[Congressional Record Volume 151, Number 138 (Wednesday, October 26, 2005)]
[House]
[Pages H9126-H9188]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FEDERAL HOUSING FINANCE REFORM ACT OF 2005
The SPEAKER pro tempore. Pursuant to House Resolution 509 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the State of the Union for the consideration of the bill, H.R. 1461.
{time} 1243
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole
[[Page H9127]]
House on the State of the Union for the consideration of the bill (H.R.
1461) to reform the regulation of certain housing-related Government-
sponsored enterprises, and for other purposes, with Mr. Simpson in the
chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the rule, the bill is considered read the
first time.
Under the rule, the gentleman from Ohio (Mr. Oxley) and the gentleman
from Massachusetts (Mr. Frank) each will control 30 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, today the House will consider H.R. 1461, the Federal
Housing Finance Reform Act of 2005. This legislation creates a world-
class regulator for the housing Government-Sponsored Enterprises, or
GSEs, Fannie Mae, Freddie Mac, and the Federal home loan banks.
Last May, the Committee on Financial Services overwhelmingly approved
H.R. 1461 by a vote of 65 to 5.
We have worked a long time on GSE regulatory reform. Since the 106th
Congress, we have had over 20 hearings and received testimony from more
than 100 witnesses on GSE-related matters. Capital Markets Subcommittee
Chairman Baker has worked hard on these issues for many, many years. He
should be commended for his many efforts.
I also want to thank Housing Subcommittee Chairman Ney for taking a
leadership role in developing the housing goals and Affordable Housing
Fund sections of the bill, as well as our ranking member, Mr. Frank,
for his constructive input on many of the bill's key provisions.
The GSEs are among the largest financial institutions, with $2.5
trillion in assets. Fannie Mae and Freddie Mac own or guarantee nearly
half of the residential mortgage market. Eight thousand banks, thrifts,
and credit unions have $550 billion in loans from the 12 Federal home
loan banks. For decades the GSEs have served the housing finance system
well.
We have heard from some that Congress should be cautious in creating
a GSE regulator and mindful not to harm the housing market. However, we
are here today largely because we have learned over the past 2 years
about multiple accounting violations and widespread corporate
mismanagement by the GSEs, resulting in billion-dollar earnings
restatements.
{time} 1245
This has brought to light the fact that current GSE regulators lack
many of the supervisory and enforcement powers bank regulators
currently have. H.R. 1461 will remedy this troublesome situation by
consolidating GSE regulation and providing all of the tools needed to
oversee these huge, complex institutions.
It is time for a new GSE regulator who can prevent problems from
developing and take swift action if the problems arise, thus ensuring
that the housing market and financial system remains strong. Some
believe that the GSEs should be more tightly controlled. Federal
Reserve Chairman Greenspan has called for a mandatory reduction in
their $1.5 trillion in mortgage portfolio holdings.
He is concerned about the systemic risk posed by the GSEs, based on
investor perception that GSE debtholders are backed by the Federal
Government. I do not take this concern lightly, nor the potential for
any taxpayer financial liability.
Today OFHEO can reduce a GSE's portfolio only if the company is
already seriously undercapitalized. H.R. 1461 gives a new regulator
broad discretionary authority to require portfolio adjustments
depending on the circumstances at the time, even if the GSE meets
minimum capital standards.
Such action must be consistent with the GSE's safe and sound
operations or mission, relying on the regulator's expertise. H.R. 1461
strikes the right balance by fully empowering the GSE regulator, while
at the same time allowing the GSEs to pursue their mission in the
housing market.
Specifically, the bill merges OFHEO, FHFB, and part of HUD into a new
independent regulatory agency, the Federal Housing Finance Agency, to
oversee the GSEs. It is funded by annual assessments on the GSEs, not
subject to the congressional appropriations process. The agency is
headed by a director appointed by the President and confirmed by the
Senate for a 5-year term.
There are three deputy directors for divisions of enterprise
regulation, Federal Home Loan bank regulation, and housing. A housing
finance oversight board advises the agency on overall strategies and
policies, but has no executive authority. The board is comprised of the
Secretaries of the Treasury and HUD, two appointed members and the
director as chairman.
The agency's director is authorized to determine minimum and risk-
based capital standards, review and adjust portfolio holdings, approve
new programs and business activities, establish credential management
and operation standards, take prompt corrective and enforcement
actions, put a critically undercapitalized GSE into receivership,
require corporate governance improvements, and hire examination and
accounting experts.
H.R. 1461 also greatly expands the affordable housing role of Fannie
and Freddie. By charter, they must assist in providing mortgages for
low- and moderate-income families. The bill includes new single-family
and multi-family housing goals, duty to serve lower income markets and
a new affordable housing fund with contributions from the enterprises.
The bill establishes a fund to finance construction of houses for
underserved people. It is modeled after the successful Affordable
Housing Program of the Federal Home Loan Bank system. Fannie Mae and
Freddie Mac will manage programs funded by a percentage of their after-
tax earnings, initially 3.5 percent, then 5 percent, or $450 to $650
million annually combined.
In comparison, CBO estimated that in 2003, GSE status provided Fannie
Mae and Freddie Mac a $20 billion Federal subsidy, one-third of which
was retained by stockholders and management, not passed through to
borrowers.
Twenty-five percent of the GSEs' contributions will go to the
Treasury Department to help pay off REFCorp, that is the old S&L bonds,
with the remainder going to the fund. Funds will be awarded through a
competitive, transparent application process to for-profit builders,
State, and local housing agencies and nonprofit organizations.
This should result in Fannie and Freddie leading the market rather
than lagging behind private sector lenders as HUD has found in
promoting affordable housing for underserved communities. Moreover, a
greater amount of the GSE subsidy will go where Congress intended.
I intend to offer a manager's amendment that includes a number of
important changes to the fund, which I will specify at that time.
Mr. Chairman, H.R. 1461 is of great importance to the safety and
soundness of the housing mission of the GSEs, as well as to the
stability of this Nation's housing and financial system. I urge Members
to support its passage.
Mr. Chairman, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself as much time
as I may consume.
Mr. Chairman, I agree with a great deal of what the gentleman from
Ohio (Mr. Oxley) has said, as I agree with a great deal of what is in
the bill. In the nature of parliamentary debate, we will be focusing on
some specific points where I disagree, but I do not want that to
obscure the fact that there is a great deal of agreement.
Mr. Chairman, I yield 4\1/2\ minutes to the gentlewoman from
California (Ms. Waters) who as ranking member of the minority on the
Housing Subcommittee has had a major role in shaping our position and
in the impact of the affordable housing front.
Ms. WATERS. Mr. Chairman, I would like to thank the gentleman from
Massachusetts (Mr. Frank) for yielding me the time and for the job he
has done to shape this legislation.
I would like to thank the gentleman from Ohio (Mr. Oxley) for the
tremendous cooperation and the leadership that has been shown that
helped to get bipartisan support for this legislation. When it left our
committee, it was a good bill. It was a bill that even some people who
had not wanted to support it went along with, because in the final
analysis, it was going to bring about reform of the GSEs.
[[Page H9128]]
Now, some of us know that there is a need for reform with the GSEs.
We are concerned. We do not want them carrying debt that is not shown,
that we do not understand, because we do not want these humongous
general services enterprises to somehow get in trouble and we have to
bail them out the way we did with the S&Ls.
So despite the fact that we think there was an effort by some on the
opposite side of the aisle to basically deal with the some of the
arguments of the banks and savings and loans about the GSEs being too
big, getting too retail, basically taking over their markets, we
support reform; and we voted for the bill because we support reform.
Because of the vision of the gentleman from Massachusetts (Mr.
Frank), we were able to do something for working people and for poor
people by creating this very, very special arrangement that could be
used for the production and preservation of low-income affordable
housing, this kind of set aside.
It would be the after-tax profit from these GSEs that will be used to
produce low-income housing. And so despite the fact that for years
there has been kind of a confrontation between the GSEs and the banks
and S&Ls about market share and all of that, we thought it made good
sense to make sure that the GSEs were not too big, carrying too much
debt. So this reform is good.
But what is absolutely mind-boggling about what has happened, from
the time the bill left committee until the time it has reached the
floor today, is this politicizing of the fund by some of those on the
opposite side of the aisle who never supported this fund for low- and
moderate-income housing to begin with.
What did they do? After the bill left committee, they decided that
they were going to try to put some unconstitutional boundaries on
nonprofits, and I guess profit-making organizations alike, that would
not allow them to participate in the production of low- and moderate-
income housing no matter what the need, no matter what the crisis, if,
in fact, they exercised their constitutional rights to assist people
and lead people in doing voter registration.
That is so unbelievable because, number one, it is unconstitutional.
It is absolutely unconstitutional. This government has shown that it
indeed supports reaching out to the citizens of this country to
encourage them to be involved in voting and participating in this
democracy. We have the Motor Voter Act, which says motor vehicle
departments all over the country, when people register their vehicles,
encourage them to vote; give them voter regulation slips; do whatever
you can to get them involved in the political process. We are on record
with doing that.
And now to have those Members from the opposite side of the aisle say
that you cannot produce low-income housing if you exercise your
constitutional right by helping people to get registered to vote is
absolutely mind-boggling. And let me tell you what is even more mind-
boggling about this. We know that we have gone through some terrible,
terrible times recently here in this country, down in Florida, where
there were databases that were developed of people supposedly who had
been incarcerated and committed felonies that were supposedly not
allowed to vote. But it turned out to be fraudulent databases.
We have had attempts to stop people and discourage them from voting
by having uniformed officers question them when they come into the
polling place. I would think that they would not want to continue with
that kind of reputation.
I will not vote for this bill no matter how much it is needed, as
long as the constitutional rights are violated.
Mr. OXLEY. Mr. Chairman, I yield 3\1/2\ minutes to the gentleman from
Texas (Mr. Hensarling).
Mr. HENSARLING. Mr. Chairman, I thank the gentleman for yielding me
the time. I thank the gentleman for his great leadership on this bill,
H.R. 1461. This has clearly been a long, long time in the making. It
has taken unbelievable negotiation, incredible legislation, incredible
patience from our chairman. I want to congratulate the gentleman from
Louisiana (Mr. Baker), as well, for his steadfast work, his incredible
leadership in bringing this bill to the floor, something, frankly, that
has been in the making for well over a decade.
I think it would be good, Mr. Chairman, to remind people why we are
here in the first place. For a lot of Americans they do not quite
understand what the GSEs are, Fannie and Freddie. Admittedly they play
a very critical role in our housing market, in helping produce what we
now enjoy, the highest rate of homeownership in the history of America.
But at the same time, we have given them a very special charter. We
have given them unique government-granted benefits that we do not grant
their competitors, and we give them these benefits so that they can
create liquidity in the secondary mortgage market and help create the
American Dream for so many people.
But, unfortunately, there have been abuses, a number of abuses. We
have now seen in recent years the largest financial restatement in
history, dwarfing the financial restatements that we saw at Enron and
WorldCom.
Now, when we saw all of these accounting irregularities earlier on
with the Enrons and WorldComs of the world, Congress was outraged. And
Congress rightly answered with critical legislation, Sarbanes-Oxley, to
address these types of corporate abuses.
But all of a sudden, there seems to have been a deafening silence
when we see Fannie and Freddie engaged in activities that with respect
to the financial restatements rival those that I have described. And so
these people play an incredible role in our marketplace, but we have
given them incredible powers as well, and there must be increased
accountability.
So I think that this legislation takes a very significant step
forward in bringing about a significant regulator for these
enterprises, because we know that we have been warned by the Chairman
of our Federal Reserve that particularly with respect to the portfolio
holdings of their own mortgage-backed securities that this represents a
systemic risk to our economy.
This is not something that we can leave unregulated and unabated. And
I think this legislation takes a very good step forward. I hope in
conference with the other body that we can came up with something that
will help address this. I am also concerned about their mission creep.
Again, when we see them engaging in activities like airplane leasing
and activities related to loan originations, and the list goes on, if
they are going to receive government-granted benefits, we need to
ensure that they use their charter to provide this liquidity in the
secondary-mortgage market.
Now we know that there is a debate over the affordable housing fund.
Again, I would ask my colleagues from the other side of the aisle, if
we want to create more affordable housing, why do we not go directly to
the people who need it? Why do we not simply increase that section 8
voucher?
{time} 1300
Are we trying to have affordable housing, or are we trying to have
affordable lobbyists and lawyers? I think we should have affordable
housing and support the manager's amendment.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 30 seconds
to welcome the conversion of the gentleman from Texas to an increased
section 8 voucher program. We on our side have several times offered
amendments to do that in the appropriations bill. I did not remember
him as a supporter. But conversion is a great thing, and I celebrate
it, and I look forward to the gentleman from Texas voting with us the
next time we move to increase the section 8 voucher program. But it
does not solve all of the problems.
Mr. Chairman, I yield 3 minutes to the gentlewoman from California
(Ms. Lee), someone who has been very hardworking, both on voter
registration and on housing.
Ms. LEE. Mr. Chairman, I want to thank the gentleman for yielding me
time.
I want to thank Chairman Oxley and Ranking Member Frank for their
leadership and their really tireless efforts on this bipartisan bill
that we reported out of committee. It is really tragic that it has
unraveled and that the spirit of bipartisanship has been totally
eroded.
Sadly, Mr. Chairman, the bill that I supported, like all of us
supported,
[[Page H9129]]
coming out of the committee, a product that struck a fair balance, a
fair balance between regulatory oversight and the GSEs' housing mission
and goals, would be turned on its head and gutted by the undemocratic
provisions of the manager's amendment that would be offered today.
It is rare that this House considers housing bills, given our
enormous housing crisis in our country. It is shameful, especially
given those left homeless by Katrina, that our bipartisan efforts to
support increased home ownership and wealth building through the
creation of an affordable housing trust fund have fallen victim to the
rights wing's ongoing assault on democracy and programs designed to
help the poor, the elderly, the disabled, the communities of color, and
our underserved community.
Mr. Chairman, once again we have found ourselves in a situation where
some of the Republicans giveth, and then they taketh away. They give us
a vote on a housing bill, but then they ensure that it will be undercut
by an extremist provision inserted into the manager's amendment at the
bidding of right-wing ideologues. Then, just to ensure that these
provisions prevail, the Republicans deny a fair vote on the Frank
amendment to strike it.
The nonprofit gag provision is not only extreme and undemocratic, it
is possibly unconstitutional. It would gag nonpartisan speech and civic
engagement and participation in our most fundamental of democratic
activities.
Let us be clear about the exact consequences of this outrageous gag
provision. It prohibits nonprofits that build affordable housing from
engaging in nonpartisan voter registration. It prohibits nonprofits
from engaging in nonpartisan get-out-to-vote efforts. It prohibits
nonprofits from engaging in nonpartisan election activities period.
What does that mean? For example, it means a preacher whose church
received affordable housing funds would be prohibited from calling on
his parishioners to vote or even identify voting locations. It means
that residents of a building constructed with affordable housing funds
will not be able to host a debate or an election watch party if their
housing units are affiliated with the supportive housing program.
These measures are unconscionable. They hurt the very people we are
trying to help, the poor, the low-income communities, the elderly, the
disabled and our underserved communities.
Mr. Chairman, it is a testament to just how far right this House has
tilted that the gentleman from Massachusetts and Democrats have been
denied a fair vote. That is all we ask for is a fair vote on this
critical issue that goes to the core of our democracy and has such dire
consequences for our communities. This is un-American. It is shameful.
And I am left with no choice but to reject the extreme provisions of
this amendment.
Mr. OXLEY. Mr. Chairman, I yield 2 minutes to the gentlewoman from
Ohio (Ms. Pryce).
Ms. PRYCE of Ohio. Mr. Chairman, I would like to congratulate the
chairman and Mr. Baker and Mr. Frank and Mr. Ney and the many Members
who have worked so hard on this issue for years now.
This is a strong bill that creates a world-class regulator for Fannie
Mae, Freddie Mac and the Federal home loan bank at a time when one is
much needed.
I rise today, Mr. Chairman, because I am concerned about specific
provisions in the manager's amendment which could have unintended
consequences on members of our senior population and the ability of
nonprofits to work together to serve low-income communities.
Specifically, Mr. Chairman, I would like to receive some assurance from
you that you will work with me on these issues as we move toward a
final bill in conference. And first I would like to work to clarify
language in the amendment so it does not disqualify nonprofits from
participating in the Affordable Housing Fund if they transport their
own senior housing residents to the polls. That is with the
understanding that many of these seniors have no other option to get to
the polls but for their own nursing home's transportation facilities.
Mr. OXLEY. Mr. Chairman, will the gentlewoman yield?
Ms. PRYCE of Ohio. I yield to the gentleman from Ohio.
Mr. OXLEY. I look forward to working with the gentlewoman on that
issue.
Ms. PRYCE of Ohio. I thank you very much, Mr. Chairman.
Secondly, I would like to see clarification that the intention of the
language in the manager's amendment pertaining to ``overlapping board
membership'' was not to disallow single individuals from serving on the
board of two organizations. Rather, the language was sought to
disqualify affiliated organizations from participating in the fund
where clear control of one organization is maintained by another which
is participating in election activities.
Mr. OXLEY. I look forward to clarifying this language with the help
of the gentlewoman from Ohio.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 1 minute. I
would be glad to yield the gentlewoman from Ohio further time to point
out the weaknesses in the manager's amendment. I share her appreciation
of the extremely excessive language there. I think she is more
optimistic than I about some of these little tweaks, but I do
appreciate her understanding of its problems.
There are further problems, and there are other ways that we will get
at it, but I welcome the gentlewoman's expression of disagreement with
the extreme sweep of the manager's amendment.
Ms. PRYCE of Ohio. I am not in need of any further time, and I thank
the chairman for his understanding of these issues.
Mr. FRANK of Massachusetts. When the gentlewoman says she is not in
need of further time, I think she is being very kind to her colleagues
in the Republican Study Committee. She is being very kind to our
colleagues who miswrote this amendment.
The only thing that I would differ with the gentlewoman is she said
there are unintended consequences. No, to her they are unintended. To
the people who think poor people vote too much, they were intended. But
we can work together to fix it.
Mr. Chairman, I yield 3 minutes to the gentleman from Pennsylvania
(Mr. Kanjorski), the ranking member of the subcommittee of jurisdiction
here, who has been one of the major architects of what we believe is
mostly a very good piece of legislation.
Mr. KANJORSKI. Mr. Chairman, the Committee on Financial Services has
studied the need to reform the regulation of housing Government-
Sponsored Enterprises for nearly 6 years.
Since convening our first government hearing on GSE reform in March
2000, we have examined these matters extensively. As the ranking
Democratic member on the subcommittee of jurisdiction, I have also had
the opportunity to participate in more than 20 hearings and to hear
scores of witnesses.
The legislation to address these matters that the Committee on
Financial Services ultimately reported earlier this year was a very,
very good piece of legislation. It would, as long as I have advocated,
created a strong, world-class, independent regulatory for housing GSEs.
The bill also received the overwhelming backing of my colleagues on the
committee, passing by a vote of 65 to 5.
While I still believe this base legislative package is a good bill, I
am concerned about some of the amendments that we will debate today.
For example, the manager's amendment that we will shortly consider will
add a number of new provisions that will severely restrict the ability
of faith-based groups to participate in the new Affordable Housing Fund
created by this bill and to participate in our democracy.
These changes are controversial, unconstitutional, and immoral. These
revisions which were not previously debated in committee, which have
generated considerable disagreement, deserve close scrutiny. Because
the rule does not allow a clean vote to remove these troubling
provisions from the legislation, I must regretfully oppose this bill on
final passage.
