114 S495 IS: Mortgage Finance Act of 2015
U.S. Senate
2015-02-12
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.
(a)This Act may be cited as the Mortgage Finance Act of 2015
.
(b)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.
2.For purposes of this Act, unless the context otherwise requires, the following definitions shall apply:
(1)The term Board of Directors means the Board of Directors of the Mortgage Finance Agency.
(2)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)The term Director, other than in the context of the Director of the Federal Housing Finance Agency, means the Director of the Mortgage Finance Agency.
(4)The term enterprise means—
(A)the Federal National Mortgage Association; and
(B)the Federal Home Loan Mortgage Corporation.
(5)The term FHFA means the Federal Housing Finance Agency.
(6)Mortgage
Finance Agency; MFAThe terms Mortgage Finance Agency and MFA mean the agency established under title II.
(7)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)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 securitiesThe 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 mortgageThe 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 mortgageThe 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)1 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)The term Secretary means the Secretary of the Treasury.
<enum>I</enum><header>Termination of
Fannie Mae and Freddie Mac Charters</header>
<section id="id87739CB5EEF24CE190F0647AD98FE6B4"><enum>101.</enum><header>Receivership
of the enterprises</header>
<subsection id="idBB4B02B60AEB47CEB612480BC0E08812"><enum>(a)</enum><header>Irrevocable
receivership</header>
<paragraph id="id9676952E09364C4D8921DCA3F1E9E535"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">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 (<external-xref legal-doc="usc" parsable-cite="usc/12/4617">12 U.S.C. 4617</external-xref>), except that—</text>
<subparagraph id="id9F8CF8E487D948FBA33A28321E4E7DDB"><enum>(A)</enum><text display-inline="yes-display-inline">paragraphs (1) through (5) of subsection (a) of such section 1367 do not apply with respect to such appointment; and</text>
</subparagraph><subparagraph id="ID7637dfb85c5849f3bcfe6ab09301aa39"><enum>(B)</enum><text>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.</text>
</subparagraph></paragraph><paragraph id="idC7CBAB22D55943BF82F14E84D9F53446"><enum>(2)</enum><header>Commencement of
liquidation</header><text>Immediately upon placement of the enterprises into receivership, the FHFA shall commence liquidation of the enterprises.</text>
</paragraph></subsection><subsection id="id1EC58A4CE8BC4086B110C7823EEBDEF5"><enum>(b)</enum><header>Repeal of GSE
charters</header>
<paragraph id="idECB8A4E3560B4A1F81DADEB3DD0ACB89"><enum>(1)</enum><header>Fannie
Mae</header><text>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.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idBEB6186311384D4185CDF99E1EF7A251"><enum>(2)</enum><header>Freddie
Mac</header><text>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.</text>
</paragraph></subsection><subsection commented="no" id="id7704798D302745CC88A9B11EF1105F1C"><enum>(c)</enum><header>Rule of
construction</header><text>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).</text>
</subsection></section><section commented="no" id="id5A94007C0C6E4AC1AE81E9BA9D0EDF9D"><enum>102.</enum><header>Repayment of
Government assistance; maximizing return to taxpayers</header>
<subsection commented="no" id="idF5DA327E8D614EEFAE6FCDF88C235294"><enum>(a)</enum><header>In
general</header><text>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.</text>
</subsection><subsection commented="no" id="id7FB266F174594D5F929D9A0F480ADF53"><enum>(b)</enum><header>Maximum return
to taxpayer</header><text>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—</text>
<paragraph commented="no" id="id7A1283CC5A84411093BEBEE3424C631C"><enum>(1)</enum><text>such resolutions are consistent with the goal of supporting a sound, stable, and liquid housing market; and</text>
