director.--
            (1) In general.--The MFA shall be headed, on a day-to-day 
        basis, by a Director, appointed by the President, by and with 
        the advice and consent of the Senate. Such appointment shall be 
        made not later than 6 months after the date of enactment of 
        this Act.
            (2) Regulatory authority.--The Director shall have general 
        regulatory authority over the MFA, and shall exercise such 
        general regulatory authority as necessary to carry out this 
        Act.
            (3) Term.--The Director shall serve for a term of 5 years. 
        An individual may serve as Director after the expiration of the 
        term for which appointed, until a successor has been appointed 
        and qualified.
            (4) Vacancies.--A vacancy in the office of the Director 
        shall be filled in the same manner as the original appointment.
            (5) Compensation.--The Director shall be compensated at the 
        rate prescribed for level II of the Executive Schedule under 
        section 5313 of title 5, United States Code.
    (b) Board of Directors.--
            (1) Members.--The operations of the MFA shall be directed 
        by a 5-member board of directors, including the Director, who 
        shall serve as the chairperson of the Board of Directors, a 
        Vice Chairman, who shall be appointed by the President, the 
        Chairman of the Securities and Exchange Commission, or a 
        designee thereof, the Secretary of the Department of Housing 
        and Urban Development, or a designee thereof, and the Chairman 
        of the Board of Governors of the Federal Reserve System, or a 
        designee thereof.
            (2) Majority vote.--A majority vote of all members of the 
        Board of Directors is necessary to resolve all voting issues of 
        the MFA.
            (3) Meetings.--The Board of Directors shall meet at the 
        call of the Director, but in no event less frequently than once 
        in each calendar quarter.
            (4) Federal employees.--The members of the Board of 
        Directors shall serve without additional pay (or benefits in 
        the nature of compensation) for service as a member of the 
        Board of Directors.
            (5) Travel expenses.--Members of the Board of Directors 
        shall be entitled to receive travel expenses, including per 
        diem in lieu of subsistence, equivalent to those set forth in 
        subchapter I of chapter 57 of title 5, United States Code.
            (6) Bylaws.--The Board of Directors may prescribe, amend, 
        and repeal such bylaws as may be necessary for carrying out the 
        functions of the Board of Directors.
            (7) Quorum.--A majority of the Board of Directors shall 
        constitute a quorum.
    (c) Privatization Advisory Board.--
            (1) Members.--There shall be appointed by the President a 
        10-member privatization advisory board. To the extent 
        practicable, the President shall seek at all times to have 
        advisory board members with expertise in--
                    (A) single family housing finance;
                    (B) multifamily housing finance;
                    (C) residential real estate development and sales;
                    (D) secondary market structuring and pricing;
                    (E) private mortgage insurance;
                    (F) privatization structuring and execution; and
                    (G) macroeconomic policy.
            (2) Role.--The roles of the advisory board shall be--
                    (A) to advise the Board of Directors on the 
                privatization of the MFA upon termination of its 
                authority under this Act, including how best to 
                facilitate a smooth, efficient, and orderly transition 
                of the guarantee business;
                    (B) to review and opine on the status of the 
                planning for privatization; and
                    (C) concurrently with the plan and annual and 
                quarterly reports presented by the MFA to Congress 
                under section 304(c), to present to Congress its own 
                independent reports on the plan for privatization and 
                the status thereof.
    (d) Inspector General.--There shall be within the MFA an Inspector 
General, who shall be appointed by the President in accordance with 
section 3(a) of the Inspector General Act of 1978 not later than 6 
months after the date of enactment of this Act.

SEC. 203. FUNDING.

    Annual appropriations to the MFA shall be based upon a budget 
submitted to Congress by the MFA and approved by the Board of 
Directors. In accordance with section 303(a)(2), amounts appropriated 
shall be recouped through collection of the guarantee fee.

SEC. 204. REGULATIONS; REPORTS.