Beyond the concerns I have with the manager's amendment, I have
concerns about those amendments which would alter the delicate balance
we crafted in committee to create a strong, world-class, and
independent safety and soundness regulator for GSEs. These
[[Page H9130]]
amendments, which I will oppose, would remove the Treasury line of
credit for the GSEs, impose capital standards based on competition
rather than risk, create arbitrary limitations on GSE portfolios for
reasons other than safety and soundness, and alter provisions of the
bill that will help middle-income families purchase homes in high-cost
areas.
Still, there are also a number of good amendments which I will
support, including my own amendment to restore the Presidential and
regulatory board appointment systems for the GSEs.
I hope all of my colleagues will support this target amendment to
retain an independent public voice on Government-Sponsored Enterprise
boards. This amendment also has the support of the National Association
of Home Builders and the National Association of Realtors.
In closing, Mr. Chairman, while this bill has many admirable aspects,
the process by which we have brought it to the floor is flawed. As a
result, I will oppose this bill at the end of the day, but hope to work
to improve the legislation as it moves on in the process.
Mr. BAKER. Mr. Chairman, I yield 2 minutes to the gentleman from New
Jersey (Mr. Garrett), who was an instrumental participant in the
construction of the reform legislation under consideration.
Mr. GARRETT of New Jersey. Mr. Chairman, I rise today to compliment
both Chairman Baker and Chairman Oxley for their work in order to put
together a bill that the main purpose which is to regulate and
strengthen the regulation of Fannie Mae and Freddie Mac.
If anyone here questions the need for additional remedies such as
regulations, all we have to do is look at a brief history going back a
couple of years of these two entities.
Back in January of 2003, Freddie Mac issued a press release and
stated it will issue an unaudited statement of earnings for the year
2002 and restate accounting results for prior years.
November of the next year, November 2003, Freddie issues a
restatement of past accounting results for the year 2000, 2001, 2002,
and revises its net earnings upwards by $4.4 billion that they were off
in their records.
September of 2004, OFHEO makes public a report highly critical of
accounting methods of Fannie Mae. November of 2004, Fannie announces
that it is unable again to file a third-quarter earning statement
because its auditor, KPMG, refused to sign off on the accounting
results.
December of 2004, the Securities and Exchange Commission, the SEC,
issues a statement supporting OFHEO's report and orders Fannie to
restate its financial results. Again, in December of 2004, the Fannie
CEO Franklin Raines and CFO Tim Howard have to resign from those
entities.
Finally, in June of 2005, after 3 years, finally Freddie issues its
first audited annual report since the year 2002. And now we are here in
October, and we look back about a week or so ago, and press reports are
out again suggesting that investigators have uncovered again new
accounting violations of Fannie Mae, possibly including overvalued
assets, underreported credit losses, and misused tax credits.
Mr. Chairman, if there was ever a need of entities that need
additional regulation, it is Fannie Mae and Freddie Mac. If there are
ever two entities that need to be limited in their size, it is these
two entities. If there were every two entities that need not grow, it
is these two entities. I applaud the chairmen for their work to
regulate them.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 3 minutes to the
gentleman from Georgia (Mr. Lewis). Since this is a bill which in its
form in the manager's amendment would interfere with voter registration
efforts, there can be no more appropriate speaker on our side than the
gentleman from Georgia, who, 40 years ago and more, literally risked
his life to advance the rights of people to vote. And I do not think he
will be deterred any more today than he was by Bull Connor.
Mr. LEWIS of Georgia. Mr. Chairman, I want to thank my friend and my
colleague from Massachusetts for yielding me time.
Today we should be doing one thing, providing housing for people who
need it. I must tell you, Mr. Chairman, I am deeply disturbed that we
would add language to this bill to prohibit nonprofit organizations and
groups, churches, synagogues, mosques, from engaging in civic
participation, activity like nonpartisan voter regulation and get-out-
the-vote drives. That is wrong. That is dead wrong.
The right to vote, the right to participate in the democratic process
in our country is almost sacred. The churches, the synagogues,
religious institutions, nonprofits have a long history of being
involved in efforts to get people to participate, to register and to
vote.
{time} 1315
Many faith-based groups will be prohibited from providing housing to
people who desperately need it, simply because part of their moral
mission is to encourage people to vote, to become participants in a
democratic process. This provision would stifle people and
organizations from engaging in their civic responsibilities.
These groups are engaging in lawful, nonpartisan, civic activity, and
I cannot believe that in 2005, this is not 1964, this is not 1965, this
is not the OEO. This is not going back to the Nixon administration.
What are we saying to the people around the world, telling the people
in Iraq they can register, they can vote, they can participate, but we
are saying here in America that our own people, nonprofit, churches,
synagogues, faith-based groups cannot engage in nonpartisan voter
registration and voter turnout? What kind of example are we sending for
an emerging democracy?
Voter identification, voter registration and get-out-the-vote
activities are fundamental activities protected by the first amendment,
the cornerstone of our democracy.
To strengthen our democracy, we need to increase voter registration
and increase voter turnout. We must promote these activities, not
discourage them or penalize people for engaging in them.
This provision will take us back to the dark past. This is
undemocratic and unconstitutional. In my estimation, it is dead wrong.
We can do better, much better.
Mr. BAKER. Mr. Chairman, I yield myself such time as I may consume.
I think it important to realize how we came to this point with just
the briefest of look-backs over historical performance of the three
enterprises that will be subject to the new regulatory standards.
In May of 1996, both HUD and the Treasury agencies issued reports to
the committee which were suggestive of reforms which ought to be
considered and adopted by the Congress, to which the then-acting Vice
President for Corporate Relations at Fannie Mae made the following
professional comment: ``This is the work of economic pencil brains who
wouldn't recognize something that works for ordinary home buyers if it
bit them in their erasers.''
To which the CBO responded to the criticisms: Not only do the
managements of Fannie Mae and Freddie Mac have a fiduciary
responsibility to defend shareholder interest, but their own financial
interests and compensation are closely linked to the continued flow of
subsidies to the enterprises.
How prescient were those observations of the CBO in 1996. It required
almost a decade longer before it was discovered that earnings
manipulations not only had led to significant restatements, they had
triggered another consequence.
Bonuses paid by the corporations to management at Fannie Mae were
tied directly to earnings per share, and there were categories of
earnings that triggered highest, moderate and lowest bonuses that could
be paid. Apparently in a given year, the earnings per share target was
hit to one-thousandths of a cent accuracy, I was later told by
mathematical probability it just happened, that triggered the payment
of $65 million in bonuses in a single year. Over the period of 2001 to
2003, the period of time for which financials have still not been
certified, total bonuses paid amounted to $154.3 million. These bonuses
are in addition to base salaries and other benefits, and represent
money provided by the American taxpayers through guarantees of
obligations that the agencies are able to use in the business world to
yield profits
[[Page H9131]]
for shareholders and evidently profits for themselves.
Further examination of the ability of the regulator to intervene even
in the matter of the unwarranted bonuses was later proven in court to
be insufficient to bar payment of the bonuses until criminal illegality
is proved. That matter is still under examination at the moment.
The bill, however, is important for other reasons to taxpayers. This
enterprise will stand between the agencies who issue debt and engage in
housing activities and significant potential losses to taxpayers should
either of the enterprises ever be found under significant financial
duress.
The regulator historically has been impaired. It is the only
financial regulator in the United States which must come to the
Congress for its funding. All other regulators are funded by
assessments on the regulated entities. We fixed that problem. All other
regulators have the ability to reach inside the organization of a
financial enterprise and adjust its capital requirements. That is money
put in the sock drawer for a rainy day. In case something goes bad, you
need to have capital.
For the OFHEO-regulated enterprises, you had to come to the Congress
and pass an act of Congress to adjust the capital. If any other
financial enterprise were to get into financial duress and be unwound
in the marketplace, that process is called receivership. Not so for
Fannie Mae and Freddie Mac. There are special provisions that allow the
Congress to intervene in protection of their financial interest. This
bill remedies that problem.
There are a host of other matters that the 360 pages of the bill
address, but probably the most important is a tool used by regulators
today in financial enterprises known as prompt corrective action. That
means if a regulator sees an activity that could lead to injury of
shareholders and taxpayers, it can intercede at a very early time and
require a cessation of those activities or simply prohibit them from
doing it again. We provide for prompt corrective action.
What we enable with the passage of this bill is the creation of an
independently funded regulator, with all the tools a modern financial
regulator should have to oversee vastly complex financial enterprises
to protect the American taxpayer from unwarranted losses.
Besides the criticism leveled at the bill today relative to
affordable housing, there is another issue which I feel appropriate to
address, and that is relative to the growth constraints on the
investment portfolios of the two enterprises.
They have, in the aggregate, $1.6 trillion invested in the two
portfolios. Under the prudential management and operations standards of
the bill, the director of the new enterprise shall examine counterparty
risks; management of interest rate risks; adequacy and maintenance of
liquidity and reserves; management of asset and investment portfolios;
investments and acquisitions; overall risk management processes; and,
if we did not cover it in that list, such other operational and
management standards as the director determines to be appropriate. That
translates into, if you do not see it on our list, Mr. Director, go do
it anyway, because we are giving you the authority.
Finally, as to the ability to establish how the portfolio should be
reduced and to what level, Secretary Snow testified before our
committee he could not tell us how to do it or to what level they
should be adjusted, but he did go on to say it should be the subject of
professional examination and recommendation.
Finally, on page 273 of the bill, we read: ``An analysis of the
potential systemic risk implications for the enterprises, the housing
and capital markets, and the financial system of portfolio holdings,
and whether such holdings should be limited or reduced over time,'' is
the director's obligation to engage in professional study, make
recommendations to the Congress if congressional action is needed, or
otherwise act in the best interest of the United States taxpayer.
Finally, with regard to the concerns over the affordable housing
disposition, it should be pointed out these funds are not available
today. This is a new fund. If people are engaged in assistance as a
charitable activity in affording housing to low-income individuals and
registering people to vote, this bill will not preclude that activity
from going forward. What it merely says is that in an instance where we
have limited funds available, estimated to be perhaps $500 million
spread across the entire country, that those funds first and foremost
should be utilized to help people in true need of housing, not
political activism.
If one is engaged in political activism and building houses as of
today's date, you can continue to do it. If you wish to be engaged in
this fund going forward, you will have to make a policy decision, do I
wish to continue political activism, or do I really want to help people
get in homes?
Mr. Chairman, I represent to the House this is a fair bill, fair
compromise and responsible action on the part of this House, and I urge
Members to support its adoption.
Mr. Chairman, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 15 seconds
to say the gentleman from Louisiana has phrased that conundrum for
groups exactly correctly.
I agree with the Roman Catholic Church of the United States that they
should not have to make that choice, and the Episcopal Church and the
Baptist. That is exactly what the Catholic Church says: We have been
doing housing; do not make us choose.
Mr. Chairman, I yield for the purpose of making a unanimous consent
request to the gentlewoman from California (Ms. Zoe Lofgren).
(Ms. ZOE LOFGREN of California asked and was given permission to
revise and extend her remarks.)
Ms. ZOE LOFGREN of California. Mr. Chairman, I thank the gentleman
for yielding.
Mr. Chairman, I am concerned about two provisions in this bill,
raising the conforming loan limit and the attempt to limit the ability
of American citizens to engage in our democratic process currently
contained in the manager's amendment offered by Mr. Oxley.
Mr. Chairman, in my district, the median price for a home in Santa
Clara County is $715,000, yes I said $715,000. The current conforming
loan limit is $359,650, about 50 percent of what the median home price
is. Mr. Chairman, there are simply not enough homes at or near the
conforming loan limit to meet the needs of my constituents.
As a result of this shortage of homes priced near the conforming loan
limit, many first-time homebuyers are either forced into taking out
jumbo loans or are more likely simply priced out of the market
altogether.
Some argue that the conforming loan limit will not make a meaningful
cost difference for homebuyers. Currently there is a .25 percent to .40
percent difference between interest rates on a conforming loan versus a
jumbo loan. In today's market that difference can be as much as $135.00
per month. That matters to hardworking families.
I remind my Republican colleagues that this administration, in
testimony before the House Financial Services Committee spoke in favor
of raising the conforming loan limit.
Part of Mr. Oxley's amendment is simply un-American. Mr. Oxley seeks
to prohibit nonprofit organizations from engaging in nonpartisan, I
repeat nonpartisan, voter registration efforts and get out the vote
drives in the 12-month period prior to applying for funds made
available through the Affordable Housing Fund. If that wasn't bad
enough, the amendment further prohibits nonprofits that receive grant
funds from subsequently engaging in these important activities.
This Congress should be about promoting the values and the processes
of democratic government, not trying to limit or suppress them. What
are you afraid of, more Americans exercising their right to participate
in their government?
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 5 minutes to the
gentleman from California (Mr. Baca), one of our most energetic members
on the committee, fully familiar with the need for housing in
particular.
Mr. BACA. Mr. Chairman, I thank the gentleman from Massachusetts for
the time.
I think we have put together a good bill. It was a bipartisan bill.
It addressed a lot of the concerns that a lot of us had about
affordable housing for minorities, low-income individuals who have an
opportunity to obtain a home, but with the poison pill that has been
put in in its final package, it makes the bill very difficult to
support.
All of us believe that affordable homes should be available for
individuals. This does strengthen regulatory
[[Page H9132]]
oversight on Freddie Mac, Fannie Mae and the Federal home loan banks. I
think that is positive, and it presents an opportunity for many
individuals, especially in my area, San Bernardino County, the Inland
Empire, where we have a lot of growth in the area. We have people that
are moving from Orange County, L.A., San Diego. They are looking at
buying affordable homes. This bill would give many individuals, low
income, an opportunity to do that, especially when the average cost of
a home in L.A. is $475,000, and in San Bernardino it is $352,000. Many
individuals cannot afford to buy a home.
Now that they have that first opportunity, I know what it is like
because I came from a family of 15, and I know for the very first time
when we were able to buy a home. Had we not bought a home, I would not
have had stability in my roots in the immediate area. That is why
provisions of this bill are great.
What I do not like about the bill is a poison pill that has been put
on there, which I believe it is unconstitutional and restrictions aimed
at suppressing the civil rights engaged in by poor minorities for
voting. We believe that every person should have the right to vote and
to participate, and we say that that does not preclude them, and you
have to put a priority whether it is for affordable housing or whether
you will be involved in engaging, encouraging individuals.
America has always encouraged individuals to participate in our
American democracy, and that is the democracy of voting. We have our
veterans who have fought for this country and are now fighting in Iraq,
are fighting for the freedoms that we enjoy today. One of those
freedoms is the right to get out and vote, to allow every individual to
participate and vote, not to restrict individuals, but to allow them to
vote.
This would restrict these individuals who are getting funded for the
housing to say you are not going to participate in this American
democracy by registering individuals to vote. We should allow them. It
is part of democracy. This is anti-civil rights, especially when we
just have Rosa Parks who just died and fought hard for civil rights. We
have Alice Paul who fought for the suffrage of women and others to
encourage to make sure that women had the right to vote.
Now what we are saying is, minorities, you are voting in higher
numbers; we are not going to include you in part of that process
because if you do, and if you get involved in part of that process, we
are going to cut out your funding. I believe this is not fair. That is
why the National Council of La Raza, NAACP, NALEO, LULAC, Puerto Rican
Association, faith-based initiatives are all opposing the restriction
of this anti-poison pill that has been put into this bill.
I hope we can make a correction in the Senate and do justice for
every individual. We talk about Leave No Child Behind. Now we are
saying leave every individual who wants to participate from low-income
minority families behind because we do not want them to participate in
our American democracy.
This is about America. We are proud Americans, and we should allow
every American to participate. We should not deny one organization from
going to them and asking them to participate in that process. What we
are doing is saying, you will not be involved in that process, you will
not be involved in that process. No, that is unfair. It is un-American.
As an American and a Member who served in the Armed Forces, which we
fought for many individuals, we have that responsibility, Mr. Chairman.
We have the responsibility to make sure that every American has that
right.
Let us not go backwards. Let us go forward. Together we can make a
difference.
Mr. Chairman, I rise in support of H.R. 1461 to strengthen the
regulatory oversight of Fannie Mae, Freddie Mac, and the Federal Home
Loan Banks.
I comment my colleagues on the Financial Services Committee for their
bipartisan approach and hard work in drafting this important bill.
This bill keeps the Government Sponsored Enterprises (GSEs) safe,
sound and focused on their mission while preserving their mission to
support financing for low- and moderate- income housing.
Also, this bill includes provisions that will increase housing
opportunities for low income families by: establishing a specific
requirement for GSEs to serve underserved areas, enhancing the GSEs
affordable housing goals and increasing loan limits for high cost
areas.
This bill includes an affordable housing fund that will increase
affordable housing for low income communities.
This fund is particularly important to me because of its potential to
increase affordable housing for many hard-working families in my
district. Housing costs in Southern California have skyrocketed. Many
families have moved to the San Bernardino area where housing is
considered less expensive. But even here, we have seen home prices rise
quickly, and I am concerned that many working couples cannot afford a
home.
Last week, the Los Angeles Times reported that the median price paid
for a Southern California home was $475,000 in September, up 16.1
percent from a year earlier. In San Bernardino County, the median price
has risen 32.8 percent in the past year to $352,000.
This issue has great meaning to me personally. I grew up in a family
with 15 children without a lot of money. I have been fortunate enough
to have worked hard and been able to achieve the American dream of
owning a home. But I know that this dream remains unattainable for
millions of families.
Hispanic families especially face difficulties buying a home as their
incomes on average are lower, and they might not have the same access
to or understanding of financial institutions. I hope the Affordable
Housing Fund will increase rental and homeownership opportunities for
these and other working class families.
As a Catholic, I have learned of our obligation to serve the poor. I
am proud of the work that Catholic Charities and other faith-based
groups engage in. Their mission to help those in need includes
providing shelter and also helping citizens fully participate in
America's political process.
While I support the bill for its merits, I am strongly opposed to the
restrictions added after it passed the committee that place severe
restrictions on nonprofit entities and faith based groups applying for
affordable housing grants.
The language inserted would undermine and severely limit the fund by
excluding nonprofits involved in non-partisan voter registration
efforts.
Republicans are trying to prevent church groups and other respected
non-profit organizations from providing important services. They are
engaged in yet another backdoor scheme to sneak in unconstitutional
restrictions aimed at suppressing the civic engagement of working class
and minority families.
These non-partisan community groups often serve as the main point of
contact and, in many cases, are the only local groups addressing the
social, civic, and educational needs of the people they serve. Yet
Conservative Republicans want to force these trusted organizations to
choose between providing civic education and affordable housing.
Why? Why do Republicans want to deny low income and minority voters
participation in the political process? What do they fear? Do they fear
democracy?
During the presidential campaign, Republican leaders made aggressive
efforts to woo Black and Hispanic voters who have historically
supported Democrats. Now Republicans are determined to deny affordable
housing to these same minority groups. Is this payback?
I hope that we would all agree our country is stronger if more
Americans register to vote and show up at the polls, whichever party or
candidate they support. We need to encourage participation in our great
democracy not limit it. I want to mention an American hero, Alice Paul,
who made our country better, fairer, more Democratic by leading the
struggle for women's rights--including the right to vote.
By the way, she was a Republican, but she was committed to promoting
political participation.
So we should encourage community organizations to help register
voters and praise them for doing so, not penalize them or prevent them.
The restrictions added by Republicans serve no other purpose than to
reduce access to voting by low income people, and I urge my colleagues
to vote against the restrictions.
If however, they pass, I am committed to working with my colleagues
to strip away these horrible provisions as the bill goes through the
Conference Committee Process.