</paragraph><paragraph commented="no" id="idFED8816E0D2B49F690ACAA8B4307ADA6"><enum>(2)</enum><text>such resolutions are consistent with applicable law.</text>
</paragraph></subsection><subsection id="ID0d9b9572c7ff4683b0f9787519c0ed73"><enum>(c)</enum><header>Transfer of
proceeds of privatization and catastrophic fund</header><text>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.</text>
</subsection></section><section id="IDa82593f0366c434a98c39ec5a371342d"><enum>103.</enum><header>Report to
Congress</header><text display-inline="no-display-inline">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 on Financial Services of the House of Representatives, certifying the completion of the receivership.</text>
</section><enum>II</enum><header>Mortgage Finance
Agency</header>
<section id="IDd8a3fc5e1f7a458faa4481d92bb247a6"><enum>201.</enum><header>Establishment
of MFA</header><text display-inline="no-display-inline">There is established the Mortgage Finance Agency, which shall be an independent agency of the Federal Government.</text>
</section><section id="id2ED3BE3FAA7E4B65B63979A0EBCA58FC"><enum>202.</enum><header>Governance</header>
<subsection id="ID0d3f3b6724824cb999dcf080a4660f58"><enum>(a)</enum><header>Director</header>
<paragraph id="idE090842365DA48D78AA9E5D139223FF9"><enum>(1)</enum><header>In
general</header><text>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.</text>
</paragraph><paragraph commented="no" id="id56EA1F2977EA48B896B8C79E0A5C816C"><enum>(2)</enum><header>Regulatory
authority</header><text>The Director shall have general regulatory authority over the MFA, and shall exercise such general regulatory authority as necessary to carry out this Act.</text>
</paragraph><paragraph id="idAE8537D8E0974DC0B4CEDE65A6803514"><enum>(3)</enum><header>Term</header><text>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.</text>
</paragraph><paragraph id="id926907E973D041669D11D3B2566F5A14"><enum>(4)</enum><header>Vacancies</header><text>A vacancy in the office of the Director shall be filled in the same manner as the original appointment.</text>
</paragraph><paragraph id="IDaaf94ca4b38840f5b5818a7b4e07054d"><enum>(5)</enum><header>Compensation</header><text>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.</text>
</paragraph></subsection><subsection id="id5DFC3AF03F3846E0B07B85661B8080A7"><enum>(b)</enum><header>Board of
directors</header>
<paragraph id="id491C677C466446DD82EB0C751A4996E2"><enum>(1)</enum><header>Members</header><text>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 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.</text>
</paragraph><paragraph id="id9350CD13116B413C920ACDB17EB21CC0"><enum>(2)</enum><header>Majority
vote</header><text>A majority vote of all members of the Board of Directors is necessary to resolve all voting issues of the MFA.</text>
</paragraph><paragraph id="id525AB03952C54297985188084EF31BAF"><enum>(3)</enum><header>Meetings</header><text>The Board of Directors shall meet at the call of the Director, but in no event less frequently than once in each calendar quarter.</text>
</paragraph><paragraph id="id6E95DC07D7CD4D3DA897139EBCEE039E"><enum>(4)</enum><header>Federal
employees</header><text>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.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id7D6C4F8C2D5849F48B223F8B1ED05B5B"><enum>(5)</enum><header>Travel
expenses</header><text>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 <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/5/57">chapter 57</external-xref> of title 5, United States Code.</text>
</paragraph><paragraph id="IDdfa8cb5646f84c4898b8e9ea92bec63b"><enum>(6)</enum><header>Bylaws</header><text>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.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDd73095c5778144918e7eeb22737b67b9"><enum>(7)</enum><header>Quorum</header><text>A majority of the Board of Directors shall constitute a quorum.</text>