    (a) Startup.--Not later than 12 months after the date of the 
appointment of the Director, the MFA shall issue such regulations, 
guidelines, orders, requirements, and standards as may be required for 
the establishment and operation of the MFA.
    (b) Report to Congress.--Not later than 6 months after the date of 
the appointment of the Director, the Board of Directors shall provide 
to Congress a progress report on the drafting of regulations and other 
conditions precedent to the MFA becoming fully operational.

SEC. 205. APPEARANCES BEFORE CONGRESS.

    The Director shall appear before Congress annually regarding--
            (1) the safety and soundness of the MFA and the 
        Catastrophic Fund, including, beginning one year after the date 
        on which the MFA becomes operational, a report by the Inspector 
        General of the MFA, and a report of an independent actuary, 
        regarding the adequacy of guarantee fees, the adequacy of the 
        Catastrophic Fund and the adequacy of the percentage of the 
        guarantee fee that is being allocated to the Catastrophic Fund;
            (2) any material deficiencies in the conduct of the 
        operations of the MFA;
            (3) the overall operational status of the MFA;
            (4) operations, resources, and performance of the Board of 
        Directors; and
            (5) such other relevant matters relating to the Board of 
        Directors and the MFA.

SEC. 206. STAFF, EXPERTS, AND CONSULTANTS.

    (a) Compensation.--
            (1) In general.--The MFA may appoint and fix the 
        compensation of such officers, attorneys, economists, 
        examiners, and other employees as may be necessary for carrying 
        out its functions. The MFA shall appoint a Chief Risk Officer 
        not later than 90 days after the date of the appointment of the 
        Director.
            (2) Rates of pay.--Rates of basic pay for all employees of 
        the MFA may be set and adjusted by the MFA without regard to 
        the provisions of chapter 51 or subchapter III of chapter 53 of 
        title 5, United States Code.
            (3) Parity.--The MFA may provide additional compensation 
        and benefits to employees of the MFA, if the same type of 
        compensation or benefits are then being provided by any agency 
        referred to under section 1206 of the Financial Institutions 
        Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833b) 
        or, if not then being provided, could be provided by such an 
        agency under applicable provisions of law, rule, or regulation. 
        In setting and adjusting the total amount of compensation and 
        benefits for employees, the MFA shall consult with, and seek to 
        maintain comparability with, the agencies referred to under 
        section 1206 of the Financial Institutions Reform, Recovery, 
        and Enforcement Act of 1989 (12 U.S.C. 1833b).
    (b) Detail of Government Employees.--Upon request of the Director, 
any Federal Government employee may be detailed to the MFA or the Board 
of Directors without reimbursement, and such detail shall be without 
interruption or loss of civil service status or privilege.
    (c) Experts and Consultants.--The Director shall procure the 
services of experts and consultants as the Director considers necessary 
or appropriate.

           TITLE III--DUTIES AND RESPONSIBILITIES OF THE MFA

SEC. 301. MFA RESPONSIBILITIES.

    The MFA is authorized--
            (1) to guarantee securities issued by qualified issuers and 
        collateralized by pools of qualified residential mortgages in 
        order to provide a dependable, transparent, and liquid market 
        for high quality mortgages for securitization;
            (2) to guarantee securities issued by qualified issuers and 
        collateralized by pools of qualified multifamily mortgages, in 
        order to provide a dependable, transparent, and liquid market 
        for high quality multifamily mortgages for securitization;
            (3) to charge and collect a guarantee fee sufficient to 
        protect the MFA and the United States Treasury from the risks 
        of guaranteeing the timely payment of principal and interest on 
        qualified mortgage-backed securities;
            (4) to establish and maintain a Catastrophic Fund to 
        minimize the burden on the Federal Government, by setting aside 
        amounts that will be available solely to pay obligations under 
        the MFA guarantee in the event of any future mortgage market 
        collapse; and
            (5) to purchase supplemental insurance coverage, as 
        provided in section 303(d).

SEC. 302. MFA GUARANTEE BUSINESS.