Mr. BAKER. Mr. Chairman, I yield 2 minutes to the distinguished
gentleman from Delaware (Mr. Castle), who is a long-term co-contributor
to the preparation of the legislation before us.
{time} 1330
Mr. CASTLE. Mr. Chairman, I thank Chairman Baker for yielding me this
time; and to call me a co-contributor, when one considers all the
effort he has put into this, is a vast overstatement. I have never
seen, during the time I
[[Page H9133]]
have been here, which is a number of years now, a legislator work so
hard on a particular issue; and I congratulate Chairman Baker for
getting it this far.
And I would like to thank the ranking member. The gentleman from
Massachusetts (Mr. Frank) has been extremely helpful. I do not know
where this is going to come out in the end because of the discussion
and dispute over the affordable housing fund. But, basically, I think
the underlying bill is a heck of a sound bill. I would like to credit
both sides.
We do not have a lot of legislation on this floor which is really
done with the best interests of America at heart without any
consideration for politics, Republican or Democrat; and I think this is
one piece of legislation that does this.
I doubt there are those, other than the gentleman from Massachusetts
(Mr. Frank) and the gentleman from Louisiana (Mr. Baker), and maybe
three or four other people in Congress, a few on the outside, who can
really describe all that this means in terms of the GSEs.
When you are dealing with Fannie Mae and Freddie Mac and the Home
Loan banks, virtually any mortgage out there is in some way touching on
them. They have vast investments. They have vast sums of dollars that
they are handling on a regular basis. If there are any organizations
that need close scrutiny and regulation in this country, to me it is
these GSEs. That is what this bill does.
I am not critical of those who have been doing the regulation before,
but the bottom line is there were some problems. We do need the most
sophisticated kind of regulation that we can have, because they are
participating in some of the most sophisticated kinds of investments
that one can make. We are dealing with a housing market; and while I
hope there will not be a bubble or anything of that nature, there are
problems potentially in that area that we will have to deal with, and
we want to make sure that they are closely monitored so they will not
contribute to that particular problem.
I appreciate the affordable housing fund. I am sorry there is a
dispute over it. I think the concept of the affordable housing fund
makes a heck of a lot of sense as well.
I would strongly recommend this legislation. I hope it will pass in
the House and we can achieve this as final legislation that the
President can sign and all of us can take a great deal of pride in
doing something that is constructive for America.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself such time as
I may consume.
First, let me say that I am glad that the gentleman from Louisiana
(Mr. Baker) indicated the status of the gentleman from Delaware (Mr.
Castle), because I would not have wanted him to have been an
unindicated co-contributor. I think that was very helpful.
Mr. Chairman, I yield 2\1/2\ minutes to the gentleman from New York
(Mr. Meeks), a very active member of the Committee on Financial
Services who is very aware of the need for housing.
Mr. MEEKS of New York. Mr. Chairman, as a member of the Committee on
Financial Services, I am shocked and disappointed in the result of what
up until now has been a true bipartisan policy-making effort.
We in this committee this past May passed a bill, H.R. 1461, by a
vote of 65-5. There was true bipartisanship. In fact, just yesterday I
was talking about how the committee was working collectively together
and there was really bipartisanship and we would come up with a bill
that we could agree upon. How wrong, how wrong I am.
Unfortunately, the Republican Study Committee got involved and has
pushed for an unjust and unnecessary amendment that restricts
nonprofits that do not have housing as their primary purpose or engage
in nonpartisan voter registration or education programs from receiving
funds and grants. Just look at it. I look at my district. My
predecessor at Allen AME is known for developing public-private housing
that is affordable to people, and they would not be able to
participate. Look at what would be left out with this ridiculous
amendment.
Furthermore, if you read this amendment, it clearly states in its
language that the restrictions for not-for-profits are not the same
restrictions as for-profits. I wonder if for-profits can engage in
whatever they want to and still be able to participate in these
fundings, but not-for-profits would not.
It seems to me there is a lot of talk, talk about democracy; but we
truly do not want democracy. We are trying to lock out a whole group of
people from having the opportunity to vote. When we look at the numbers
of people who come out to vote, the numbers are far less than the
percentages any place else. We should be doing everything in our power
to encourage people to come out to vote.
I wonder why the Republicans are doing this. For if they feel so
strong and righteous about their manager's amendment, they surely would
have allowed the Frank amendment which would have stripped this
destructive language before a vote. They did not do this because they
are afraid their own Republican Members that support the CDCs and
faith-based affordable housing programs would vote in favor of the
Frank amendment. There is no democracy for the Republican Caucus. This
was an excellent bill that the radical right wing of the Republican
Caucus has destroyed.
Mr. BAKER. Mr. Chairman, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2\1/2\ minutes to
the gentleman from Massachusetts (Mr. Lynch), who has worked in the
building trades and knows this issue very well.
Mr. LYNCH. Mr. Chairman, I thank the gentleman for yielding me this
time.
Mr. Chairman, I rise in opposition to the measure before us today.
Specifically, I stand in this House to condemn the language in this
bill which would prohibit faith-based organizations, our churches, my
church, our temples and synagogues and mosques, from helping the
homeless by providing housing for the thousands of families in this
country who are either homeless or in shelters or forced to live in
substandard housing.
Under the express terms of this manager's amendment, nonprofit groups
that engage in voter participation activities will be prohibited from
applying for a grant under the affordable housing fund. I am frustrated
as well with the whole process here because my friend and colleague
from Massachusetts (Mr. Frank) was denied the opportunity to offer an
amendment to strike these egregious provisions.
In this day and age when we are beset by major crises such hurricanes
Katrina and Rita and Wilma, which have destroyed literally hundreds of
thousands of homes across the southern part of this country, it is no
time to shackle the hands of our nonprofit, faith-based organizations
from doing what Americans have always taken pride in, and that is
helping their neighbor.
While like most Members I deeply respect the separation of church and
State in matters of worship and the freedom to practice religion
without government influence, there has always been in this country a
recognition, at least until now, that we have faith-based institutions;
and when they have sought to provide basic assistance, such as food for
the hungry and health care for the sick and elderly and housing for the
homeless, free of any effort to persuade or proselytize, they are in
the business of solely reducing suffering, and we have recognized the
goodness in that.
That would end today if the manager's amendment succeeds. We would
have a departure in this country from that long tradition, and for
those reasons I oppose this bill.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2\1/2\ minutes to
the gentleman from New York (Mr. Crowley), one of the most active
members of the committee and very familiar with needs for housing.
Mr. CROWLEY. Mr. Chairman, I rise to tell my colleagues of the good
bipartisan bill that was crafted by the Financial Services Committee,
by Chairman Oxley and by ranking member Barney Frank.
The members of that committee crafted a bill that passed the
committee on a vote of 65-5 that would finally create a tough new
regulator for the Federal housing GSEs and the Federal Home Loan Banks,
something that was needed after some accounting missteps at the GSEs.
[[Page H9134]]
At the same time, this bill also created a massive new Federal
housing trust fund, using a percentage of the profits of these housing
GSEs to ensure a new stock of affordable housing in every section of
this country and providing millions of families the opportunity of
attaining the American dream of homeownership. But that is not the bill
that is before us under this manager's amendment.
This bill went before the Committee on Rules where it was hijacked by
the extremist wing of the Republican Party that holds a grip over the
House of Representatives. They added language to ban churches and other
houses of worship the ability to tap into these funds if they take part
in any type of nonpartisan voter activity, such as helping register
people to vote or taking people to the polls.
What this bill really is is an utter disregard for our Constitution.
This is not a gray area. This is a limitation on free speech. I am
amazed that the same people who champion legislation by the gentleman
from North Carolina (Mr. Jones) known as the Houses of Worship Free
Speech Restoration Act, which would allow churches and other houses of
worship to discuss politics and endorse candidates from the pulpit
without losing their tax-exempt status, will now be the same people who
are stripping their churches from any of this funding to help their
congregations.
This bill could be the greatest housing construction legislation ever
passed by Congress and will help people in every district in America
and benefit almost every church and house of worship in our country,
but the far right wing is opposed to it. They are hypocritically
opposed to it and so stuck in ideology that they refuse to debate this
bill for the issue it is.
Like scared children, they tuck the provisions into the manager's
amendment and refuse any opportunity in the rule to strike it because
they know they cannot win.
We are a religious country and we have many members of the cloth in
Congress, most of whom, I point out, are Democrats, and the far right
knows that their anti-religious language cannot pass on the merits.
That is why I regretfully ask all members of faith and all Members who
respect the independence of religion and the pulpit to oppose the
manager's amendment.
As the gentleman from Massachusetts (Mr. Frank) has stated, if the
manager's amendment is defeated, all of the good sections will be
restored, such as targeting this aid to the hurricane-ravaged areas, in
the motion to recommit.
Mr. Chairman, stand up for your constituents, stand up for the
American dream of homeownership, stand up for people of faith, and
stand up to the far right wing extremists who are hijacking this bill
for their own purposes.
Mr. OXLEY. Mr. Chairman, I yield 2 minutes to the gentleman from Ohio
(Mr. Ney), the chairman of the housing subcommittee.
Mr. NEY. Mr. Chairman, I rise today in support of the bill. As
chairman of the Subcommittee on Housing and Community Opportunity, I
have had a keen interest in the strength of the mortgage market. The
mortgage market has single-handedly kept the economy afloat during
these difficult economic times.
Passage of this bill sends an important signal that we understand the
importance of GSEs and the secondary-mortgage markets in maintaining a
stable economy.
More importantly, I want to comment on the issues of affordable
housing and the effect of the affordable housing fund, which is a great
fund to have, and we have worked with the minority on this issue and
the gentleman from Ohio (Mr. Oxley) and his staff and our staff. I
believe that we will have a profound impact on the country with the
fund.
As Members know, it is very difficult to achieve the delicate balance
between meeting public policy goals and ensuring a free market business
climate. The creation of the government-sponsored enterprises was one
such feat that provides an invaluable public service of creating and
maintaining a secondary market for the mortgage markets. As a result,
our homeownership rates and our access to capital are the best in the
world.
On the other hand, I also understand that because these financial
institutions are creatures of the Federal Government, we also have a
responsibility to ensure they achieve a public-policy purpose.
Homeownership rates among minority families are increasing, but we can
obviously do much better than the current average of 50 percent for
African Americans, Hispanic urban and rural communities, just to name a
few. We have to ensure that these communities that have not been full
participants in the pursuit of the American Dream can be reached.
Fannie Mae and Freddie Mac own or guarantee nearly half of this
country's residential mortgage market. The legislation we are
considering today would markedly improve GSE performance of their
housing mission. The Committee on Financial Services approved major
sections on new single-family and multi-family housing goals; the duty
to serve lower income markets, and I stress duty to serve them; and a
new affordable housing fund with contributions from the enterprises.
Of course, there are other parts of this bill that are good, and I
give credit to the gentleman from Ohio (Mr. Oxley) and the gentleman
from Louisiana (Mr. Baker) in strengthening oversight.
Today, I just wanted to speak freely on the actual housing fund. I
urge my colleagues to support this legislation.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2\1/2\ minutes to
the gentleman from New Jersey (Mr. Pascrell) to speak regarding a very
important provision of the bill as it now exists.
Mr. PASCRELL. Mr. Chairman, I first of all commend the chairman and
the ranking member for putting a great bipartisan bill together
concerning government-sponsored enterprises.
In addition to establishing a very strong, independent regulator, the
legislation will also create a sorely needed affordable housing fund.
The housing fund will help people with low incomes who face the
greatest difficulty in finding housing that is available and
affordable; but as we put forward this new housing fund, I do not think
the manager's amendment is a very good one. We should never force
nonprofits to choose between providing affordable housing and
encouraging full participation in the American Dream.
The housing trust fund will provide a much-needed stimulus to our
American economy, but it is not only low-income Americans who suffer
from lack of affordable housing. I would ask the gentleman to please be
cognizant of what I am saying. I know my district and the area within
my district. A recent study has found that 4.8 million working
families, many of them middle-income, have faced critical housing needs
in recent years, spending more than half of their income on rent or
living in substandard housing.
To help struggling middle-class families, it is essential that we
preserve section 123 of this bill, which raises the conforming loan
limit by up to 50 percent for certain high-cost housing areas. Without
raising that limit, the benefits of the GSE housing subsidies are not
distributed evenly or fairly across geographical lines.
In 2003, Fannie Mae and Freddie Mac purchased 35 percent of all
mortgages originated nationwide. In several high-cost housing areas,
these institutions were able to purchase fewer than 30 percent of the
new mortgages. In my area, a large portion of real estate transactions
take place over the conforming loan limit.
In my own district, my own area, Bergen, Passaic, and Essex counties,
the median price of housing is 125 percent above the existing loan
limit, one of the highest rates in the country.
{time} 1345
This is an unfair limit. It prevents many middle-class families in
New Jersey from being able to own a home in the State.
At a time, Mr. Chairman, when wages are stagnant, energy prices
soaring, college tuition skyrocketing, we are well aware of just how
much these hardworking families are being squeezed financially. This is
common sense. This is not Democrat or Republican. This is common sense
that we help middle-class folks out to purchase the homes. And I am not
going to talk personally to the gentleman from New Jersey, but on this
he is dead wrong.
Mr. OXLEY. Mr. Chairman, I yield 1 minute to the gentleman from
California (Mr. Gary G. Miller).
[[Page H9135]]
Mr. GARY G. MILLER of California. Mr. Chairman, Chairman Oxley and
Ranking Member Frank have worked very hard to come up with a very good
bill. The goal is to make sure we find liquidity in the secondary
marketplace so people in this country have a home. The more liquidity
we have in the marketplace, the more stability we have in the
marketplace, the better it is for the Nation and the overall vibrant
housing market.
GSEs have been at the forefront of creating affordable housing
opportunity throughout our Nation for American families. There is an
amendment that is coming up later that guts something we tried to do in
this bill, and that is to make sure that GSEs can adequately provide
loans in the markets throughout this country. And people who happen to
live in certain areas that are considered high-cost areas, such as
California; New York; Massachusetts, Mr. Frank's State, currently are
not able to acquire Freddie and Fannie loans because the housing market
has grown so much and the costs have grown so much that they have
exceeded the limits that GSEs can lend in. And it is a shame that if
people live in Hawaii, Guam, and places like that, they can still get a
Freddie and Fannie loan, yet in California they cannot. And what we
have done through this bill, thanks to Chairman Oxley, is provide for
those needs and turned out a very good bill.
I strongly urge my colleagues to support this bill.
I rise in strong support of H.R. 1461, the Federal Housing Finance
Reform Act of 2005.
I commend Chairman Oxley and Ranking Member Frank for their tireless
efforts to produce a balanced bill, that ensures that the housing GSEs
are adequately regulated without disrupting our nation's strong and
vibrant housing markets.
Government Sponsored Enterprises (GSEs) have been at the forefront of
creating affordable housing opportunities for American families.
In my district, for example, Fannie Mae has created employer-assisted
housing programs for the City of Brea Police Department to allow police
officers to live in the communities they serve.
They have helped to finance affordable housing initiatives in
Anaheim, California.
Across the district, they have been able to offer innovative programs
to allow those with blemished credit to afford the dream of
homeownership, to help seniors convert the equity in their homes into
cash to help them meet their needs, and to help families and
individuals with special needs become homeowners.
All of this, in partnership with lenders, is intended to meet the
ever-growing needs of our communities.
As we have addressed deficiencies in GSE supervision, we worked hard
to ensure H.R. 1461 does not lose sight of Congress' original goal in
chartering GSEs.
The mission of Fannie Mae and Freddie Mac is to provide stability and
on-going assistance to the secondary market for residential mortgages,
and to promote access to mortgage credit and homeownership in the
United States.
While we make these regulatory reforms, we are also unwavering in our
commitment to help Americans achieve the dream of homeownership.
H.R. 1461 seeks to improve regulation of the GSEs while continuing to
ensure the accessibility of mortgage funds at the lowest cost.
While there is no question that regulatory changes must be made to
ensure the safety and soundness of the secondary mortgage market, H.R.
1461 recognizes that strong regulation provides a means to achieve our
ultimate goal of expanding the supply of affordable mortgage credit
across this nation.
For generations, the goal of owning a home has been the bedrock of
our economy and a fundamental part of the American Dream.
The bill we consider today is about homeownership in this country.
Homeownership benefits our communities and national economy. Indeed,
it is the key to promoting long-term economic stability for our
citizens and nation. That is why this bill is so important.
H.R. 1461 provides for a strong regulator for the GSEs so that
investors and the markets are assured that these companies are sound
and that their investments in America's housing markets are safe.
Loan Limit Language
I am especially grateful that the bill includes language that
recognizes that housing costs differ widely throughout the country.
While GSEs are chartered to operate in every district across the
country, their effectiveness in certain areas has been seriously
hindered because high housing prices have caused fewer and fewer
mortgages to fall within the conforming loan limit.
Those who live in high-cost areas of the country should be able to
participate in federal efforts to provide affordable housing
opportunities.
This is a simple issue of fairness. It is unacceptable for the
federal government to tell my constituents that federal programs exist
to increase homeownership in America, but they cannot qualify simply
because of where they happen to live and work.
The language in the bill increases loan limits in high cost areas to
the median home price of the area, not to exceed the limit for Alaska,
Hawaii, Guam, and the Virgin Islands (150 percent of national loan
limit). This does not impact the portfolios of the GSEs as all loans
made in high-cost areas must be securitized.
By adjusting conforming loan limits in high-cost areas, we can create
nearly 250,000 new homeowners at no cost to taxpayers.
I urge my colleagues to support this important provision and reject
efforts to remove it during the amendment process.
Mr. OXLEY. Mr. Chairman, I yield 2 minutes to the gentleman from
Connecticut (Mr. Shays).
Mr. SHAYS. Mr. Chairman, I thank the gentleman for yielding me this
time. And I particularly want to thank the gentleman from Louisiana
(Mr. Baker) for his efforts for years in this area and for the
gentleman from Ohio's (Mr. Oxley) work and the gentleman from
Massachusetts' (Mr. Frank) work as well.
When Enron was collapsing and Sarbanes-Oxley was created, the
gentleman from Louisiana (Mr. Baker) said to me, But you know what?
Fannie Mae and Freddie Mac do not even come under these laws because
they do not come under the 1933 Securities Act and the 1934 Securities
Exchange Act.
So we thought let us try to get them under it. And I cannot tell the
Members the grief that ensued after that. All of a sudden Fannie Mae
and Freddie Mac considered us enemies because we wanted them to play by
the same rules that everyone else had to play by. And through the work
of the gentleman from Louisiana (Mr. Baker) and others, Fannie Mae was
forced to come under, voluntarily as they said, the 1934 act. And when
they did that, all of a sudden all this information about all of their
problems started to come out because information was being provided to
us. This action we are taking today is in response to the information
that we have learned about Fannie Mae and Freddie Mac.
I am grateful that the new administrations of these agencies are no
longer arrogant like the previous ones. I am grateful that we are
starting to say that they should have to play by the same rules as
everyone else. And because of that, the taxpayers will be protected,
and the investors will be protected.
There are parts of this law that I would like strengthened, but this
is a good act. It deserves our support. And, again, I thank our
chairman for moving forward, as he always does, in a bipartisan way and
for listening to the wisdom of the gentleman from Louisiana (Mr.
Baker).
I rise in strong support of this legislation and appreciate Chairman
Oxley and Chairman Baker's efforts. Fannie Mae and Freddie Mac play a
vital role in our housing finance market, yet for far too long these
companies have been playing by their own set of rules. During this time
we've witnessed massive earning restatements, accounting
irregularities, frequent challenges to their regulator's judgment and
authority, and a cookie jar reserve. These were all part of a culture
of arrogance at the GSEs, and were enabled by a weak and ineffective
regulator. With this legislation, we are beginning to correct this very
serious situation.