</paragraph></subsection><subsection id="ID32531f991d5448a7b1bf08601244a4b4"><enum>(c)</enum><header>Privatization
Advisory Board</header>
<paragraph id="ID0d6419b951204929aa525153a3945e40"><enum>(1)</enum><header>Members</header><text>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—</text>
<subparagraph id="id8EF9D41B670E4BFA84EA7741F9379D5E"><enum>(A)</enum><text>single family housing finance;</text>
</subparagraph><subparagraph id="id13F6A05511AD436D80E234148A302BFB"><enum>(B)</enum><text>multifamily housing finance;</text>
</subparagraph><subparagraph id="id3288C4768AA24CFB87638D8BE3265F8E"><enum>(C)</enum><text>residential real estate development and sales;</text>
</subparagraph><subparagraph id="id04E86F276AAC4D9FAED1E7CB096B3819"><enum>(D)</enum><text>secondary market structuring and pricing;</text>
</subparagraph><subparagraph id="id14FAB363667C48D2B38A3BC97EB5F04B"><enum>(E)</enum><text>private mortgage insurance;</text>
</subparagraph><subparagraph id="id9BDE49CC8D224279903681B20445CD6B"><enum>(F)</enum><text>privatization structuring and execution; and</text>
</subparagraph><subparagraph id="id72729FB603FC4A828EA1A2BCBEC312BC"><enum>(G)</enum><text>macroeconomic policy.</text>
</subparagraph></paragraph><paragraph id="ID2b57f212101e4331be556d2f7464bc06"><enum>(2)</enum><header>Role</header><text>The roles of the advisory board shall be—</text>
<subparagraph id="id68B33BC8E3EC4A3FB7A0A906E324FCB0"><enum>(A)</enum><text>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;</text>
</subparagraph><subparagraph id="idCC67029F783E4624A82EBD235901A6A1"><enum>(B)</enum><text>to review and opine on the status of the planning for privatization; and</text>
</subparagraph><subparagraph id="idB15660F7B48A4F6B9DE760BA577DFD7C"><enum>(C)</enum><text>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.</text>
</subparagraph></paragraph></subsection><subsection id="IDcc0788d6f28f4e24a8d257624674a525"><enum>(d)</enum><header>Inspector
general</header><text>There shall be within the MFA an Inspector General, who shall be appointed by the President in accordance with <external-xref legal-doc="usc-act" parsable-cite="usc-act/Inspector General Act of 1978 /3">section 3(a)</external-xref> of the Inspector General Act of 1978 (5 U.S.C. App.) not later than 6 months after the date of enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="id4E4510AB9D85440C951A68D7E53369C7"><enum>203.</enum><header>Funding</header><text display-inline="no-display-inline">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.</text>
</section><section commented="no" display-inline="no-display-inline" id="id19549FC29A7A4B888D741D7F59081516"><enum>204.</enum><header>Regulations;
reports</header>
<subsection id="ID5b3414dce7d44e81a9a636290954e627"><enum>(a)</enum><header>Startup</header><text>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 necessary for the establishment and operation of the MFA.</text>
</subsection><subsection id="ID15255e9f33294699ad8d202f218d22cd"><enum>(b)</enum><header>Report to
Congress</header><text>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.</text>
</subsection></section><section id="ID11abfcf61cda4b2a84d4978526c345cd"><enum>205.</enum><header>Appearances
before congress</header><text display-inline="no-display-inline">The Director shall appear before Congress annually regarding—</text>
<paragraph id="idE423587D099F4BBA9F76DCFB33BEBBFC"><enum>(1)</enum><text>the safety and soundness of the MFA and the Catastrophic Fund, including, beginning 1 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;</text>
</paragraph><paragraph id="id6BDA63F820C54E82BD0705DA8C62F2F5"><enum>(2)</enum><text>any material deficiencies in the conduct of the operations of the MFA;</text>
</paragraph><paragraph id="idADD4F09E17B64830B4C71D5ED040E42F"><enum>(3)</enum><text>the overall operational status of the MFA;</text>
</paragraph><paragraph id="idB31272349A394A679E365C37F9EB9DA6"><enum>(4)</enum><text>operations, resources, and performance of the Board of Directors; and</text>