    (a) In General.--The MFA shall guarantee the timely payment of 
principal and interest to holders of qualified mortgage-backed 
securities. In the event of a payment default on a mortgage that 
collateralizes a qualified mortgage-backed security, the MFA guarantee 
shall cover any shortfalls to security holders after giving effect to 
proceeds, if any, from liquidation of the property securing the 
mortgage and from claims paid pursuant to any private mortgage 
insurance coverage (including supplemental insurance coverage, if any). 
The MFA guarantee of timely payment of principal and interest on 
qualified mortgage-backed securities shall be backed by the full faith 
and credit of the United States Government. The MFA shall charge a fee 
for such guarantee in accordance with section 303.
    (b) Qualified Residential Mortgages and Qualified Multifamily 
Mortgages.--The MFA shall issue guidelines consistent with this Act 
specifying the terms and conditions of mortgages that satisfy--
            (1) the definition of a qualified residential mortgage, not 
        later than 6 months after the date of confirmation of the 
        Director; and
            (2) the definition of a qualified multifamily mortgage, not 
        later than 1 year after the date of confirmation of the 
        Director.
    (c) Guidelines.--
            (1) In general.--Not later than 12 months after the date of 
        confirmation of the Director, the MFA shall issue guidelines 
        designed to oversee the financial condition and origination and 
        servicing standards of qualified issuers and servicers of 
        qualified residential mortgages and qualified multifamily 
        mortgages that collateralize qualified mortgage-backed 
        securities.
            (2) Inclusions.--Guidelines issued under this subsection 
        shall--
                    (A) include specific financial and operational 
                standards for such qualified issuers and such 
                servicers; and
                    (B) ensure--
                            (i) broad participation in the issuance of 
                        qualified mortgage-backed securities by 
                        community banks, credit unions, national banks 
                        and State-licensed mortgage lenders;
                            (ii) that qualified issuers bear the risk 
                        of noncompliance with representations and 
                        warranties made in connection with the issuance 
                        of qualified mortgage-backed securities; and
                            (iii) that qualified issuers have the 
                        financial resources to support any obligations 
                        arising from any violations of representations 
                        and warranties made in connection with the 
                        issuance of qualified mortgage-backed 
                        securities.
    (d) Limitations.--
            (1) Qualified residential mortgage loan limits.--The MFA 
        shall set loan limits for qualified residential mortgages that 
        secure qualified mortgage-backed securities. Such loan limits 
        shall be calculated and set annually, on a by-county basis, at 
        an amount equal to not more than 150 percent of the area median 
        home price for the preceding year, and not less than the 
        national median home price for such year, in each case 
        calculated using home price data compiled by FHFA or, if FHFA 
        no longer compiles such data, by the MFA. In no event shall the 
        loan limits in effect under this section in any county be lower 
        than amounts applicable to single family mortgages insured by 
        the Federal Housing Administration in such county.
            (2) Qualified multifamily mortgage loan limits.--The MFA, 
        in consultation with the Board of Directors, shall consider 
        setting loan limits for qualified multifamily mortgages that 
        secure qualified mortgage-backed securities, if such limits 
        would foster competition between the MFA and private issuers in 
        advance of the privatization of the MFA.
            (3) Prohibition on investment portfolio.--The MFA shall not 
        invest in mortgage-backed securities or otherwise maintain an 
        investment portfolio, other than to the extent necessary for 
        the MFA to carry out its responsibilities as guarantor of 
        qualified mortgage-backed securities.

SEC. 303. GUARANTEE FEES; CATASTROPHIC FUND; SUPPLEMENTAL INSURANCE.