How serious is the issue of GSE oversight? What's at stake if one or
both companies fail? Fannie Mae and Freddie Mac have $1.6 trillion in
combined assets; $1.4 trillion in retained mortgages in portfolio; $1.5
trillion in outstanding debt; and $1.5 trillion in notional
derivatives. In addition, outstanding mortgage-backed securities
guaranteed by Fannie and Freddie, but held by third parties, total $1.7
trillion. Mr. Chairman, in the absence of a world-class regulator to
oversee these institutions, we are truly playing Russian roulette.
Creating a new regulator is not about punishing the GSEs--it is in
fact vital to the safety and soundness of our Nation's housing market.
Both investors and taxpayers have a right to know the financial
condition of the GSEs and they deserve a strong, independent regulator
that has the resources to oversee their operations.
There has been and will continue to be vigorous debate about this
legislation. I want to address a few key issues surrounding this
legislation, and share my thoughts on what I
[[Page H9136]]
hope is ultimately included in the bill that is sent to the President.
Currently, Fannie Mae and Freddie Mac are the only two publicly-
traded companies in the Fortune 500 that are exempt from regulation by
the SEC. The only reason Fannie Mae and Freddie Mac were forced to
reveal their accounting errors is because in July 2002, under pressure
from Congress and the Administration, the two companies finally agreed
to comply with certain reporting requirements of the Securities
Exchange Act of 1934. Fannie Mae followed through and registered in
2003, but failed to file a report in the third quarter of 2004, and is
now in the process of restating those reports it did file. Freddie Mac
simply never lived up to the agreement.
I believe all publicly traded firms should play by the same set of
rules, and am pleased this legislation codifies the 2002 agreement.
This legislation should go even further by requiring Fannie Mae and
Freddie Mac to comply fully with the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Regarding the powers of the new regulator, due to the enormity of the
GSEs' holdings, it seems to me we should go even further in empowering
this new office. Economic experts, most notably Federal Reserve Board
Chairman Alan Greenspan, have warned this Congress that the tremendous
concentration of mortgage assets at Fannie Mae and Freddie Mac coupled
with the dangers associated with interest rate risk may pose a systemic
risk, not only to the U.S. capital markets, but indeed the global
financial system. Later today, I intend to support an amendment to
empower the regulator to reduce Fannie and Freddie's mortgage assets if
it determines these assets pose a systemic risk. I oppose placing
statutory or hard caps on the GSEs' portfolios, but consistent with the
Treasury Department's recommendation, it is prudent we provide the new
regulator with the authority to consider systemic risk.
Finally, regarding the affordable housing fund, despite my concern
that creating this fund will only deepen the perception the GSEs are
backed by the Federal government, those concerns are outweighed by the
pressing need for more affordable housing in Connecticut and around the
country. Year after year, we vigorously debate the amount of Federal
funds to allocate for public housing, Section 8 and other housing
programs, and it is my strong conviction that we must creatively
address the affordable housing crisis. It seems to me this fund is a
worthy solution.
Non-profit organizations and social service providers in Connecticut
do an amazing job and are continually finding ways to do more with
less. But the needs are tremendous, and families continue to struggle
to find housing where they can safely raise their children and still
afford to feed them too. It's time we empowered housing organizations
with additional resources to build more affordable units, including in
the Gulf Coast region devastated by Hurricanes Katrina and Rita.
Mr. Chairman, while there is more work to be done before Congress
sends this legislation to the President, I support what we have before
us today and encourage my colleagues to do so as well.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself the balance
of my time.
Mr. Chairman, I have noticed a certain level of discomfort on some of
my friends on the Republican side and some of my not so good friends on
the Republican side. So I want to be very generous and ease their
discomfort.
There are people who are not happy with everything in the manager's
amendment. A lot of what is in the manager's amendment a lot of us
like, the preference for the gulf areas, some of the restrictions on
what people do with the use of funds.
There are three small provisions in the manager's amendment that are
controversial. The one that says no faith-based groups can go in there,
the principal purpose; and the one that says nonpartisan voter
registration and nonpartisan get out the vote are not possible.
So I want to tell people this: If the manager's amendment is
defeated, I will offer as the recommittal motion the exact manager's
amendment minus those three specifics. So if they like the manager's
amendment but do not want to keep the Catholic Church out of affordable
housing, do not want to have the problem that the gentlewoman from Ohio
(Ms. Pryce) mentioned where they cannot take old people to the polls,
and do not want to restrict nonpartisan voter registration, if the
manager's amendment is defeated, everything except those three things
that were in the manager's amendment will be in the recommit.
And as proof of that, I have given a copy of what the recommit would
then be over to the Republican side. They can look it up, as Casey
Stengel used to say. They will be able to see that they can then
carefully and in good conscience vote against the manager's amendment
and then vote for the recommit because it will be their amendment; so
they will get permission to vote for the recommit, and they will get
everything in the manager's amendment except the one thing that keeps
out faith-based, restricting it to people whose primary purpose is
here, and the nonpartisan restriction on voter registration. All the
other restrictions and everything else will be in it. So do not worry.
I am making their life easier.
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
This has been an excellent debate, and we appreciate the efforts on
both sides of the aisle for this legislation.
Mr. Chairman, this is historic legislation, the first time that any
Congress has reached a stage where we are debating a major reform
effort for the GSEs. It is a long time coming. The gentleman from
Louisiana (Mr. Baker) has toiled in the vineyards for all of these
years, and we have finally reached a situation where we can finally
pass legislation that will improve the regulatory structure of the
GSEs, ultimately make them stronger and more accountable, provide
affordable housing funds through the GSEs throughout the country and
particularly related to the hurricane-affected areas.
This is well balanced. It makes a lot of sense, something that we
have been working on for a long time. And I know a lot of the debate
has been about one particular part of the manager's amendment that I
will be offering next, but at the end of the day, when this bill comes
up for final passage, most Members will support it because it makes
good sense from a regulatory standpoint, it makes good sense from an
affordable housing standpoint.
House of Representatives,
Committee on Financial Services,
Washington, DC, September 14, 2005.
Hon. F. James Sensenbrenner, Jr.,
Chairman, Committee on the Judiciary, Rayburn House Office
Building, Washington, DC.
Dear Mr. Chairman: On July 14, 2005, the Committee on
Financial Services filed its report on H.R. 1461, ``Federal
Housing Finance Reform Act of 2005.'' The bill was then
sequentially referred to the Committee on the Judiciary until
September 16, 2005. I am writing to confirm our mutual
understanding with respect to the further consideration of
H.R. 1461.
I am pleased that our staffs have been working together
during this period and have reached an agreement on an
amendment regarding independent litigation authority (copy
attached). I agree that I will request the Rules Committee
make this amendment in order as part of a manager's amendment
during consideration of the bill, and to consult with your
Committee in providing an explanation of its contents. It is
my understanding that with this commitment, no further action
by the Judiciary Committee on this bill will be required and
the time period for the sequential referral will thereby
lapse. It is also understood that this procedure is without
prejudice to the jurisdictional interests of the Judiciary
Committee on this or similar legislation. I will also support
the request of the Judiciary Committee for an appropriate
appointment of conferees should H.R. 1461 or a similar Senate
bill be considered in conference. I will also include this
exchange of letters in the Congressional Record during
consideration of the bill.
Thank you for your cooperation and your attention to this
important matter.
Yours truly,
Michael G. Oxley,
Chairman.
____
House of Representatives,
Committee on the Judiciary,
Washington, DC, September 14, 2005.
Hon. Michael G. Oxley,
Chairman, House Committee on Financial Services, Rayburn
House Office Building, Washington DC.
Dear Chairman Oxley: This letter responds to your recent
letter concerning H.R. 1461, the ``Federal Housing Finance
Reform Act of 2005,'' which was ordered reported to the House
by the Committee on Financial Services on July 14, 2005 and
sequentially referred to the Committee on the Judiciary.
As you know the Committee on the Judiciary has jurisdiction
over matters concerning independent litigation, bankruptcy
laws, civil judicial matters, and other subject matter
contained in the bill. I am pleased to acknowledge the
agreement between our Committees to address changes that you
will include in a manager's amendment to the bill concerning
independent litigating authority. In order to expedite this
legislation for floor consideration, the Judiciary Committee
agrees to forgo action on this bill based on the agreement
reached by our Committees
[[Page H9137]]
and with the understanding that no other provisions affecting
the jurisdiction of the Judiciary Committee are included in
the amendment to H.R. 1461. The Judiciary Committee takes
this action with the understanding that it in no way
prejudices the Committee with respect to the appointment of
conferees or its jurisdictional prerogatives on this or
similar legislation. I also request that you include this
exchange of letters in the Congressional Record during floor
consideration of this bill.
Thank you for your attention to this matter and for the
cooperation of your staff.
Sincerely,
F. James Sensenbrenner, Jr.,
Chairman.
____
House of Representatives,
Committee on Ways and Means,
Washington, DC, October 25, 2005.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services, Rayburn House
Office Building, Washington, DC.
Dear Chairman Oxley: I am writing with respect to H.R.
1461, the ``Federal Housing Finance Reform Act of 2005,''
which was reported to the House by the Committee on Financial
Services on Thursday, July 14, 2005.
As you know, the Committee on Ways and Means has
jurisdiction over matters concerning taxes and the Internal
Revenue Code of 1986. A provision in Section 144 of H.R. 1461
would provide an exemption for a limited-life enterprise from
Federal taxes, and thus falls within the jurisdiction of the
Committee on Ways and Means. However, in order to expedite
this legislation for floor consideration, the Committee will
forgo action on this bill. This is being done with the
understanding that it does not in any way prejudice the
Committee with respect to the appointment of conferees or its
jurisdictional prerogatives on this or similar legislation.
I would appreciate your response to this letter, confirming
this understanding with respect to H.R. 1461, and would ask
that a copy of our exchange of letters on this matter be
included in the Congressional Record during floor
consideration.
Best regards,
Bill Thomas,
Chairman.
____
House of Representatives,
Committee on Financial Services,
Washington, DC, October 26, 2005.
Hon. William M. Thomas,
Chairman, Committee on Ways and Means, House of
Representatives, Longworth House Office Building,
Washington, DC.
Dear Chairman Thomas: Thank you for your letter concerning
H.R. 1461, the ``Federal Housing Finance Reform Act of
2005''. This bill was reported by the Committee on Financial
Services on July 14, 2005. It is my expectation that this
bill will be scheduled for floor consideration in the near
future.
I acknowledge your committee's interest in a provision
contained in section 144 of the bill which would provide an
exemption for a limited-life enterprise from Federal taxes.
Such matters concerning Federal taxation fall under the
exclusive jurisdiction of the Committee on Ways and Means.
However, I appreciate your willingness to forego action on
H.R. 1461 in order to allow the bill to come to the floor
expeditiously. I agree that your decision to forego further
action on this bill will not prejudice the Committee on Ways
and Means with respect to its jurisdictional prerogatives on
this or similar legislation. I would support your request for
conferees on those provisions within your jurisdiction should
this bill be the subject of a House-Senate conference.
I will include this exchange of correspondence in the
Congressional Record when this bill is considered by the
House. Thank you again for your assistance.
Yours truly,
Michael G. Oxley,
Chairman.
____
Mr. WEINER. Mr. Chairman, despite the divisiveness of the term
``faith-based,'' most Americans are united in their support of
religious organizations. Across the country, these organizations do
great work, feeding the hungry, caring for the sick, and in many cases
providing affordable housing to those most in need.
That's why it's surprising that the Republicans are using an
otherwise worthy effort to reform Government Sponsored Enterprises like
Fannie Mae and Freddie Mac to throw a wrench in the relationship
between government and the religious community. The Affordable Housing
Fund created by the bill will commit 5 percent of Fannie and Freddie
profits toward a grant program to build, maintain, and rehabilitate
housing for low-income families. Yet language passed in the Managers
Amendment stops that money from flowing to faith-based organizations.
That amounts to $500 million a year that Republicans don't believe
should go to organizations like Catholic Charities.
Today in Brooklyn and Queens alone Catholic Charities operates 3,000
units of affordable housing including 2,090 units for senior citizens,
480 units of family housing and 377 units of supportive housing for
formerly homeless individuals. But the Church, the largest non-profit
provider of low income housing in Brooklyn and Queens, will be shut out
of the new program.
Faith should never be used to divide an electorate or play a
political game. I believe that is exactly what Republicans have done in
order to take the teeth out of a program designed to help those most in
need.
We should all embrace the principle of Tikkun Olam which says that
those who have a little more, should do a little more. That is exactly
what the Affordable Housing Fund would have allowed faith-based
organizations to do in partnership with the Federal Government until
Republicans inserted their limiting provisions.
In the words of the Most Rev. Nicholas DiMarzio, Bishop of Brooklyn,
in a letter to the Speaker dated October 3, ``There are ample ways to
write safeguards into the legislation to prevent the diversion of
affordable housing funds to uses other than what they are intended
without requiring recipients to forego their constitutionally protected
rights as a condition for participating in Affordable Housing Fund
programs.''
I include the Bishop's letter for the Record.
Department of Social Development
and World Peace,
Washington, DC, October 3, 2005.
Hon. J. Dennis Hastert,
Speaker, House of Representatives,
Washington, DC.
Dear Mr. Speaker: I write as Chairman of the Domestic
Policy Committee of the United States Conference of Catholic
Bishops (USCCB) to urge you to retain the Affordable Housing
Fund as part of the Federal Housing Finance Reform Act of
2005 (H.R. 1461) and bring the bill to a vote forthwith. The
Catholic Bishops have historically urged the federal
government to help meet our nation's promise of a decent home
for every American family, especially those families with
extremely low incomes.
As I noted in my June 10 letter to the House of
Representatives, the Catholic Community--through our
Charities agencies, dioceses, and parishes--serves tens of
thousands of men, women, and children who struggle to
maintain adequate housing. Besides sheltering homeless people
who turn to us for help, we have built, and continue to
maintain, thousands of affordable housing units. All of these
experiences have demonstrated to us how inadequate,
substandard housing hurts human life, undermines families,
destroys communities, and weakens the social fabric of our
nation. Despite our efforts--and the efforts of so many
others--there just is not enough affordable housing
available.
Proposals that would limit eligible recipients to
organizations that have as their primary purpose the
provision of affordable housing would effectively prevent
Catholic dioceses, parishes and Catholic Charities agencies
from participating in Affordable Housing Fund programs.
Similarly, proposals that would prohibit recipients from
engaging in voter registration and lobbying activities with
their own funds during the period they are utilizing
affordable housing funds would force Catholic agencies to
choose between participating in Affordable Housing Fund
programs or engaging in constitutionally protected voter
registration and lobbying activities with their own funds. I
urge you to oppose inclusion of these kinds of unnecessary
limitations and prohibitions in H.R. 1461 as it moves to the
House floor for a vote. There are ample ways to write
safeguards into the legislation to prevent the diversion of
affordable housing funds to uses other than what they are
intended without requiring recipients to forego their
constitutionally protected rights as a condition for
participating in Affordable Housing Fund programs.
The Bishops' statement, Putting Children and Families
First, notes: ``Many families cannot find or afford decent
housing, or must spend so much of their income for shelter
that they forego other necessities, such as food and
medicine.... [The Catholic bishops] support housing policies
which seek to preserve and increase the supply of affordable
housing and help families pay for it.'' We must put in place
a sustainable source of funds to build affordable housing and
this new fund would do that.
As I said in my June letter, this legislation presents
Congress with a genuine opportunity to make the shelter needs
of extremely low-income families a national priority. I
believe that such families who need housing the most should
be targeted to receive these limited funds.
With every best wish, I am,
Sincerely,
Most Rev. Nicholas DiMarzio, PhD, DD
Bishop of Brooklyn, Chairman, Domestic Policy Committee,
United States Conference of Catholic Bishops.
____
Ms. KILPATRICK of Michigan. Mr. Chairman, it is with some reluctance
I rise now in opposition to H.R. 1461, the Federal Housing Finance
Reform Act. In its amended form, the legislation no longer puts the
best interest of our Nation at heart, but instead holds a precious
resource hostage for the sake of partisan politics.
The provision restricting non-profit organizations, and their
affiliates, from using their own funds to engage in non-partisan voter
registration or get-out-the-vote activities if they want
[[Page H9138]]
to apply for the much-needed affordable housing funds is entirely
inappropriate. Election activities promoting good citizenship conducted
by unbiased, non-profit organizations should be encouraged, not
restricted. To add insult to injury, the new provision imposes a new
burden of requiring these groups to list housing assistance as their
``primary purpose'' if they want to apply for funds. The effect of this
constraint will be to reduce the diversity of assistance that will be
available.
With such a growing need for affordable housing, and for competent
groups capable of connecting people with the already scarce resources,
I cannot imagine why my colleagues would want to handicap these
organizations from providing assistance to our Nation's most vulnerable
populations.
It is for these reasons I cannot support this otherwise sound and
reasonable measure to improve the regulation of our Nation's largest
source of mortgages. I urge my colleagues to vote ``no'' on H.R. 1461.
Mr. NADLER. Mr. Chairman, I rise in opposition to this legislation.
I support increasing oversight of Fannie Mae and Freddie Mac. It is a
worthwhile goal, one that the recent scandals at these institutions and
on Wall Street illustrate is sorely needed. And I support the creation
of a budget-neutral Affordable Housing Fund. Indeed, that this kind of
program should be created, given the proclivity of this Republican
House of gutting programs for the poor, is nothing short of miraculous.
However, I cannot support a program whose benefits come at the
expense of the rights of nonprofit organizations. The provision in
question would disqualify any nonprofit group that engages in voter
participation activities, such as voter registration and get-out-the-
vote efforts, from applying for a grant under the Affordable Housing
Fund. This would apply even if the activities are non-partisan and even
if they are paid for with non-federal monies. This provision would have
a chilling effect on the Constitutional speech and association rights
of all nonprofits.
How can the Republicans, in good faith, claim to work with us on the
reauthorization of the Voting Rights Act, and turn around and tie the
hands of those groups who are trying to incorporate the disenfranchised
into the democratic process? What's worse, this provision is entirely
superfluous. Nonprofits are already prohibited from using federal funds
to lobby. However, they are free to engage in lobbying and nonpartisan
voter registration with non-federal dollars. This bill is a slap in the
face to those groups who need this money most. What's more, this
restriction only applies to non-profit organizations, not any for-
profit entities seeking grants from the Fund.
This bill also essentially bars non-profits whose mission extends
beyond the provision of affordable housing. Many organizations develop
and manage effective affordable housing programs alongside programs
that provide food, closing, counseling, and other health and social
services. Those who claim to work on behalf of the faith-based
community should take a close look at this bill, and should watch this
vote closely. By voting aye you are barring church groups from
affordable housing funds if their primary mission goes beyond
affordable housing.
This is a typical piece of Republican legislation. Once again, my
friends from across the aisle have poisoned legislation that would
otherwise have received bipartisan support by picking on those who can
least afford to defend themselves. I encourage my colleagues to join me
in opposing this bill, and supporting the motion to recommit. We can
and should do better.
Mr. FOSSELLA. Mr. Chairman as we consider H.R. 1461, the Federal
Housing Finance Reform Act, I would like to urge my colleagues to
support the inclusion of a provision to provide an increase in
Conforming Loan Limits for high cost Metropolitan Service Areas, MSAs.
Since 1980, the price of homeownership in New York has increased by
492 percent, and continues to escalate in the current housing market.
With drastically higher prices than other parts of the country,
homeownership in the area has limited access for lower and middle
income New Yorkers.