</paragraph><paragraph id="idA9B37CE53C1E4AFAABACB125815C7E44"><enum>(5)</enum><text>such other relevant matters relating to the Board of Directors and the MFA.</text>
</paragraph></section><section id="ID2f191ec7fb6046c08ac3d36fd5b840a7"><enum>206.</enum><header>Staff,
experts, and consultants</header>
<subsection id="idCE56938BC6BA45D3998F0E7102F742E8"><enum>(a)</enum><header>Compensation</header>
<paragraph id="ID596faf352fef40fab23d6feef4b6179e"><enum>(1)</enum><header>In
general</header><text>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.</text>
</paragraph><paragraph id="ID5aae6f8c81a742238f844de61ae13c41"><enum>(2)</enum><header>Rates of
pay</header><text>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 <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/5/53">chapter 53</external-xref> of title 5, United States Code.</text>
</paragraph><paragraph id="ID973c9f31b3244ce989964d89aadab609"><enum>(3)</enum><header>Parity</header><text>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 (<external-xref legal-doc="usc" parsable-cite="usc/12/1833b">12 U.S.C. 1833b</external-xref>) 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 (<external-xref legal-doc="usc" parsable-cite="usc/12/1833b">12 U.S.C. 1833b</external-xref>).</text>
</paragraph></subsection><subsection id="idE840636B7ACB4C428A8B83E833500298"><enum>(b)</enum><header>Detail of
government employees</header><text>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.</text>
</subsection><subsection id="ID9894554e307648d6b8d8b64e39fa8fd6"><enum>(c)</enum><header>Experts and
consultants</header><text>The Director shall procure the services of experts and consultants as the Director considers necessary or appropriate.</text>
</subsection></section><enum>III</enum><header>Duties and
responsibilities of the MFA</header>
<section id="id852B0A19427D425CBD48E19671DAF963"><enum>301.</enum><header>MFA
responsibilities</header><text display-inline="no-display-inline">The MFA is authorized—</text>
<paragraph id="ID63d105c747114406ae7232c9cca2af7c"><enum>(1)</enum><text>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;</text>
</paragraph><paragraph id="IDbe31b964a40d422ba4e4de0e1127c198"><enum>(2)</enum><text>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;</text>
</paragraph><paragraph id="ID0117f572a953410991ce3f71c3ad24a2"><enum>(3)</enum><text>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;</text>
</paragraph><paragraph id="IDb013d5aa40b94687b59284d2c0a72939"><enum>(4)</enum><text>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</text>
</paragraph><paragraph id="ID7f7b4bda14de4c249b94267fbab2dafd"><enum>(5)</enum><text>to purchase supplemental insurance coverage, as provided in section 303(d).</text>
</paragraph></section><section id="idE8B80B76466F42B0B5F9C5A4410434A6"><enum>302.</enum><header>MFA Guarantee
business</header>
<subsection id="ID38df41ad0bcb4dd1a25448da4e40489f"><enum>(a)</enum><header>In
general</header><text>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.</text>
</subsection><subsection id="ID535778565f774c3f94f49a97390a9fac"><enum>(b)</enum><header>Qualified
Residential Mortgages and Qualified Multifamily Mortgages</header><text>The MFA shall issue guidelines consistent with this Act specifying the terms and conditions of mortgages that satisfy—</text>
<paragraph id="id39062C86F75C4E238CB7737D569DADC1"><enum>(1)</enum><text>the definition of a qualified residential mortgage, not later than 6 months after the date of confirmation of the Director; and</text>
</paragraph><paragraph id="id951DD74B792F475C886ED81E4CA90A11"><enum>(2)</enum><text>the definition of a qualified multifamily mortgage, not later than 1 year after the date of confirmation of the Director.</text>
</paragraph></subsection><subsection id="IDa8802b0580ff4ba3a9a0055e02aea74f"><enum>(c)</enum><header>Guidelines</header>
<paragraph commented="no" id="IDcd239aa5f80d4eb09b05e683944813b1"><enum>(1)</enum><header>In
general</header><text>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.</text>