    (a) Guarantee Fees.--
            (1) Guarantee fees.--The MFA shall charge a guarantee fee 
        under this section in connection with any guarantee issued by 
        the MFA of timely payment of principal and interest on the 
        qualified mortgage-backed securities. At all times, the 
        guarantee fee shall be set at an equal amount for all qualified 
        issuers. The amount of the guarantee fee shall be adjusted 
        periodically, as necessary to fulfill the purposes described in 
        paragraph (2).
            (2) Purposes.--The purposes of the guarantee fees are--
                    (A) to fund the operations of the MFA;
                    (B) to capitalize the Catastrophic Fund;
                    (C) to cover any losses; and
                    (D) to purchase supplemental insurance coverage, as 
                provided in subsection (d).
            (3) Approval.--The Board of Directors shall approve the 
        amount of guarantee fees and any adjustments thereto, and shall 
        determine the percentage of the guarantee fees, if any, that 
        will be allocated to the Catastrophic Fund in accordance with 
        subsection (b). Such percentage may be adjusted by the Board of 
        Directors semiannually, as necessary to ensure that the 
        Catastrophic Fund is adequately capitalized.
    (b) Creation of Catastrophic Fund.--
            (1) Establishment.--There is established in the Treasury of 
        the United States a fund to be known as the ``Catastrophic 
        Fund'', which the MFA shall--
                    (A) maintain and administer; and
                    (B) use to carry out its insurance and guarantee 
                functions, in the manner provided by this Act; and
                    (C) invest in accordance with subsection (c).
            (2) Deposits.--The Catastrophic Fund shall be credited 
        with--
                    (A) the amount of guarantee fees, if any, that the 
                Board of Directors determines should be allocated to 
                the Catastrophic Fund to protect against catastrophic 
                losses;
                    (B) any amounts earned on investments of the 
                Catastrophic Fund, other than as needed in connection 
                with the routine operation of the guarantee business; 
                and
                    (C) such other amounts as may otherwise be credited 
                to the Catastrophic Fund by the Board of Directors.
            (3) Uses.--The Catastrophic Fund shall be solely available 
        to the MFA for use by the MFA to satisfy obligations under its 
        guarantee in accordance with this Act. Amounts remaining in the 
        Catastrophic Fund following the repayment of all qualified 
        mortgage-backed securities shall be distributed to the United 
        States Treasury in accordance with section 102(c).
    (c) Actuarial Review.--Beginning one year after the date on which 
the MFA becomes fully operational, and each year thereafter, the Board 
of Directors shall commission an independent actuarial study to 
determine the adequacy of the guarantee fees and of the capitalization 
of the Catastrophic Fund, the results of which study shall be made 
available to the public by the Board of Directors. The Board of 
Directors shall rely on such study to determine the amount of the 
guarantee fee that shall be charged and the percentage of the guarantee 
fees that shall be allocated to the Catastrophic Fund.
    (d) Investments.--
            (1) Authority.--Amounts in the Catastrophic Fund that are 
        not otherwise employed shall be invested in obligations of the 
        United States or in obligations guaranteed as to principal and 
        interest by the United States.
            (2) Limitation.--The MFA shall not sell or purchase any 
        obligations described in paragraph (1) for its own account, at 
        any one time aggregating in excess of $1,000,000, without the 
        approval of the Secretary of the Treasury. The Secretary may 
        approve a transaction or class of transactions subject to the 
        provisions of this paragraph under such conditions as the 
        Secretary may determine.
    (e) Supplemental Coverage.--
            (1) In general.--The MFA may use a portion of the guarantee 
        fee to purchase supplemental insurance coverage on offerings of 
        qualified mortgage-backed securities. The guarantee fee shall 
        be set in an amount that is sufficient to cover the cost of 
        such supplemental insurance, in addition to the other purposes 
        set forth in subsection (a)(2). The supplemental insurance 
        shall insure against losses, if any, after giving effect to the 
        primary, first loss mortgage insurance coverage on mortgages 
        collateralizing the mortgage-backed securities.
            (2) Reduced exposure.--The supplemental insurance shall be 
        structured to further reduce the exposure of the United States 
        Government to losses arising under its guarantee on qualified 
        mortgage-backed securities that are covered by supplemental 
        insurance. Separate insurance coverage shall be provided for 
        each new offering of qualified mortgage-backed securities.
            (3) Purchase of supplemental coverage required.--
                    (A) In general.--Not later than 1 year after the 
                MFA certification date, the Board of Directors shall 
                issue guidelines to determine whether supplemental 
                coverage--
                            (i) is being offered on commercially 
                        reasonable terms; and
                            (ii) is reasonably likely to mitigate the 
                        risk that the MFA will have to make any payment 
                        pursuant to its guarantee.
                    (B) Coverage required.--Beginning not later than 3 
                years after the MFA certification date, the MFA shall 
                purchase supplemental coverage for each offering of 
                qualified mortgage-backed securities if the MFA 
                determines that the supplemental coverage meets the 
                guidelines issued by the Board of Directors under 
                subparagraph (A).
            (4) Authority to purchase supplemental coverage.--The MFA 
        shall be authorized to purchase supplemental coverage from any 
        mortgage insurance company authorized to provide mortgage 
        insurance on a qualified residential mortgage, or from any 
        other licensed insurance company with comparable regulatory 
        oversight, capital, and reserve requirements.