The GSE's chartered mission is to expand homeownership for low to
middle income Americans, and this should apply to Americans regardless
of the geographic region in which they reside. In working towards
achieving this mission, Fannie Mae and Freddie Mac are restricted in
their ability to participate in these high cost areas because
significantly fewer mortgages fall within the conforming loan limit.
The current loan limit is set at $359,650. The median price of a home
in the New York area, however, is $435,200--considerably higher even
for entry level home prices. While the current loan limit has been
raised to the lesser of 150 percent of the statutory limit or the
median home price in Alaska, Hawaii, Guam and the Virgin Islands, high
cost metropolitan areas like New York City have been left out.
Language included in HR 1461 would increase loan limits in high cost
areas to the maximum of the area's median home purchase price, capped
at 150 percent of the current limit. Raising these limits will help
lower to middle income residents in high cost areas like Staten Island
gain access to the lower interest mortgage rates Fannie and Freddie are
able to provide--mortgage rates that, compared to jumbo loans, can save
my constituents as much as $135 a month.
Fannie and Freddie are able to provide lower interest rates to
homebuyers and expand homeownership through the contributions of the
American taxpayer. It is time the taxpayers in high cost areas like New
York City realize the benefits of their contributions through access to
lower interest mortgages. The current disparity is undeniable.
I urge my colleagues to support the Conforming Loan Limits language
and vote no on attempts to remove it from the Federal Housing Finance
Reform Act.
Mr. RAHALL. Mr. Chairman, today, the House of Representatives voted
on H.R. 1461, the GSE Federal Housing Finance Reform Act of 2005. This
bill will not only substantially overhaul the safety and soundness of
the housing government-sponsored enterprises, but it will also
establish an Affordable Housing Fund.
I voted in favor of this legislation, but with some reservation.
The Affordable Housing Fund provides funds to grantees to build
housing that is affordable to low income families. This is an important
goal, and while I support the bill and the establishment of the
Affordable Housing Fund, I do not support the inclusion of language
that blocks non-profit organizations from non-partisan activities that
encourage citizens to participate in our democratic process. This is
why I voted against the manager's amendment to H.R. 1461 earlier today.
The amendment included language that will prohibit grantees from
using even their own funds to encourage citizens to exercise their
right to vote and would retroactively penalize organizations that have
done so in the past. This language would restrict non-profits who
engage in first amendment political activity, with their own funds,
from receiving Affordable Housing Fund grants. In short, it will have a
chilling effect on the free speech rights of non-profit organizations.
By keeping funding out of the hands of non-profit and faith-based
organizations that are associated with any kind of voter registration
activities and exempting for-profit companies from the same
restrictions, I ask, what legitimate governmental interest is there in
preventing nonpartisan voter participation activities? Political
participation is a foundation of our Constitution.
I hope that when H.R. 1461 reaches Conference, a bi-partisan effort
will come together to strike this language from an otherwise worthy
piece of legislation. I will continue to protect our citizens' ability
to register to vote and have a voice in the political process.
Mrs. MALONEY. Mr. Chairman, when this bill left the Financial
Services Committee on a 65 to 5 vote, I felt we were on the way to a
great accomplishment. I was truly impressed with the hard work that
Chairman Oxley, Ranking Member Frank, Congressman Baker, and others had
done to bring the GSEs into this century.
It is no less than tragic that the majority leadership and the
administration have deep sixed this bipartisan legislation.
The bill creates the sort of regulator that the GSEs have long lacked
and that they demonstrably need, without destroying their housing
mission.
I was particularly excited by the Affordable Housing Fund provided by
this bill. The Fund is a critical and long-overdue step toward
addressing the very real housing crisis that confronts low-income
families.
It would be the first concrete step the Congress has taken in support
of housing in this administration.
We know that without Federal assistance, housing for low-income
families does not get built or made available. Yet each year this
administration has cut its support for housing. In this bill, we found
a bipartisan way to support housing using a new funding source.
The GSEs were chartered by the Federal government for the purpose of
providing housing to more Americans, and they enjoy a benefit as a
result of their Federal charter. Thus, it is uniquely appropriate that
they plow a percentage of their profits--up to 5 percent--back into the
low-income end of the housing market.
This would be $500 million or more annually. That is serious money.
We built on success: the Fund is modelled after the successful
Affordable Housing Program of the Federal Home Loan Bank Program.
We wanted all players involved. Funds would be awarded through a
competitive process to for profit builders, State housing
organizations, and non-profits.
[[Page H9139]]
We put in place safeguards to prevent abuse. The funds must be used
for low-income housing. They may not be used to lobby or to conduct
partisan political activities. Recipients who misuse funds will not be
allowed to participate again.
This bill is the best thing that has come along for housing in a very
long time.
Therefore it is particularly tragic that the majority has injected a
poison pill into the bipartisan bill that left our Committee: the
provision that prevents any nonprofit recipient of a housing grant from
conducting nonpartisan voter registration or get-out-the-vote
activities.
This is an outrageously bad provision that imposes unconstitutional
restrictions on promoting the most fundamental of our civil liberties:
the right to vote.
It is profoundly disturbing that the majority and the administration
are willing to use any tool available to kill this bill and prevent the
Housing Fund from becoming a reality.
I urge my colleagues on both sides of the aisle to repudiate these
provisions that strike at faith based organizations and the fundamental
right to vote.
I cannot in good conscience vote for this bill with this provision in
it. Even the promise of housing money comes at too high a price when we
must compromise the principles on which this Nation is built.
Ms. PELOSI. Mr. Chairman, I thank the gentlemen from the Financial
Services Committee, Mr. Frank and Mr. Oxley for working in a bipartisan
way to build broad support for the GSE reform bill they bring to the
Floor today. This bill was reported from the Committee by a vote of 65-
5.
But today that spirit of working together for common sense reforms
and for the good of the people seems to have vanished.
The first order of business will be to consider a manager's amendment
that will eviscerate a provision of the bill that is central to the
broad support it enjoys--the Affordable Housing program funded through
a small percentage of the profits of Fannie Mae and Freddie Mac. If
enacted, it will be the first affordable housing resource created
without using Federal dollars since Congress established the Federal
Home Loan Banks Affordable Housing Program in 1989.
Mr. Chairman, for too long many of America's low-income families have
struggled to find affordable, safe, decent housing. Budget cuts and
rising development costs mean that fewer units are built under existing
programs each year. We are losing more affordable housing than we are
building. Therefore it is vital that a new dedicated funding stream for
affordable housing be created.
Unfortunately, my Republican conservative colleagues hijacked this
bill in an effort to strip away the bipartisan housing fund. When they
were not able to completely get rid of it, they limited its use by
blocking nonprofit organizations and faith-based groups, who engage in
vote registration with their own funds, from even applying for grants
to build affordable housing. There are no similar restrictions on
``for-profit'' organizations.
This is not fair. As Catholic Charities has pointed out,
``Encouraging citizens to exercise their right to vote is an integral
part of the Catholic Church's religious and moral mission and
reinforces individual responsibility for the common good . . . Catholic
Charities agencies should not be forced to choose between affordable
housing funds and fulfillment of their religious mission.''
It is unacceptable to force a poisoned choice on these entities: to
help fill critical housing needs or to exercise their basic civic
responsibilities. Most importantly, it is an unacceptable barrier to
Americans' right to vote.
Our democracy depends on protecting the right of every American
citizen to vote--and to register to vote--in every election. As the
Supreme Court noted: ``No right is more precious in a free country than
that of having a voice in the election of those who make the law, under
which, as good citizens, we must live.''
We dare not, we must not create barriers on the right to vote and
undermine 40 years of progress. It is a chilling precedent and a path
we should refuse to walk. No church, no religious order, no faith-based
group or non-profit organization should face the prospect of being
deemed ineligible for money to help low-income, elderly, or disabled
individuals find affordable homes simply because they offer a full
range of services, including counseling, clothing, mentoring, and--
yes--helping people fulfill their right to participate in their
government.
Mr. Chairman, today we honor the life of Rosa Parks. We must use the
opportunity in this bill to recommit ourselves to the ideals of
equality and opportunity that are both our hope and our future. We must
defeat this cynical, political strategy to divide us once again. I urge
my colleagues to support our effort to strip these mean-spirited
restrictions from the bill.
Mr. GUTIERREZ. Mr. Chairman, I am very proud of the committee print
of H.R. 1461, legislation designed to improve the regulatory structure
of the Government Sponsored Enterprises, GSEs. I am pleased that two
amendments I offered at markup are part of the bill. One of my
amendments preserves the minority component of the single family
housing goals relating to underserved areas, with a major improvement
in its implementation. My other amendment provides protection from
liability for a GSE that makes reports to its regulator concerning
transactions involving fraudulent loans or financial instruments. This
provision was modeled after the protection from potential liability for
such reports that banking institutions currently have under the Bank
Secrecy Act.
H.R. 1461 also contains a much-needed expansion of Fannie and
Freddie's affordable housing goals. The legislation directs each
company to establish and manage an affordable housing fund to promote
affordable housing and assist victims of Hurricane Katrina. The GSEs
would devote 3.5 percent of after tax profits to the fund beginning in
2006, which increases to 5 percent annually beginning in 2007.
In 1989, in the FIRREA legislation, we created a similar Affordable
Housing Program in the Federal Home Loan Bank System. The AHP requires
the FHLBs to devote 10 percent of each year's net profits as grants for
affordable housing projects sponsored by their member financial
institutions. The AHP's success can be measured by the fact that today
it constitutes the largest private source of funding for affordable
housing and community development projects.
In my hometown of Chicago, the Federal Home Loan Bank of Chicago's
AHP plays a key role in local efforts to address the housing needs of
low- and moderate-income families by providing financial assistance for
rental and owner-occupied housing, assisted living facilities, senior
housing developments, homeless shelters and group homes.
In 2004 alone, the Chicago FHLB awarded $32.1 million of subsidies to
109 projects in Illinois and Wisconsin, and another 15 projects in
other States. As a result, 5,680 housing units were created or
rehabilitated, of which 58 percent were for very low-income households.
Another $10.4 million was funded in downpayment assistance to help
2,278 families buy their first home in Illinois or Wisconsin.
While these figures are impressive, numbers do not quite tell the
whole story. Let me describe one AHP project in the Humboldt Park/West
Town area of Chicago to provide a better sense of the impact these
programs can have in their local communities.
Joly Hernandez and Jose Rodriguez, with their children Imani and
Albert, lived in Chicago's Humboldt Park/West Town community. Like
many, they wanted a larger apartment, but could not afford the higher
rent due the dramatic rise in the cost of housing in the area. In the
1990s, with increased recognition of Humboldt Park as an attractive,
artist-friendly neighborhood and historic district, property values
soared, and affordable rental housing was lost to speculators and
developers of expensive luxury condos and single-family homes.
In 1994, Bickerdike Redevelopment Corporation, BRC, a nonprofit,
community-based affordable housing developer and property manager began
the arduous task of planning the Harold Washington Unity Cooperative to
address the loss of affordable housing in the Humboldt Park/West Town
area. Despite the increase of new construction and housing renovation
in the area, a few pockets remained undeveloped. BRC knew that if the
vacant land and neglected buildings were not immediately claimed for
affordable housing, more long-time residents would be displaced.
A project was planned to develop 87 housing units in 18 buildings
over 10 sites in a formerly blighted four-block area bordered by Kedzie
Avenue, Albany Avenue, Chicago Avenue and Ohio Street. All 87 units in
the Cooperative will remain affordable to households earning 50 percent
or less of the area median income for at least 15 years.
The total cost of the project was almost $14 million. The Chicago
FHLB, working through Bank One, which sponsored the project's
application, provided an AHP grant of $500,000. In addition, the
project received financing from CDBG funds through the City of Chicago,
Trust Funds from the Illinois Housing and Development Agency, Federal
Low Income Housing Tax Credits, Illinois State Tax Credits, an
Empowerment Zone grant, a Tax Increment Financing, TIF, loan and first
mortgage financing.
Ten years after its original conception, the Harold Washington Unity
Cooperative stands as an enviable display of community pride,
determination and opportunity.
Because of the hard work and dedication of BRC, Joly, Jose and their
two children now live in a new home in their old neighborhood. They
also belong to the Bickerdike Residents Council and feel a strong sense
of community and camaraderie with their neighbors.
[[Page H9140]]
Extending this program to Fannie and Freddie is long overdue, has
overwhelming bipartisan support, and I look forward to similar success
stories once this legislation is implemented.
Those of us on the Committee have worked very hard to ensure that the
fund can only be used for affordable housing purposes. It cannot be
used for political advocacy or lobbying either by the receiving entity
or a third party affiliated with them. It cannot be used for counseling
services or tax preparation or travel expenses, administrative costs or
anything that is outside of the GSE charter. It can only be used for
affordable housing purposes. But apparently that was not enough for a
small minority of radical conservative members, who insisted on
inserting a provision restricting non-partisan civic activities by non-
profits. This language would prohibit non-profit organizations (as well
as any affiliate of the non-profit) from using their own funds to
engage in non-partisan voter registration or get-out-the-vote
activities. Profit earning entities are not similarly restricted.
Low-income housing groups and faith-based groups would be forced to
choose between obtaining funding for low-income housing and using other
funds to engage in non-partisan voter registration and get-out-the-vote
activities. This provision is likely unconstitutional.
The manager's amendment also contains language that would require
that a faith-based or social welfare non-profit entity applying for a
grant must have as its sole ``primary purpose'' the provision of
affordable housing. This restriction is particularly problematic for
social welfare and faith-based groups, which have a broader mission
than exclusively affordable housing.
These provisions are not only offensive substantively, but I have a
real procedural problem with the way these provisions are being
inserted in the bill. They are a part of the manager's amendment, which
also contains important provisions that were worked out on a bipartisan
basis, and provisions designed to help hurricane victims. The Rules
Committee has unconscionably denied us an opportunity to vote to strike
these offensive provisions on a stand alone basis. They did this
because they knew we would win such a vote and they needed to bow to a
tiny minority of conservatives who apparently have little regard for
the Constitution.
Regretfully, I must oppose H.R. 1461 due to the inclusion of these
provisions and the fact that we were not even allowed an opportunity to
vote to strike it. I sincerely hope that these provisions are stripped
in conference and, if that is the case, I look forward to
enthusiastically supporting the conference report so that this
otherwise excellent legislation can become law.
Mr. PAUL. Mr. Chairman, H.R. 1461 fails to address the core problems
with the Government Sponsored Enterprises, GSEs. Furthermore, since
this legislation creates new government programs that will further
artificially increase the demand for housing, H.R. 1461 increases the
economic damage that will occur when the housing bubble bursts. The
main problem with the GSEs is the special privileges the Federal
Government gives the GSEs. According to the Congressional Budget
Office, the housing-related GSEs received almost 20 billion dollars
worth of indirect federal subsidies in fiscal year 2004 alone.
One of the major privileges the Federal Government grants to the GSEs
is a line of credit from the United States Treasury. According to some
estimates, the line of credit may be worth over two billion dollars.
GSEs also benefit from an explicit grant of legal authority given to
the Federal Reserve to purchase the debt of the GSEs. GSEs are the only
institutions besides the United States Treasury granted explicit
statutory authority to monetize their debt through the Federal Reserve.
This provision gives the GSEs a source of liquidity unavailable to
their competitors.
This implicit promise by the government to bail out the GSEs in times
of economic difficulty helps the GSEs attract investors who are willing
to settle for lower yields than they would demand in the absence of the
subsidy. Thus, the line of credit distorts the allocation of capital.
More importantly, the line of credit is a promise on behalf of the
government to engage in a massive unconstitutional and immoral income
transfer from working Americans to holders of GSE debt. This is why I
am offering an amendment to cut off this line of credit. I hope my
colleagues join me in protecting taxpayers from having to bail out
Fannie Mae and Freddie Mac when the housing bubble bursts.
The connection between the GSEs and the government helps isolate the
GSEs' managements from market discipline. This isolation from market
discipline is the root cause of the mismanagement occurring at Fannie
and Freddie. After all, if investors did not believe that the Federal
Government would bail out Fannie and Freddie if the GSEs faced
financial crises, then investors would have forced the GSEs to provide
assurances that the GSEs are following accepted management and
accounting practices before investors would consider Fannie and Freddie
to be good investments.
Federal Reserve Chairman Alan Greenspan has expressed concern that
the government subsidies provided to the GSEs makes investors
underestimate the risk of investing in Fannie Mae and Freddie Mac.
Although he has endorsed many of the regulatory ``solutions'' being
considered here today, Chairman Greenspan has implicitly admitted the
subsidies are the true source of the problems with Fannie and Freddie.
Mr. Chairman, H.R. 1461 compounds these problems by further
insulating the GSEs from market discipline. By creating a ``world-
class'' regulator, Congress would send a signal to investors that
investors need not concern themselves with investigating the financial
health and stability of Fannie and Freddie since a ``world-class''
regulator is performing that function.
However, one of the forgotten lessons of the financial scandals of a
few years ago is that the market is superior at discovering and
punishing fraud and other misbehavior than are government regulators.
After all, the market discovered, and began to punish, the accounting
irregularities of Enron before the government regulators did.
Concerns have been raised about the new regulator's independence from
the Treasury Department. This is more than a bureaucratic ``turf
battle'' as there are legitimate worries that isolating the regulator
from Treasury oversight may lead to regulatory capture. Regulatory
capture occurs when regulators serve the interests of the businesses
they are supposed to be regulating instead of the public interest.
While H.R. 1461 does have some provisions that claim to minimize the
risk of regulatory capture, regulatory capture is always a threat where
regulators have significant control over the operations of an industry.
After all, the industry obviously has a greater incentive than any
other stakeholder to influence the behavior of the regulator.
The flip side of regulatory capture is that mangers and owners of
highly subsidized and regulated industries are more concerned with
pleasing the regulators than with pleasing consumers or investors,
since the industries know that investors will believe all is well if
the regulator is happy. Thus, the regulator and the regulated industry
may form a symbiosis where each looks out for the other's interests
while ignoring the concerns of investors.
Furthermore, my colleagues should consider the constitutionality of
an ``independent regulator.'' The Founders provided for three branches
of government--an executive, a judiciary, and a legislature. Each
branch was created as sovereign in its sphere, and there were to be
clear lines of accountability for each branch. However, independent
regulators do not fit comfortably within the three branches; nor are
they totally accountable to any branch. Regulators at these independent
agencies often make judicial-like decisions, but they are not part of
the judiciary. They often make rules, similar to the ones regarding
capital requirements, that have the force of law, but independent
regulators are not legislative. And, of course, independent regulators
enforce the laws in the same way, as do other parts of the executive
branch; yet independent regulators lack the day-to-day accountability
to the executive that provides a check on other regulators.
Thus, these independent regulators have a concentration of powers of
all three branches and lack direct accountability to any of the
democratically chosen branches of government. This flies in the face of
the Founders' opposition to concentrations of power and government
bureaucracies that lack accountability. These concerns are especially
relevant considering the remarkable degree of power and autonomy this
bill gives to the regulator. For example, in the scheme established by
H.R. 1461 the regulator's budget is not subject to appropriations. This
removes a powerful mechanism for holding the regulator accountable to
Congress. While the regulator is accountable to a board of directors,
this board may conduct all deliberations in private because it is not
subject to the sunshine act.
Ironically, by transferring the risk of widespread mortgage defaults
to the taxpayers through government subsidies and convincing investors
that all is well because a ``world-class'' regulator is ensuring the
GSEs' soundness, the government increases the likelihood of a painful
crash in the housing market. This is because the special privileges of
Fannie and Freddie have distorted the housing market by allowing Fannie
and Freddie to attract capital they could not attract under pure market
conditions. As a result, capital is diverted from its most productive
uses into housing. This reduces the efficacy of the entire market and
thus reduces the standard of living of all Americans.