</paragraph><paragraph id="ID322c7a8c3ce04778a17f60574420341d"><enum>(2)</enum><header>Inclusions</header><text>Guidelines issued under this subsection shall—</text>
<subparagraph id="ID64ccdeaf96b9473bb14fa461a2ce217a"><enum>(A)</enum><text>include specific financial and operational standards for such qualified issuers and such servicers; and</text>
</subparagraph><subparagraph id="IDa2ea567e8e054ec7b1c90cccb167a3d7"><enum>(B)</enum><text>ensure—</text> <clause id="ID6fbe771023ac4af295759bd64ebb532e"><enum>(i)</enum><text>broad participation in the issuance of qualified mortgage-backed securities by community banks, credit unions, national banks, and State-licensed mortgage lenders;</text>
</clause><clause id="IDd798a66b5f99441197737a3777125119"><enum>(ii)</enum><text>that qualified issuers bear the risk of noncompliance with representations and warranties made in connection with the issuance of qualified mortgage-backed securities; and</text>
</clause><clause id="ID7fc3267fa60d414dae2b834d6a6378c7"><enum>(iii)</enum><text>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.</text>
</clause></subparagraph></paragraph></subsection><subsection id="ID91006e40b2254234bc46779e04698806"><enum>(d)</enum><header>Limitations</header>
<paragraph id="id07CDF3C1E54C442284BDB81F4C4AE936"><enum>(1)</enum><header>Qualified
residential mortgage loan limits</header><text>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 county-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 the FHFA or, if the 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 under title II of the National Housing Act (<external-xref legal-doc="usc" parsable-cite="usc/12/1707">12 U.S.C. 1707 et seq.</external-xref>) in such county.</text>
</paragraph><paragraph id="IDdfe5f47c36b143a3bf4e7beedcf20795"><enum>(2)</enum><header>Qualified
multifamily mortgage loan limits</header><text>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.</text>
</paragraph><paragraph id="IDb182f81fa1ad4070934b265e7d1e3af0"><enum>(3)</enum><header>Prohibition on
investment portfolio</header><text>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.</text>
</paragraph></subsection></section><section id="idF301F246BECC440EAFB8BED43BA4D5D5"><enum>303.</enum><header>Guarantee
fees; catastrophic fund; supplemental insurance</header>
<subsection id="idE5693FDF8747402894CF2F491AC8A9F9"><enum>(a)</enum><header>Guarantee
Fees</header>
<paragraph id="ID5834eb3589014d8c8054d616a674392a"><enum>(1)</enum><header>Guarantee
Fees</header><text>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).</text>
</paragraph><paragraph id="ID3d3c7ba9c79049468fdb264de6b72844"><enum>(2)</enum><header>Purposes</header><text>The purposes of the guarantee fees are—</text>
<subparagraph id="id74F02186E2A046FF843E90AC4C88A30A"><enum>(A)</enum><text>to fund the operations of the MFA;</text>
</subparagraph><subparagraph id="id5D7812B4FD9943288CE7BF13BE4E8C9E"><enum>(B)</enum><text>to capitalize the Catastrophic Fund;</text>
</subparagraph><subparagraph id="id019B323819674791A2668F3F4D779284"><enum>(C)</enum><text>to cover any losses; and</text>
</subparagraph><subparagraph id="ID0ebd3ad8af7b4b0d89b00c256fa1ee78"><enum>(D)</enum><text>to purchase supplemental insurance coverage, as provided in subsection (d).</text>
</subparagraph></paragraph><paragraph id="IDe0746e9704764ab6941cc3daea838add"><enum>(3)</enum><header>Approval</header><text>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.</text>
</paragraph></subsection><subsection id="IDc5f10175842044b2af6823e3028a759f"><enum>(b)</enum><header>Creation of
Catastrophic Fund</header>
<paragraph id="ID535cbc77e6404ae0b700cfc1323fdb55"><enum>(1)</enum><header>Establishment</header><text>There is established in the Treasury of the United States a fund to be known as the <quote>Catastrophic Fund</quote>, which the MFA shall—</text>
<subparagraph id="idC22D0BE4D15647DBA61CE0E8E6BD5434"><enum>(A)</enum><text>maintain and administer;</text>