SEC. 304. NO LIMIT ON PRIVATE SECTOR INVOLVEMENT; TERMINATION OF 
              AUTHORITY.

    (a) Private Entities Encouraged.--Nothing in this Act may be 
construed as preventing the private sector from securitizing qualified 
residential mortgages, qualified multifamily mortgages, or other non-
qualified residential single family or multifamily mortgages. Robust 
competition between the MFA and private issuers shall be encouraged to 
facilitate the soonest possible privatization of the MFA.
    (b) Termination of Authority.--The authority granted to the MFA 
under this Act shall expire 10 years after the date of enactment of 
this Act, and the MFA shall be terminated on that date. The MFA, in 
consultation with the Board of Directors, shall begin planning for such 
termination during the third year following the date of enactment of 
this Act.
    (c) Periodic Reports on Privatization.--
            (1) Initial report.--During the 5th year following the date 
        of enactment of this Act, the MFA shall present to Congress a 
        detailed plan for privatization of the MFA upon termination of 
        its authority in accordance with subsection (b).
            (2) Regular reports.--To ensure the transfer to 
        privatization, the MFA shall report to Congress on the 
        implementation of the detailed plan for privatization submitted 
        under paragraph (1)--
                    (A) annually through the 7th year following the 
                date of enactment of this Act; and
                    (B) quarterly, beginning in the 8th year following 
                the date of enactment of this Act.

                    TITLE IV--CONFORMING AMENDMENTS

SEC. 401. AMENDMENTS TO DODD-FRANK ACT.

    Section 15G of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
11) is amended--
            (1) in subsection (a)--
                    (A) by redesignating paragraphs (3) and (4) as 
                paragraphs (4) and (5), respectively; and
                    (B) by inserting after paragraph (2) the following:
            ``(3) the term `qualified residential mortgage' has the 
        same meaning as in section 2 of the Mortgage Finance Act of 
        2011;''; and
            (2) by adding at the end the following:
    ``(j) Exemption for Qualified Mortgage-backed Securities.--
Qualified mortgage-backed securities, as defined in section 2 of the 
Mortgage Finance Act of 2011, and any other securitizations of 
qualified residential mortgages, shall be exempt from the risk 
retention provisions of subsection (c)(1)(B)(i).''.

SEC. 402. FEDERAL HOUSING ENTERPRISES FINANCIAL SAFETY AND SOUNDNESS 
              ACT OF 1992.

    (a) Definitions.--Section 1303(20) of the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 
4502(20)) is amended by striking ``means--'' and all that follows 
through ``(C) any'' and inserting ``means any''.
    (b) Transfer of Functions.--All functions of the FHFA with respect 
to the enterprises, as that term is defined in section 1303 of the 
Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 
other than any function related to receivership of the enterprises, are 
transferred to the MFA, effective 90 days after the date on which 
liquidation of the enterprises is complete, in accordance with this 
Act.
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