Despite the long-term damage to the economy inflicted by the
government's interference in the housing market, the government's
policy
[[Page H9141]]
of diverting capital into housing creates a short-term boom in housing.
Like all artificially created bubbles, the boom in housing prices
cannot last forever. When housing prices fall, homeowners will
experience difficulty as their equity is wiped out. Furthermore, the
holders of the mortgage debt will also have a loss. These losses will
be greater than they would have been had government policy not actively
encouraged over-investment in housing.
H.R. 1461 further distorts the housing market by artificially
inflating the demand for housing through the creation of a national
housing trust fund. This fund further diverts capital to housing that,
absent government intervention, would be put to a use more closely
matching the demands of consumers. Thus, this new housing program will
reduce efficacy and create yet another unconstitutional redistribution
program.
Perhaps the Federal Reserve can stave off the day of reckoning by
purchasing the GSEs' debt and pumping liquidity into the housing
market, but this cannot hold off the inevitable drop in the housing
market forever. In fact, postponing the necessary and painful market
corrections will only deepen the inevitable fall. The more people are
invested in the market, the greater the effects across the economy when
the bubble bursts.
Instead of addressing government polices encouraging the
misallocation of resources to the housing market, H.R. 1461 further
introduces distortion into the housing market by expanding the
authority of Federal regulators to approve the introduction of new
products by the GSEs. Such regulation inevitability delays the
introduction of new innovations to the market, or even prevents some
potentially valuable products from making it to the market. Of course,
these new regulations are justified in part by the GSEs' government
subsidies. We once again see how one bad intervention in the market
(the GSEs' government subsidies) leads to another (the new
regulations).
In conclusion, H.R. 1461 compounds the problems with the GSEs and may
increases the damage that will be inflicted by a bursting of the
housing bubble. This is because this bill creates a new unaccountable
regulator and introduces further distortions into the housing market
via increased regulatory power. H.R. 1461 also violates the
Constitution by creating yet another unaccountable regulator with
quasi-executive, judicial, and legislative powers. Instead of expanding
unconstitutional and market distorting government bureaucracies,
Congress should act to remove taxpayer support from the housing GSEs
before the bubble bursts and taxpayers are once again forced to bailout
investors who were misled by foolish government interference in the
market.
Mr. OXLEY. Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN. All time for general debate has expired.
Pursuant to the rule, the amendment in the nature of a substitute
printed in the bill shall be considered as an original bill for the
purpose of amendment under the 5-minute rule and shall be considered
read.
The text of the amendment in the nature of a substitute is as
follows:
H.R. 1461
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Federal
Housing Finance Reform Act of 2005''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title and table of contents.
Sec. 2. Definitions.
TITLE I--REFORM OF REGULATION OF ENTERPRISES AND FEDERAL HOME LOAN
BANKS
Subtitle A--Improvement of Safety and Soundness
Sec. 101. Establishment of the Federal Housing Finance Agency.
Sec. 102. Duties and authorities of Director.
Sec. 103. Housing Finance Oversight Board.
Sec. 104. Authority to require reports by regulated entities.
Sec. 105. Disclosure of charitable contributions by enterprises.
Sec. 106. Assessments.
Sec. 107. Examiners and accountants.
Sec. 108. Prohibition and withholding of executive compensation.
Sec. 109. Reviews of regulated entities.
Sec. 110. Regulations and orders.
Sec. 111. Risk-based capital requirements.
Sec. 112. Minimum and critical capital levels.
Sec. 113. Review of and authority over enterprise assets and
liabilities.
Sec. 114. Corporate governance of enterprises.
Sec. 115. Required registration under Securities Exchange Act of 1934.
Sec. 116. Financial Institutions Examination Council.
Sec. 117. Guarantee fee study.
Sec. 118. Conforming amendments.
Subtitle B--Improvement of Mission Supervision
Sec. 121. Transfer of program and activities approval and housing goal
oversight.
Sec. 122. Review by Director of new programs and activities of
enterprises.
Sec. 123. Conforming loan limits.
Sec. 124. Annual housing report regarding regulated entities.
Sec. 125. Revision of housing goals.
Sec. 126. Duty to serve underserved markets.
Sec. 127. Monitoring and enforcing compliance with housing goals.
Sec. 128. Affordable housing fund.
Sec. 129. Consistency with mission.
Sec. 130. Enforcement.
Sec. 131. Conforming amendments.
Subtitle C--Prompt Corrective Action
Sec. 141. Capital classifications.
Sec. 142. Supervisory actions applicable to undercapitalized regulated
entities.
Sec. 143. Supervisory actions applicable to significantly
undercapitalized regulated entities.
Sec. 144. Authority over critically undercapitalized regulated
entities.
Sec. 145. Conforming amendments.
Subtitle D--Enforcement Actions
Sec. 161. Cease-and-desist proceedings.
Sec. 162. Temporary cease-and-desist proceedings.
Sec. 163. Prejudgment attachment.
Sec. 164. Enforcement and jurisdiction.
Sec. 165. Civil money penalties.
Sec. 166. Removal and prohibition authority.
Sec. 167. Criminal penalty.
Sec. 168. Subpoena authority.
Sec. 169. Conforming amendments.
Subtitle E--General Provisions
Sec. 181. Presidentially appointed directors of enterprises.
Sec. 182. Report on portfolio operations, safety and soundness, and
mission of enterprises.
Sec. 183. Conforming and technical amendments.
Sec. 184. Study of alternative secondary market systems.
Sec. 185. Effective date.
TITLE II--FEDERAL HOME LOAN BANKS
Sec. 201. Definitions.
Sec. 202. Directors.
Sec. 203. Federal Housing Finance Agency oversight of Federal Home Loan
Banks.
Sec. 204. Joint activities of banks.
Sec. 205. Sharing of information between Federal Home Loan Banks.
Sec. 206. Reorganization of banks and voluntary merger.
Sec. 207. Securities and Exchange Commission disclosure.
Sec. 208. Community financial institution members.
Sec. 209. Technical and conforming amendments.
Sec. 210. Study of affordable housing program use for long-term care
facilities.
Sec. 211. Effective date.
TITLE III--TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY OF OFFICE OF
FEDERAL HOUSING ENTERPRISE OVERSIGHT, FEDERAL HOUSING FINANCE BOARD,
AND DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Subtitle A--Office of Federal Housing Enterprise Oversight
Sec. 301. Abolishment of OFHEO.
Sec. 302. Continuation and coordination of certain regulations.
Sec. 303. Transfer and rights of employees of OFHEO.
Sec. 304. Transfer of property and facilities.
Subtitle B--Federal Housing Finance Board
Sec. 321. Abolishment of the Federal Housing Finance Board.
Sec. 322. Continuation and coordination of certain regulations.
Sec. 323. Transfer and rights of employees of the Federal Housing
Finance Board.
Sec. 324. Transfer of property and facilities.
Subtitle C--Department of Housing and Urban Development
Sec. 341. Termination of enterprise-related functions.
Sec. 342. Continuation and coordination of certain regulations.
Sec. 343. Transfer and rights of employees.
Sec. 344. Transfer of appropriations, property, and facilities.
SEC. 2. DEFINITIONS.
Section 1303 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4502) is amended--
(1) in paragraph (7), by striking ``an enterprise'' and
inserting ``a regulated entity'';
(2) by striking ``the enterprise'' each place such term
appears (except in paragraphs (4) and (18)) and inserting
``the regulated entity'';
(3) in paragraph (5), by striking ``Office of Federal
Housing Enterprise Oversight of the Department of Housing and
Urban Development'' and inserting ``Federal Housing Finance
Agency'';
(4) in each of paragraphs (8), (9), (10), and (19), by
striking ``Secretary'' each place that term appears and
inserting ``Director'';
(5) in paragraph (13), by inserting ``, with respect to an
enterprise,'' after ``means'';
(6) by redesignating paragraphs (16) through (19) as
paragraphs (20) through (23), respectively;
(7) by striking paragraphs (14) and (15) and inserting the
following new paragraphs:
``(18) Regulated entity.--The term `regulated entity'
means--
``(A) the Federal National Mortgage Association and any
affiliate thereof;
``(B) the Federal Home Loan Mortgage Corporation and any
affiliate thereof; and
[[Page H9142]]
``(C) each Federal home loan bank.
``(19) Regulated entity-affiliated party.--The term
`regulated entity-affiliated party' means--
``(A) any director, officer, employee, or controlling
stockholder of, or agent for, a regulated entity;
``(B) any shareholder, affiliate, consultant, or joint
venture partner of a regulated entity, and any other person,
as determined by the Director (by regulation or on a case-by-
case basis) that participates in the conduct of the affairs
of a regulated entity;
``(C) any independent contractor for a regulated entity
(including any attorney, appraiser, or accountant); and
``(D) any not-for-profit corporation that receives its
principal funding, on an ongoing basis, from any regulated
entity.'';
(8) by redesignating paragraphs (8) through (13) as
paragraphs (12) through (17), respectively; and
(9) by inserting after paragraph (7) the following new
paragraph:
``(11) Federal home loan bank.--The term `Federal home loan
bank' means a bank established under the authority of the
Federal Home Loan Bank Act.'';
(10) by redesignating paragraphs (2) through (7) as
paragraphs (5) through (10), respectively; and
(11) by inserting after paragraph (1) the following new
paragraphs:
``(2) Agency.--The term `Agency' means the Federal Housing
Finance Agency.
``(3) Authorizing statutes.--The term `authorizing
statutes' means--
``(A) the Federal National Mortgage Association Charter
Act;
``(B) the Federal Home Loan Mortgage Corporation Act; and
``(C) the Federal Home Loan Bank Act.
``(4) Board.--The term `Board' means the Housing Finance
Oversight Board established under section 1313B.''.
TITLE I--REFORM OF REGULATION OF ENTERPRISES AND FEDERAL HOME LOAN
BANKS
Subtitle A--Improvement of Safety and Soundness
SEC. 101. ESTABLISHMENT OF THE FEDERAL HOUSING FINANCE
AGENCY.
(a) In General.--The Housing and Community Development Act
of 1992 (12 U.S.C. 4501 et seq.) is amended by striking
sections 1311 and 1312 and inserting the following:
``SEC. 1311. ESTABLISHMENT OF THE FEDERAL HOUSING FINANCE
AGENCY.
``(a) Establishment.--There is established the Federal
Housing Finance Agency, which shall be an independent agency
of the Federal Government.
``(b) General Supervisory and Regulatory Authority.--
``(1) In general.--Each regulated entity shall, to the
extent provided in this title, be subject to the supervision
and regulation of the Agency.
``(2) Authority over fannie mae, freddie mac, and federal
home loan banks.--The Director of the Federal Housing Finance
Agency shall have general supervisory and regulatory
authority over each regulated entity and shall exercise such
general regulatory authority, including such duties and
authorities set forth under section 1313 of this Act, to
ensure that the purposes of this Act, the authorizing
statutes, and any other applicable law are carried out.
``(c) Savings Provision.--The authority of the Director to
take actions under subtitles B and C shall not in any way
limit the general supervisory and regulatory authority
granted to the Director.
``SEC. 1312. DIRECTOR.
``(a) Establishment of Position.--There is established the
position of the Director of the Federal Housing Finance
Agency, who shall be the head of the Agency.
``(b) Appointment; Term.--
``(1) Appointment.--The Director shall be appointed by the
President, by and with the advice and consent of the Senate,
from among individuals who are citizens of the United States,
have a demonstrated understanding of financial management or
oversight, and have a demonstrated understanding of capital
markets, including the mortgage securities markets and
housing finance.
``(2) Term and removal.--The Director shall be appointed
for a term of 5 years and may be removed by the President
only for cause.
``(3) Vacancy.--A vacancy in the position of Director that
occurs before the expiration of the term for which a Director
was appointed shall be filled in the manner established under
paragraph (1), and the Director appointed to fill such
vacancy shall be appointed only for the remainder of such
term.
``(4) Service after end of term.--An individual may serve
as the Director after the expiration of the term for which
appointed until a successor has been appointed.
``(5) Transitional provision.--Notwithstanding paragraphs
(1) and (2), the Director of the Office of Federal Housing
Enterprise Oversight of the Department of Housing and Urban
Development shall serve as the Director until a successor has
been appointed under paragraph (1).
``(c) Deputy Director of the Division of Enterprise
Regulation.--
``(1) In general.--The Agency shall have a Deputy Director
of the Division of Enterprise Regulation, who shall be
appointed by the Director from among individuals who are
citizens of the United States, have a demonstrated
understanding of financial management or oversight and of
mortgage securities markets and housing finance.
``(2) Functions.--The Deputy Director of the Division of
Enterprise Regulation shall have such functions, powers, and
duties with respect to the oversight of the enterprises as
the Director shall prescribe.
``(d) Deputy Director of the Division of Federal Home Loan
Bank Regulation.--
``(1) In general.--The Agency shall have a Deputy Director
of the Division of Federal Home Loan Bank Regulation, who
shall be appointed by the Director from among individuals who
are citizens of the United States, have a demonstrated
understanding of financial management or oversight and of the
Federal Home Loan Bank System and housing finance.
``(2) Functions.--The Deputy Director of the Division of
Federal Home Loan Bank Regulation shall have such functions,
powers, and duties with respect to the oversight of the
Federal home loan banks as the Director shall prescribe.
``(e) Deputy Director for Housing.--
``(1) In general.--The Agency shall have a Deputy Director
for Housing, who shall be appointed by the Director from
among individuals who are citizens of the United States, and
have a demonstrated understanding of the housing markets and
housing finance.
``(2) Functions.--The Deputy Director for Housing shall
have such functions, powers, and duties with respect to the
oversight of the housing mission and goals of the
enterprises, and with respect to oversight of the housing
mission of the Federal home loan banks, as the Director shall
prescribe.
``(f) Limitations.--The Director and each of the Deputy
Directors may not--
``(1) have any direct or indirect financial interest in any
regulated entity or regulated entity-affiliated party;
``(2) hold any office, position, or employment in any
regulated entity or regulated entity-affiliated party; or
``(3) have served as an executive officer or director of
any regulated entity, or regulated entity-affiliated party,
at any time during the 3-year period ending on the date of
appointment of such individual as Director or Deputy
Director.''.
(b) Appointment of Director.--Notwithstanding any other
provision of law or of this Act, the President may, any time
after the date of the enactment of this Act, appoint an
individual to serve as the Director of the Federal Housing
Finance Agency, as such office is established by the
amendment made by subsection (a). This subsection shall take
effect on the date of the enactment of this Act.
SEC. 102. DUTIES AND AUTHORITIES OF DIRECTOR.
(a) In General.--The Housing and Community Development Act
of 1992 (12 U.S.C. 4513) is amended by striking section 1313
and inserting the following new sections:
``SEC. 1313. DUTIES AND AUTHORITIES OF DIRECTOR.
``(a) Duties.--
``(1) Principal duties.--The principal duties of the
Director shall be--
``(A) to oversee the operations of each regulated entity;
and
``(B) to ensure that--
``(i) each regulated entity operates in a safe and sound
manner, including maintenance of adequate capital and
internal controls;
``(ii) the operations and activities of each regulated
entity foster liquid, efficient, competitive, and resilient
national housing finance markets that minimize the cost of
housing finance (including activities relating to mortgages
on housing for low- and moderate- income families involving a
reasonable economic return that may be less than the return
earned on other activities);
``(iii) each regulated entity complies with this title and
the rules, regulations, guidelines, and orders issued under
this title and the authorizing statutes; and
``(iv) each regulated entity carries out its statutory
mission only through activities that are consistent with this
title and the authorizing statutes.
``(2) Scope of authority.--The authority of the Director
shall include the authority--
``(A) to review and, if warranted based on the principal
duties described in paragraph (1), reject any acquisition or
transfer of a controlling interest in an enterprise; and
``(B) to exercise such incidental powers as may be
necessary or appropriate to fulfill the duties and
responsibilities of the Director in the supervision and
regulation of each regulated entity.
``(b) Delegation of Authority.--The Director may delegate
to officers or employees of the Agency, including each of the
Deputy Directors, any of the functions, powers, or duties of
the Director, as the Director considers appropriate.
``(c) Litigation Authority.--
``(1) In general.--In enforcing any provision of this
title, any regulation or order prescribed under this title,
or any other provision of law, rule, regulation, or order, or
in any other action, suit, or proceeding to which the
Director is a party or in which the Director is interested,
and in the administration of conservatorships and
receiverships, the Director may act in the Director's own
name and through the Director's own attorneys.
``(2) Subject to suit.--Except as otherwise provided by
law, the Director shall be subject to suit (other than suits
on claims for money damages) by a regulated entity or
director or officer thereof with respect to any matter under
this title or any other applicable provision of law, rule,
order, or regulation under this title, in the United States
district court for the judicial district in which the
regulated entity has its principal place of business, or in
the United States District Court for the District of
Columbia, and the Director may be served with process in the
manner prescribed by the Federal Rules of Civil Procedure.
``SEC. 1313A. PRUDENTIAL MANAGEMENT AND OPERATIONS STANDARDS.
``(a) Standards.--The Director shall establish standards,
by regulation, guideline, or order, for each regulated entity
relating to--
[[Page H9143]]
``(1) adequacy of internal controls and information systems
taking into account the nature and scale of business
operations;
``(2) independence and adequacy of internal audit systems;
``(3) management of credit and counterparty risk, including
systems to identify concentrations of credit risk and
prudential limits to restrict exposure of the regulated
entity to a single counterparty or groups of related
counterparties;
``(4) management of interest rate risk exposure;
``(5) management of market risk, including standards that
provide for systems that accurately measure, monitor, and
control market risks and, as warranted, that establish
limitations on market risk;
``(6) adequacy and maintenance of liquidity and reserves;
``(7) management of any asset and investment portfolio;
``(8) investments and acquisitions by a regulated entity,
to ensure that they are consistent with the purposes of this
Act and the authorizing statutes;
``(9) maintenance of adequate records, in accordance with
consistent accounting policies and practices that enable the
Director to evaluate the financial condition of the regulated
entity;
``(10) issuance of subordinated debt by that particular
regulated entity, as the Director considers necessary;
``(11) overall risk management processes, including
adequacy of oversight by senior management and the board of
directors and of processes and policies to identify, measure,
monitor, and control material risks, including reputational
risks, and for adequate, well-tested business resumption
plans for all major systems with remote site facilities to
protect against disruptive events; and
``(12) such other operational and management standards as
the Director determines to be appropriate.
``(b) Failure to Meet Standards.--
``(1) Plan requirement.--
``(A) In general.--If the Director determines that a
regulated entity fails to meet any standard established under
subsection (a)--
``(i) if such standard is established by regulation, the
Director shall require the regulated entity to submit an
acceptable plan to the Director within the time allowed under
subparagraph (C); and
``(ii) if such standard is established by guideline, the
Director may require the regulated entity to submit a plan
described in clause (i).
``(B) Contents.--Any plan required under subparagraph (A)
shall specify the actions that the regulated entity will take
to correct the deficiency. If the regulated entity is
undercapitalized, the plan may be a part of the capital
restoration plan for the regulated entity under section
1369C.
``(C) Deadlines for submission and review.--The Director
shall by regulation establish deadlines that--
``(i) provide the regulated entities with reasonable time
to submit plans required under subparagraph (A), and
generally require a regulated entity to submit a plan not
later than 30 days after the Director determines that the
entity fails to meet any standard established under
subsection (a); and
``(ii) require the Director to act on plans expeditiously,
and generally not later than 30 days after the plan is
submitted.