</subparagraph><subparagraph id="id49A18E7803CC495EAA5D1C3F18E9E922"><enum>(B)</enum><text>use to carry out its insurance and guarantee functions, in the manner provided by this Act; and</text>
</subparagraph><subparagraph id="id09BCAED59FD6488D899800279C21296C"><enum>(C)</enum><text display-inline="yes-display-inline">invest in accordance with subsection (c).</text>
</subparagraph></paragraph><paragraph id="IDc70237f84d4843a3936e4ce345d7a506"><enum>(2)</enum><header>Deposits</header><text>The Catastrophic Fund shall be credited with—</text>
<subparagraph id="ID9c9291e11c5141c5948474327a0d80cc"><enum>(A)</enum><text>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;</text>
</subparagraph><subparagraph id="ID4cb507ad32bb4bab81c78a5d5a7b8412"><enum>(B)</enum><text>any amounts earned on investments of the Catastrophic Fund, other than as needed in connection with the routine operation of the guarantee business; and</text>
</subparagraph><subparagraph id="ID84050913ad3a4655a4d0ed6cffe1710e"><enum>(C)</enum><text>such other amounts as may otherwise be credited to the Catastrophic Fund by the Board of Directors.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDBA14C5F23EA343DFA1CB94C4E478280A"><enum>(3)</enum><header display-inline="yes-display-inline">Uses</header><text>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).</text>
</paragraph></subsection><subsection id="ID9277446882aa456ca509883cf22520fb"><enum>(c)</enum><header>Actuarial
review</header><text>Beginning 1 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.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id20EE9EA413AA4DA58B19A0848CB3A70E"><enum>(d)</enum><header>Investments</header>
<paragraph commented="no" id="ID20D5B6DE97614889916A7F9A8A8C5D7C"><enum>(1)</enum><header>Authority</header><text>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.</text>
</paragraph><paragraph commented="no" id="ID5B03EA2D54DF4CBC9414DAFEDF059E46"><enum>(2)</enum><header>Limitation</header><text>The MFA may 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. 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.</text>
</paragraph></subsection><subsection id="ID03d530e33b88476380b0fef2632efc90"><enum>(e)</enum><header>Supplemental
coverage</header>
<paragraph id="ID0ec019537a634d398d989d1e3e7202b5"><enum>(1)</enum><header>In
general</header><text>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.</text>
</paragraph><paragraph id="IDd1b3c03d187e4a31951be0d9fbcff789"><enum>(2)</enum><header>Reduced
exposure</header><text>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.</text>
</paragraph><paragraph id="IDc85005c89a894a26817d167e2ec49898"><enum>(3)</enum><header>Purchase of
supplemental coverage required</header>
<subparagraph id="id0E090501D30142DA9A7A7F9BEED0ABFB"><enum>(A)</enum><header>In
general</header><text>Not later than 1 year after the MFA certification date, the Board of Directors shall issue guidelines to determine whether supplemental coverage—</text>
<clause id="id503AFDB24A6F443492421D678D07C33B"><enum>(i)</enum><text>is being offered on commercially reasonable terms; and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idFBE97BEA878C40338A1BCB0B4F096085"><enum>(ii)</enum><text>is reasonably likely to mitigate the risk that the MFA will have to make any payment pursuant to its guarantee.</text>
</clause></subparagraph><subparagraph id="id1C8AFD591266406FBE66E19327F2E0F6"><enum>(B)</enum><header>Coverage
required</header><text>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).</text>
</subparagraph></paragraph><paragraph id="ID104b344470cc46f8abab2cc461b4a964"><enum>(4)</enum><header>Authority to
purchase supplemental coverage</header><text>The MFA may 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.</text>
</paragraph></subsection></section><section id="ID04cb04b72caf48468464b88898801d63"><enum>304.</enum><header>No limit on
private sector involvement; termination of authority</header>
<subsection id="id1914B738C9BE4A36AE9B5CE1BD1037BC"><enum>(a)</enum><header>Private
entities encouraged</header><text display-inline="yes-display-inline">Nothing in this Act shall 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. The MFA shall encourage robust competition between the MFA and private issuers to facilitate the soonest possible privatization of the MFA.</text>
</subsection><subsection id="ID1104901c8ea6494aa4735bb22f952057"><enum>(b)</enum><header>Termination of
authority</header><text>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.</text>
</subsection><subsection id="ID3c55f5fa32c34d12bc59be1664b25431"><enum>(c)</enum><header>Periodic
Reports on Privatization</header>
<paragraph id="id38135A530CD84A5A9150F9C155E483D0"><enum>(1)</enum><header>Initial
report</header><text>During the fifth 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).</text>
</paragraph><paragraph id="id8955696FAA1247528599294DB9E351AA"><enum>(2)</enum><header>Regular
reports</header><text>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)—</text>
<subparagraph id="id0D134AF359F04B8CB67C8C69E23ABD30"><enum>(A)</enum><text>annually through the seventh year following the date of enactment of this Act; and</text>
</subparagraph><subparagraph id="idD70ABE3E69834B3FAB8CB235BC33B10B"><enum>(B)</enum><text>quarterly, beginning in the eighth year following the date of enactment of this Act.</text>
</subparagraph></paragraph></subsection></section><enum>IV</enum><header>Conforming
amendments</header>
<section id="id5DD029A6286F4633A87939365DC7D950"><enum>401.</enum><header>Amendments to
Dodd-Frank Act</header><text display-inline="no-display-inline">Section 15G of the Securities Exchange Act of 1934 (<external-xref legal-doc="usc" parsable-cite="usc/15/78o-11">15 U.S.C. 78o–11</external-xref>) is amended—</text>
<paragraph id="id7A02CE5720664E2884E697B76CB3092C"><enum>(1)</enum><text>in subsection (a)—</text>
<subparagraph id="id5EB486CA1E5E4003A0406982FF929A0A"><enum>(A)</enum><text>by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively; and</text>
</subparagraph><subparagraph id="id2A49250D614342EB800C17881F92C15F"><enum>(B)</enum><text>by inserting after paragraph (2) the following:</text>
<quoted-block display-inline="no-display-inline" id="idC6CAFACD828A4260B71F5F4C6C16BE43" style="OLC">
<paragraph id="id873F784A8F4E4507BF7B15271ED740ED"><enum>(3)</enum><text>the term <term>qualified residential mortgage</term> has the meaning given that term in section 2 of the Mortgage Finance Act of 2015;</text></paragraph><after-quoted-block>;
and</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="id4FB25F47CAAB46CA98EAE7BA2110F206"><enum>(2)</enum><text>by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="id9FC6BFCAC27044378EEEE9F8C30AE6FB" style="OLC">
<subsection id="id2726EDA85184454D95324912EEACD722"><enum>(j)</enum><header>Exemption for
qualified mortgage-Backed securities</header><text>Qualified mortgage-backed securities, as defined in section 2 of the Mortgage Finance Act of 2015, and any other securitizations of qualified residential mortgages, shall be exempt from the risk retention provisions of subsection (c)(1)(B)(i).</text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></section><section id="id09464FA974C0472CA5721189F599BA3B"><enum>402.</enum><header>Federal
Housing Enterprises Financial Safety and Soundness Act of 1992</header>
<subsection id="IDc8c44dfefb544af485230997bf5be64e"><enum>(a)</enum><header>Definitions</header><text>Section 1303(20) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (<external-xref legal-doc="usc" parsable-cite="usc/12/4502">12 U.S.C. 4502(20)</external-xref>) is amended by striking <quote>means—</quote> and all that follows through <quote>(C) any</quote> and inserting <quote>means any</quote>.</text>
</subsection><subsection id="idB519896E204F45EE82E08119D61CBB27"><enum>(b)</enum><header>Transfer of
functions</header><text>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 (<external-xref legal-doc="usc" parsable-cite="usc/12/4502">12 U.S.C. 4502</external-xref>), 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.</text></subsection></section>