``(2) Required order upon failure to submit or implement
plan.--If a regulated entity fails to submit an acceptable
plan within the time allowed under paragraph (1)(C), or fails
in any material respect to implement a plan accepted by the
Director, the following shall apply:
``(A) Required correction of deficiency.--The Director
shall, by order, require the regulated entity to correct the
deficiency.
``(B) Other authority.--The Director may, by order, take
one or more of the following actions until the deficiency is
corrected:
``(i) Prohibit the regulated entity from permitting its
average total assets (as such term is defined in section
1316(b)) during any calendar quarter to exceed its average
total assets during the preceding calendar quarter, or
restrict the rate at which the average total assets of the
entity may increase from one calendar quarter to another.
``(ii) Require the regulated entity--
``(I) in the case of an enterprise, to increase its ratio
of core capital to assets.
``(II) in the case of a Federal home loan bank, to increase
its ratio of total capital (as such term is defined in
section 6(a)(5) of the Federal Home Loan Bank Act (12 U.S.C.
1426(a)(5)) to assets.
``(iii) Require the regulated entity to take any other
action that the Director determines will better carry out the
purposes of this section than any of the actions described in
this subparagraph
``(3) Mandatory restrictions.--In complying with paragraph
(2), the Director shall take one or more of the actions
described in clauses (i) through (iii) of paragraph (2)(B)
if--
``(A) the Director determines that the regulated entity
fails to meet any standard prescribed under subsection (a);
``(B) the regulated entity has not corrected the
deficiency; and
``(C) during the 18-month period before the date on which
the regulated entity first failed to meet the standard, the
entity underwent extraordinary growth, as defined by the
Director.
``(c) Other Enforcement Authority not Affected.--The
authority of the Director under this section is in addition
to any other authority of the Director.''.
(b) Independence in Congressional Testimony and
Recommendations.--Section 111 of Public Law 93-495 (12 U.S.C.
250) is amended by striking ``the Federal Housing Finance
Board'' and inserting ``the Director of the Federal Housing
Finance Agency''.
SEC. 103. HOUSING FINANCE OVERSIGHT BOARD.
(a) In General.--Title XIII of the Housing and Community
Development Act of 1992 (12 U.S.C. 4501 et seq.) is amended
by inserting after section 1313A, as added by section 102 of
this Act, the following new section:
``SEC. 1313B. HOUSING FINANCE OVERSIGHT BOARD.
``(a) In General.--There is established the Housing Finance
Oversight Board.
``(b) Duties.--
``(1) In general.--The Board shall advise the Director with
respect to overall strategies and policies in carrying out
the duties of the Director under this title, at the request
of the Director and at the initiative of the Board, and shall
carry out such functions as otherwise provided by law.
``(2) Limitation.--The Director may not delegate to the
Board any of the functions, powers, or duties of the
Director.
``(c) Composition.--The Board shall be comprised of 5
members, as follows:
``(1) One member shall be the Director, who shall serve as
the Chairperson of the Board.
``(2) One member shall be the Secretary of the Treasury or
the designee of the Secretary.
``(3) One member shall be the Secretary of Housing and
Urban Development or the designee of the Secretary.
``(4) Two members shall be appointed by the President, by
and with the advice and consent of the Senate, who shall
include--
``(A) one individual who has extensive experience and
expertise in the capital markets (including debt markets),
the secondary mortgage market, and mortgage-backed
securities; and
``(B) one individual who has extensive experience and
expertise in mortgage finance (including single family and
multifamily housing mortgage finance), development of
affordable housing, and economic development and
revitalization.
``(d) Terms and Vacancies.--
``(1) Terms.--Each member of the Board pursuant to
paragraph (4) shall be appointed for a term of 3 years, and
may be removed by the President only for cause.
``(2) Vacancies.--A member of the Board appointed to fill a
vacancy occurring before the expiration of the term for which
the member's predecessor was appointed shall be appointed
only for the remainder of that term. A member of the Board
may serve after the expiration of the member's term until a
successor has been appointed.
``(e) Prohibition of Additional Compensation.--
Notwithstanding any other provision of law, members of Board
pursuant to paragraphs (1), (2), and (3) shall not receive
additional compensation by reason of service on the Board.
``(f) Limitations.--Each member of the Board may not--
``(1) have any direct or indirect financial interest in any
regulated entity or regulated entity-affiliated party; or
``(2) hold any office, position, or employment in any
regulated entity or regulated entity-affiliated party.
``(g) Full-Time Members and Staff.--
``(1) Full-time members.--The members of the Board pursuant
to subsection (c)(4) shall serve on a full-time basis.
``(2) Staff.--The staff of the Board shall be appointed
subject to the provisions of title 5, United States Code,
governing appointments in the competitive service, and shall
be paid in accordance with the provisions of chapter 51 and
subchapter III of chapter 53 of that title relating to
classification and General Schedule pay rates, except that
each member of the Board pursuant to paragraph (4) may
appoint one staff member without regard to the such
provisions governing appointments in the competitive service
and such staff members may be paid by the Board without
regard to the such provisions relating to classification and
General Schedule pay rates.
``(h) Meetings.--
``(1) In general.--The Board shall meet upon notice by the
Director, but in no event shall the Board meet less
frequently than once every 3 months.
``(2) Special meetings.--Any member of the Board may, upon
giving written notice to the Director, require a special
meeting of the Board, which shall be convened by the Director
within 30 days after such notice.
``(i) Testimony.--On an annual basis, the Board shall
testify before Congress regarding--
``(1) the safety and soundness of the regulated entities;
``(2) any material deficiencies in the conduct of the
operations of the regulated entities;
``(3) the overall operational status of the regulated
entities;
``(4) an evaluation of the performance of the regulated
entities in carrying out their respective missions;
``(5) operations, resources, and performance of the Agency
and the Board; and
``(6) such other matters relating to the Agency, the Board,
and the regulated entities, and their fulfillment of their
missions, as the Board determines appropriate.
``(j) Costs.--Costs of the Board, including staff, shall be
paid by the Agency as a cost and expense of the Agency.
``(k) Exemption.--Notwithstanding any other provision of
law, the provisions of section 552b of title 5, United States
Code, shall not apply to the Board.''.
(b) Annual Report of the Director.--Section 1319B(a) of the
Housing and Community Development Act of 1992 (12 U.S.C. 4521
(a)) is amended--
(1) in paragraph (3), by striking ``and'' at the end; and
[[Page H9144]]
(2) by striking paragraph (4) and inserting the following
new paragraphs:
``(4) an assessment of the Board with respect to--
``(A) the safety and soundness of the regulated entities;
``(B) any material deficiencies in the conduct of the
operations of the regulated entities;
``(C) the overall operational status of the regulated
entities;
``(D) an evaluation of the performance of the regulated
entities in carrying out their missions, including compliance
of the enterprises with the housing goals under subpart B of
part 2 of this subtitle and compliance of the Federal home
loan banks with the community investment and affordable
housing programs under subsections (i) and (j) of section 10
of the Federal Home Loan Bank Act;
``(E) an evaluation of the performance of the Agency in
fulfilling its duties and responsibilities under law; and
``(F) such other matters relating to the Board and the
fulfillment of its duties as the Board considers appropriate;
``(5) operations, resources, and performance of the Agency;
and
``(6) such other matters relating to the Agency and its
fulfillment of its mission.''.
SEC. 104. AUTHORITY TO REQUIRE REPORTS BY REGULATED ENTITIES.
Section 1314 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4514) is amended--
(1) in the section heading, by striking ``ENTERPRISES'' and
inserting ``REGULATED ENTITIES'';
(2) in subsection (a)--
(A) in the subsection heading, by striking ``Special
Reports and Reports of Financial Condition'' and inserting
``Regular and Special Reports'';
(B) in paragraph (1)--
(i) in the paragraph heading, by striking ``Financial
condition'' and inserting ``Regular reports''; and
(ii) by striking ``reports of financial condition and
operations'' and inserting ``regular reports on the condition
(including financial condition), management, activities, or
operations of the regulated entity, as the Director considers
appropriate''; and
(C) in paragraph (2), after ``submit special reports''
insert ``on any of the topics specified in paragraph (1) or
such other topics''; and
(3) by adding at the end the following new subsection:
``(c) Reports of Fraudulent Financial Transactions.--
``(1) Requirement to report.--The Director shall require a
regulated entity to submit to the Director a timely report
upon discovery by the regulated entity that it has purchased
or sold a fraudulent loan or financial instrument or suspects
a possible fraud relating to a purchase or sale of any loan
or financial instrument. The Director shall require the
regulated entities to establish and maintain procedures
designed to discover any such transactions.
``(2) Protection from liability for reports.--
``(A) In general.--If a regulated entity makes a report
pursuant to paragraph (1), or a regulated entity-affiliated
party makes, or requires another to make, such a report, and
such report is made in a good faith effort to comply with the
requirements of paragraph (1), such regulated entity or
regulated entity-afffiliated party shall not be liable to any
person under any law or regulation of the United States, any
constitution, law, or regulation of any State or political
subdivision of any State, or under any contract or other
legally enforceable agreement (including any arbitration
agreement), for such report or for any failure to provide
notice of such report to the person who is the subject of
such report or any other person identified in the report.
``(B) Rule of construction.--Subparagraph (A) shall not be
construed as creating--
``(i) any inference that the term `person', as used in such
subparagraph, may be construed more broadly than its ordinary
usage so as to include any government or agency of
government; or
``(ii) any immunity against, or otherwise affecting, any
civil or criminal action brought by any government or agency
of government to enforce any constitution, law, or regulation
of such government or agency.''.
SEC. 105. DISCLOSURE OF CHARITABLE CONTRIBUTIONS BY
ENTERPRISES.
Section 1314 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4514), as amended by the preceding
provisions of this Act, is further amended by adding at the
end the following new subsection:
``(d) Disclosure of Charitable Contributions by
Enterprises.--
``(1) Required disclosure.--The Director shall, by
regulation, require each enterprise to submit a report
annually, in a format designated by the Director, containing
the following information:
``(A) Total value.--The total value of contributions made
by the enterprise to nonprofit organizations during its
previous fiscal year.
``(B) Substantial contributions.--If the value of
contributions made by the enterprise to any nonprofit
organization during its previous fiscal year exceeds the
designated amount, the name of that organization and the
value of contributions.
``(C) Substantial contributions to insider-affiliated
charities.--Identification of each contribution whose value
exceeds the designated amount that were made by the
enterprise during the enterprise's previous fiscal year to
any nonprofit organization of which a director, officer, or
controlling person of the enterprise, or a spouse thereof,
was a director or trustee, the name of such nonprofit
organization, and the value of the contribution.
``(2) Definitions.--For purposes of this subsection--
``(A) the term `designated amount' means such amount as may
be designated by the Director by regulation, consistent with
the public interest and the protection of investors for
purposes of this subsection; and
``(B) the Director may, by such regulations as the Director
deems necessary or appropriate in the public interest, define
the terms officer and controlling person.
``(3) Public availability.--The Director shall make the
information submitted pursuant to this subsection publicly
available.''.
SEC. 106. ASSESSMENTS.
Section 1316 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4516) is amended--
(1) by striking subsection (a) and inserting the following
new subsection:
``(a) Annual Assessments.--The Director shall establish and
collect from the regulated entities annual assessments in an
amount not exceeding the amount sufficient to provide for
reasonable costs and expenses of the Agency, including--
``(1) the expenses of any examinations under section 1317
of this Act and under section 20 of the Federal Home Loan
Bank Act;
``(2) the expenses of obtaining any reviews and credit
assessments under section 1319; and
``(3) such amounts in excess of actual expenses for any
given year as deemed necessary by the Director to maintain a
working capital fund in accordance with subsection (e).'';
(2) in subsection (b)--
(A) in the subsection heading, by striking ``Enterprises''
and inserting ``Regulated Entities'' ;
(B) by realigning paragraph (2) two ems from the left
margin, so as to align the left margin of such paragraph with
the left margins of paragraph (1);
(C) in paragraph (1)--
(i) by striking ``Each enterprise'' and inserting ``Each
regulated entity'';
(ii) by striking ``each enterprise'' and inserting ``each
regulated entity''; and
(iii) by striking ``both enterprises'' and inserting ``all
of the regulated entities''; and
(D) in paragraph (3)--
(i) in subparagraph (B), by striking ``subparagraph (A)''
and inserting ``clause (i)'';
(ii) by redesignating subparagraphs (A), (B), and (C) as
clauses (i), (ii) and (ii), respectively, and realigning such
clauses, as so redesignated, so as to be indented 6 ems from
the left margin;
(iii) by striking the matter that precedes clause (i), as
so redesignated, and inserting the following:
``(3) Definition of total assets.--For purposes of this
section, the term `total assets' means as follows:
``(A) Enterprises.--With respect to an enterprise, the sum
of--''; and
(iv) by adding at the end the following new subparagraph:
``(B) Federal home loan banks.--With respect to a Federal
home loan bank, the total assets of the Bank, as determined
by the Director in accordance with generally accepted
accounting principles.'';
(3) by striking subsection (c) and inserting the following
new subsection:
``(c) Increased Costs of Regulation.--
``(1) Increase for inadequate capitalization.--The
semiannual payments made pursuant to subsection (b) by any
regulated entity that is not classified (for purposes of
subtitle B) as adequately capitalized may be increased, as
necessary, in the discretion of the Director to pay
additional estimated costs of regulation of the regulated
entity.
``(2) Adjustment for enforcement activities.--The Director
may adjust the amounts of any semiannual assessments for an
assessment under subsection (a) that are to be paid pursuant
to subsection (b) by a regulated entity, as necessary in the
discretion of the Director, to ensure that the costs of
enforcement activities under subtitle B and C for a regulated
entity are borne only by such regulated entity.
``(3) Additional assessment for deficiencies.--If at any
time, as a result of increased costs of regulation of a
regulated entity that is not classified (for purposes of
subtitle B) as adequately captitalized or as the result of
supervisory or enforcement activities under subtitle B or C
for a regulated entity, the amount available from any
semiannual payment made by such regulated entity pursuant to
subsection (b) is insufficient to cover the costs of the
Agency with respect to such entity, the Director may make and
collect from such regulated entity an immediate assessment to
cover the amount of such deficiency for the semiannual
period. If, at the end of any semiannual period during which
such an assessment is made, any amount remains from such
assessment, such remaining amount shall be deducted from the
assessment for such regulated entity for the following
semiannual period.'';
(4) in subsection (d), by striking ``If'' and inserting
``Except with respect to amounts collected pursuant to
subsection (a)(3), if''; and
(5) by striking subsections (e) through (g) and inserting
the following new subsections:
``(e) Working Capital Fund.--At the end of each year for
which an assessment under this section is made, the Director
shall remit to each regulated entity any amount of assessment
collected from such regulated entity that is attributable to
subsection (a)(3) and is in excess of the amount the Director
deems necessary to maintain a working capital fund.
``(f) Treatment of Assessments.--
``(1) Deposit.--Amounts received by the Director from
assessments under this section may be deposited by the
Director in the manner provided in section 5234 of the
Revised Statutes (12 U.S.C. 192) for monies deposited by the
Comptroller of the Currency.
[[Page H9145]]
``(2) Not government funds.--The amounts received by the
Director from any assessment under this section shall not be
construed to be Government or public funds or appropriated
money.
``(3) No apportionment of funds.--Notwithstanding any other
provision of law, the amounts received by the Director from
any assessment under this section shall not be subject to
apportionment for the purpose of chapter 15 of title 31,
United States Code, or under any other authority.
``(4) Use of funds.--The Director may use any amounts
received by the Director from assessments under this section
for compensation of the Director and other employees of the
Agency and for all other expenses of the Director and the
Agency.
``(5) Availability of oversight fund amounts.--
Notwithstanding any other provision of law, any amounts
remaining in the Federal Housing Enterprises Oversight Fund
established under this section (as in effect before the
effective date under section 185 of the Federal Housing
Finance Reform Act of 2005), and any amounts remaining from
assessments on the Federal Home Loan banks pursuant to
section 18(b) of the Federal Home Loan Bank Act (12 U.S.C.
1438(b)), shall, upon such effective date, be treated for
purposes of this subsection as amounts received from
assessments under this section.
``(g) Budget and Financial Management.--
``(1) Financial operating plans and forecasts.--The
Director shall provide to the Director of the Office of
Management and Budget copies of the Director's financial
operating plans and forecasts as prepared by the Director in
the ordinary course of the Agency's operations, and copies of
the quarterly reports of the Agency's financial condition and
results of operations as prepared by the Director in the
ordinary course of the Agency's operations.
``(2) Financial statements.--The Agency shall prepare
annually a statement of assets and liabilities and surplus or
deficit; a statement of income and expenses; and a statement
of sources and application of funds.
``(3) Financial management systems.--The Agency shall
implement and maintain financial management systems that
comply substantially with Federal financial management
systems requirements, applicable Federal accounting
standards, and that uses a general ledger system that
accounts for activity at the transaction level.
``(4) Assertion of internal controls.--The Director shall
provide to the Comptroller General an assertion as to the
effectiveness of the internal controls that apply to
financial reporting by the Agency, using the standards
established in section 3512 (c) of title 31, United States
Code.
``(5) Rule of construction.--This subsection may not be
construed as implying any obligation on the part of the
Director to consult with or obtain the consent or approval of
the Director of the Office of Management and Budget with
respect to any reports, plans, forecasts, or other
information referred to in paragraph (1) or any jurisdiction
or oversight over the affairs or operations of the Agency.
``(h) Audit of Agency.--
``(1) In general.--The Comptroller General shall annually
audit the financial transactions of the Agency in accordance
with the U.S. generally accepted government auditing
standards as may be prescribed by the Comptroller General of
the United States. The audit shall be conducted at the place
or places where accounts of the Agency are normally kept. The
representatives of the Government Accountability Office shall
have access to the personnel and to all books, accounts,
documents, papers, records (including electronic records),
reports, files, and all other papers, automated data, things,
or property belonging to or under the control of or used or
employed by the Agency pertaining to its financial
transactions and necessary to facilitate the audit, and such
representatives shall be afforded full facilities for
verifying transactions with the balances or securities held
by depositaries, fiscal agents, and custodians. All such
books, accounts, documents, records, reports, files, papers,
and property of the Agency shall remain in possession and
custody of the Agency. The Comptroller General may obtain and
duplicate any such books, accounts, documents, records,
working papers, automated data and files, or other
information relevant to such audit without cost to the
Comptroller General and the Comptroller General's right of
access to such information shall be enforceable pursuant to
section 716(c) of title 31, United States Code.
``(2) Report.--The Comptroller General shall submit to the
Congress a report of each annual audit conducted under this
subsection. The report to the Congress shall set forth the
scope of the audit and shall include the statement of assets
and liabilities and surplus or deficit, the statement of
income and expenses, the statement of sources and application
of funds, and such comments and information as may be deemed
necessary to inform Congress of the financial operations and
condition of the Agency, together with such recommendations
with respect thereto as the Comptroller General may deem
advisable. A copy of each report shall be furnished to the
President and to the Agency at the time submitted to the
Congress.
``(3) Assistance and costs.--For the purpose of conducting
an audit under this subsection, the Comptroller General may,
in the discretion of the Comptroller General, employ by
contract, without regard to section 5 of title 41, United
States Code, professional services of firms and organizations
of certified public accountants for temporary periods or for
special purposes. Upon the request of the Comptroller
General, the Director of the Agency shall transfer to the
Government Accountability Office from funds available, the
amount requested by the Comptroller General to cover the full
costs of any audit and report conducted by the Comptroller
General. The Comptroller General shall credit funds
transferred to the account established for salaries and
expenses of the Government Accountability Office, and such
amount shall be available upon receipt and without fiscal
year limitation to cover the full costs of the audit and
report.''.
SEC. 107. EXAMINERS AND ACCOUNTANTS.
(a) Examinations.--Section 1317 of the Housing and
Community Development Act of 1992 (12 U.S.C. 4517) is
amended----
(1) in subsection (a), by adding after the period at the
end the following: ``Each examination under this subsection
of a regulated entity shall include a review of the
procedures required to be established and maintained by the
regulated entity pursuant to section 1314(c) (relating to
fraudulent financial transactions) and the report regarding
each such examination shall describe any problems with such
procedures maintained by the regulated entity.'';
(2) in subsection (b)--
(A) by inserting ``of a regulated entity'' after ``under
this section''; and
(B) by striking ``to determine the condition of an
enterprise for the purpose of ensuring its financial safety
and soundness'' and inserting ``or appropriate'' ; and
(3) in subsection (c)--
(A) in the second sentence, by inserting ``to conduct
examinations under this section'' before the period; and
(B) in the third sentence, by striking ``from amounts
available in the Federal Housing Enterprises Oversight
Fund''.
(b) Enhanced Authority to Hire Examiners and Accountants.--
Section 1317 of the Housing and Community Development Act of
1992 (12 U.S.C. 4517) is amended by adding at the end the
following new subsection:
``(g) Appointment of Accountants, Economists, Specialists,
and Examiners.--
``(1) Applicability.--This section applies with respect to
any position of examiner, accountant, specialist in financial
markets, specialist in technology, and economist at the
Agency, with respect to supervision and regulation of the
regulated entities, that is in the competitive service.
``(2) Appointment authority.--The Director may appoint
candidates to any position described in paragraph (1)--
``(A) in accordance with the statutes, rules, and
regulations governing appointments in the excepted service;
and
``(B) notwithstanding any statutes, rules, and regulations
governing appointments in the competitive service.''.
(c) Repeal.--Section 20 of the Federal Home Loan Bank Act
(12 U.S.C. 1440) is amended--
(1) in the section heading, by striking ``REPORTS'' and
inserting ``GAO AUDITS'';
(2) in the third sentence, by striking ``the Board and''
each place such term appears; and
(3) by striking the first two sentences and inserting the
following: ``The Federal home loan banks shall be subject to
examinations by the Director to the extent provided in
section 1317 of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (12 U.S.C. 4517).''.
SEC. 108. PROHIBITION AND WITHHOLDING OF EXECUTIVE
COMPENSATION.
(a) In General.--Section 1318 of the Housing and Community
Development Act of 1992 (12 U.S.C. 4518) is amended--
(1) in the section heading, by striking ``OF EXCESSIVE''
and inserting ``AND WITHHOLDING OF EXECUTIVE'';
(2) by redesignating subsection (b) as subsection (d); and
(3) by inserting after subsection (a) the following new
subsections:
``(b) Factors.--In making any determination under
subsection (a), the Director may take into consideration any
factors the Director considers relevant, including any
wrongdoing on the part of the executive officer, and such
wrongdoing shall include any fraudulent act or omission,
breach of trust or fiduciary duty, violation of law, rule,
regulation, order, or written agreement, and insider abuse
with respect to the regulated entity. The approval of an
agreement or contract pursuant to section 309(d)(3)(B) of the
Federal National Mortgage Association Charter Act (12 U.S.C.
1723a(d)(3)(B)) or section 303(h)(2) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1452(h)(2)) shall not
preclude the Director from making any subsequent
determination under subsection (a).
``(c) Withholding of Compensation.--In carrying out
subsection (a), the Director may require a regulated entity
to withhold any payment, transfer, or disbursement of
compensation to an executive officer, or to place such
compensation in an escrow account, during the review of the
reasonableness and comparability of compensation.''.
(b) Conforming Amendments.--
(1) Fannie mae.--Section 309(d) of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1723a(d)) is
amended by adding at the end the following new paragraph:
``(4) Notwithstanding any other provision of this section,
the corporation shall not transfer, disburse, or pay
compensation to any executive officer, or enter into an
agreement with such executive officer, without the approval
of the Director, for matters being reviewed under section
1318 of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4518).''.
(2) Freddie mac.--Section 303(h) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1452(h)) is amended by
adding at the end the following new paragraph:
``(4) Notwithstanding any other provision of this section,
the Corporation shall not transfer, disburse, or pay
compensation to any executive officer, or enter into an
agreement with such executive officer, without the approval
of the Director, for matters being reviewed under section
[[Page H9146]]
1318 of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4518).''.
(3) Federal home loan banks.--Section 7 of the Federal Home
Loan Bank Act (12 U.S.C. 1427) is amended by adding at the
end the following new subsection:
``(l) Withholding of Compensation.--Notwithstanding any
other provision of this section, a Federal home loan bank
shall not transfer, disburse, or pay compensation to any
executive officer, or enter into an agreement with such
executive officer, without the approval of the Director, for
matters being reviewed under section 1318 of the Federal
Housing Enterprises Financial Safety and Soundness Act of
1992 (12 U.S.C. 4518).''.
SEC. 109. REVIEWS OF REGULATED ENTITIES.
Section 1319 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4519) is amended--
(1) by striking the section designation and heading and
inserting the following:
``SEC. 1319. REVIEWS OF REGULATED ENTITIES.''; AND
(2) by inserting after ``any entity'' the following: ``that
the Director considers appropriate, including an entity''.
SEC. 110. REGULATIONS AND ORDERS.
Section 1319G of the Housing and Community Development Act
of 1992 (12 U.S.C. 4526) is amended--
(1) by striking subsection (a) and inserting the following
new subsection:
``(a) Authority.--The Director shall issue any regulations,
guidelines, and orders necessary to carry out the duties of
the Director under this title and each of the authorizing
statutes to ensure that the purposes of this title and such
Acts are accomplished.'';
(2) in subsection (b), by inserting ``, this title, or any
of the authorizing statutes'' after ``under this section'';
and
(3) by striking subsection (c).
SEC. 111. RISK-BASED CAPITAL REQUIREMENTS.
(a) In General.--Section 1361 of the Housing and Community
Development Act of 1992 (12 U.S.C. 4611) is amended to read
as follows:
``SEC. 1361. RISK-BASED CAPITAL LEVELS FOR REGULATED
ENTITIES.
``(a) In General.--
``(1) Enterprises.--The Director shall, by regulation,
establish risk-based capital requirements for the enterprises
to ensure that the enterprises operate in a safe and sound
manner, maintaining sufficient capital and reserves to
support the risks that arise in the operations and management
of the enterprises.
``(2) Federal home loan banks.--The Director shall
establish risk-based capital standards under section 6 of the
Federal Home Loan Bank Act for the Federal home loan banks.
``(b) Confidentiality of Information.--Any person that
receives any book, record, or information from the Director
or a regulated entity to enable the risk-based capital
requirements established under this section to be applied
shall--
``(1) maintain the confidentiality of the book, record, or
information in a manner that is generally consistent with the
level of confidentiality established for the material by the
Director or the regulated entity; and
``(2) be exempt from section 552 of title 5, United States
Code, with respect to the book, record, or information.
``(c) No Limitation.--Nothing in this section shall limit
the authority of the Director to require other reports or
undertakings, or take other action, in furtherance of the
responsibilities of the Director under this Act.''.
(b) Federal Home Loan Banks Risk-Based Capital.--Section
6(a)(3) of the Federal Home Loan Bank Act (12 U.S.C.
1426(a)(3)) is amended--
(1) by striking subparagraph (A) and inserting the
following new subparagraph:
``(A) Risk-based capital standards.--The Director shall, by
regulation, establish risk-based capital standards for the
Federal home loan banks to ensure that the Federal home loan
banks operate in a safe and sound manner, with sufficient
permanent capital and reserves to support the risks that
arise in the operations and management of the Federal home
loans banks.''; and
(2) in subparagraph (B), by striking ``(A)(ii)'' and
inserting ``(A)''.
SEC. 112. MINIMUM AND CRITICAL CAPITAL LEVELS.
(a) Minimum Capital Level.--Section 1362 of the Housing and
Community Development Act of 1992 (12 U.S.C. 4612) is
amended--
(1) in subsection (a), by striking ``In General'' and
inserting ``Enterprises'' ; and
(2) by striking subsection (b) and inserting the following
new subsections:
``(b) Federal Home Loan Banks.--For purposes of this
subtitle, the minimum capital level for each Federal home
loan bank shall be the minimum capital required to be
maintained to comply with the leverage requirement for the
bank established under section 6(a)(2) of the Federal Home
Loan Bank Act (12 U.S.C. 1426(a)(2)).
``(c) Establishment of Revised Minimum Capital Levels.--
Notwithstanding subsections (a) and (b) and notwithstanding
the capital classifications of the regulated entities, the
Director may, by regulations issued under section 1319G(b),
establish a minimum capital level for the enterprises, for
the Federal home loan banks, or for both the enterprises and
the banks, that is higher than the level specified in
subsection (a) for the enterprises or the level specified in
subsection (b) for the Federal home loan banks, to the extent
needed to ensure that the regulated entities operate in a
safe and sound manner.
``(d) Authority to Require Temporary Increase.--
Notwithstanding subsections (a) and (b) and any minimum
capital level established pursuant to subsection (c), the
Director may, by order, increase the minimum capital level
for a regulated entity for such period as the Director may
provide if the Director--
``(1) makes any of the determinations specified in
subparagraphs (A) through (C) of section 1364(c)(1); or
``(2) determines that the regulated entity has violated any
of the prudential management and operations standards
established pursuant to section 1313A and, as a result of
such violation, is operating in an unsafe and unsound manner.
``(e) Authority to Establish Additional Capital and Reserve
Requirements for Particular Programs.--The Director may, at
any time by order or regulation, establish such capital or
reserve requirements with respect to any program or activity
of a regulated entity as the Director considers appropriate
to ensure that the regulated entity operates in a safe and
sound manner, with sufficient capital and reserves to support
the risks that arise in the operations and management of the
regulated entity.
``(f) Periodic Review.--The Director shall periodically
review the amount of core capital maintained by the
enterprises, the amount of capital retained by the Federal
home loan banks, and the minimum capital levels established
for such regulated entities pursuant to this section. The
Director may, by regulations issued under section 1319G(b),
adjust the minimum capital levels as necessary, based on the
Director's review.''.
(b) Critical Capital Levels.--
(1) In general.--Section 1363 of the Housing and Community
Development Act of 1992 (12 U.S.C. 4613) is amended--
(A) by striking ``For'' and inserting ``(a) Enterprises.--
For''; and
(B) by adding at the end the following new subsection:
``(b) Federal Home Loan Banks.--
``(1) In general.--For purposes of this subtitle, the
critical capital level for each Federal home loan bank shall
be such amount of capital as the Director shall, by
regulation require.
``(2) Consideration of other critical capital levels.--In
establishing the critical capital level under paragraph (1)
for the Federal home loan banks, the Director shall take due
consideration of the critical capital level established under
subsection (a) for the enterprises, with such modifications
as the Director determines to be appropriate to reflect the
difference in operations between the banks and the
enterprises.''.
(2) Regulations.--Not later than the expiration of the 180-
day period beginning on the effective date under section 185,
the Director of the Federal Housing Finance Agency shall
issue regulations pursuant to section 1363(b) of the Housing
and Community Development Act of 1992 (as added by paragraph
(1) of this subsection) establishing the critical capital
level under such section.
SEC. 113. REVIEW OF AND AUTHORITY OVER ENTERPRISE ASSETS AND
LIABILITIES.
Subtitle B of title XIII of the Housing and Community
Development Act of 1992 (12 U.S.C. 4611 et seq.) is amended--
(1) by striking the subtitle designation and heading and
inserting the following:
``Subtitle B--Required Capital Levels for Regulated Entities, Special
Enforcement Powers, and Reviews of Assets and Liabilities''; and
(2) by adding at the end the following new section:
``SEC. 1369E. REVIEWS OF ENTERPRISE ASSETS AND LIABILITIES.
``(a) In General.--The Director shall conduct, on a
periodic basis, a review of the on-balance sheet and off-
balance sheet assets and liabilities of each enterprise.
``(b) Authority to Require Disposition or Acquisition.--
Pursuant to such a review and notwithstanding the capital
classifications of the enterprises, the Director may by order
require an enterprise, under such terms and conditions as the
Director determines to be appropriate, to dispose of or
acquire any asset or liability, if the Director determines
that such action is consistent with the safe and sound
operation of the enterprise or with the purposes of this Act
or any of the authorizing statutes.''.
SEC. 114. CORPORATE GOVERNANCE OF ENTERPRISES.
The Housing and Community Development Act of 1992 is
amended by inserting before section 1323 (12 U.S.C. 4543) the
following new section:
``SEC. 1322A. CORPORATE GOVERNANCE OF ENTERPRISES.
``(a) Board of Directors.--
``(1) Independence.--A majority of seated members of the
board of directors of each enterprise shall be independent
board members, as defined under rules set forth by the New
York Stock Exchange, as such rules may be amended from time
to time.
``(2) Frequency of meetings.--To carry out its obligations
and duties under applicable laws, rules, regulations, and
guidelines, the board of directors of an enterprise shall
meet at least eight times a year and not less than once a
calendar quarter.
``(3) Non-management board member meetings.--The non-
management directors of an enterprise shall meet at regularly
scheduled executive sessions without management
participation.
``(4) Quorum; prohibition on proxies.--For the transaction
of business, a quorum of the board of directors of an
enterprise shall be at least a majority of the seated board
of directors and a board member may not vote by proxy.
``(5) Information.--The management of an enterprise shall
provide a board member of the enterprise with such adequate
and appropriate information that a reasonable board member
would find important to the fulfillment of his or her
fiduciary duties and obligations.
``(6) Annual review.--At least annually, the board of
directors of each enterprise shall review, with appropriate
professional assistance,
[[Page H9147]]
the requirements of laws, rules, regulations, and guidelines
that are applicable to its activities and duties.
``(b) Committees of Boards of Directors.--
``(1) Frequency of meetings.--Any committee of the board of
directors of an enterprise shall meet with sufficient
frequency to carry out its obligations and duties under
applicable laws, rules, regulations, and guidelines.
``(2) Required committees.--Each enterprise shall provide
for the establishment, however styled, of the following
committees of the board of directors:
``(A) Audit committee.
``(B) Compensation committee.
``(C) Nominating/corporate governance committee.
Such committees shall be in compliance with the charter,
independence, composition, expertise, duties,
responsibilities, and other requirements set forth under
section 10A(m) of the Securities Exchange Act of 1934 (15
U.S.C. 78j-1(m)), with respect to the audit committee, and
under rules issued by the New York Stock Exchange, as such
rules may be amended from time to time.
``(c) Compensation.--
``(1) In general.--The compensation of board members,
executive officers, and employees of an enterprise--
``(A) shall not be in excess of that which is reasonable
and appropriate;
``(B) shall be commensurate with the duties and
responsibilities of such persons,
``(C) shall be consistent with the long-term goals of the
enterprise;
``(D) shall not focus solely on earnings performance, but
shall take into account risk management, operational
stability and legal and regulatory compliance as well; and
``(E) shall be undertaken in a manner that complies with
applicable laws, rules, and regulations.
``(2) Reimbursement.--If an enterprise is required to
prepare an accounting restatement due to the material
noncompliance of the enterprise, as a result of misconduct,
with any financial reporting requirement under the securities
laws, the chief executive officer and chief financial officer
of the enterprise shall reimburse the enterprise as provided
under section 304 of the Sarbanes-Oxley Act of 2002 (15
U.S.C. 7243). This provision does not otherwise limit the
authority of the Agency to employ remedies available to it
under its enforcement authorities.
``(d) Code of Conduct and Ethics.--
``(1) In general.--An enterprise shall establish and
administer a written code of conduct and ethics that is
reasonably designed to assure the ability of board members,
executive officers, and employees of the enterprise to
discharge their duties and responsibilities, on behalf of the
enterprise, in an objective and impartial manner, and that
includes standards required under section 406 of the
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7264) and other
applicable laws, rules, and regulations.
``(2) Review.--Not less than once every three years, an
enterprise shall review the adequacy of its code of conduct
and ethics for consistency with practices appropriate to the
enterprise and make any appropriate revisions to such code.
``(e) Conduct and Responsibilities of Board of Directors.--
The board of directors of an enterprise shall be responsible
for directing the conduct and affairs of the enterprise in
furtherance of the safe and sound operation of the enterprise
and shall remain reasonably informed of the condition,
activities, and operations of the enterprise. The
responsibilities of the board of directors shall include
having in place adequate policies and procedures to assure
its oversight of, among other matters, the following:
``(1) Corporate strategy, major plans of action, risk
policy, programs for legal and regulatory compliance and
corporate performance, including prudent plans for growth and
allocation of adequate resources to manage operations risk.
``(2) Hiring and retention of qualified executive officers
and succession planning for such executive officers.
``(3) Compensation programs of the enterprise.
``(4) Integrity of accounting and financial reporting
systems of the enterprise, including independent audits and
systems of internal control.
``(5) Process and adequacy of reporting, disclosures, and
communications to shareholders, investors, and potential
investors.
``(6) Extensions of credit to board members and executive
officers.
``(7) Responsiveness of executive officers in providing
accurate and timely reports to Federal regulators and in
addressing the supervisory concerns of Federal regulators in
a timely and appropriate manner.
``(f) Prohibition of Extensions of Credit.--An enterprise
may not directly or indirectly, including through any
subsidiary, extend or maintain credit, arrange for the
extension of credit, or renew an extension of credit, in the
form of a personal loan to or for any board member or
executive officer of the enterprise, as provided by section
13(k) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(k)).
``(g) Certification of Disclosures.--The chief executive
officer and the chief financial officer of an enterprise
shall review each quarterly report and annual report issued
by the enterprise and such reports shall include
certifications by such officers as required by section 302 of
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241).
``(h) Change of Audit Partner.--An enterprise may not
accept audit services from an external auditing firm if the
lead or coordinating audit partner who has primary
responsibility for the external audit of the enterprise, or
the external audit partner who has responsibility for
reviewing the external audit has performed audit services for
the enterprise in each of the five previous fiscal years.
``(i) Compliance Program.--
``(1) Requirement.--Each enterprise shall establish and
maintain a compliance program that is reasonably designed to
assure that the enterprise complies with applicable laws,
rules, regulations, and internal controls.
``(2) Compliance officer.--The compliance program of an
enterprise shall be headed by a compliance officer, however
styled, who reports directly to the chief executive officer
of the enterprise. The compliance officer shall report
regularly to the board of directors or an appropriate
committee of the board of directors on compliance with and
the adequacy of current compliance policies and procedures of
the enterprise, and shall recommend any adjustments to such
policies and procedures that the compliance officer considers
necessary and appropriate.
``(j) Risk Management Program.--
``(1) Requirement.--Each enterprise shall establish and
maintain a risk management program that is reasonably
designed to manage the risks of the operations of the
enterprise.
``(2) Risk management officer.--The risk management program
of an enterprise shall be headed by a risk management
officer, however styled, who reports directly to the chief
executive officer of the enterprise. The risk management
officer shall report regularly to the board of directors or
an appropriate committee of the board of directors on
compliance with and the adequacy of current risk management
policies and procedures of the enterprise, and shall
recommend any adjustments to such policies and procedures
that the risk management officer considers necessary and
appropriate.
``(k) Compliance With Other Laws.--
``(1) Deregistered or unregistered common stock.--If an
enterprise deregisters or has not registered its common stock
with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, the enterprise shall comply
or continue to comply with sections 10A(m) and 13(k) of the
Securities Exchange Act of 1934 (15 U.S.C. 78j-1(m), 78m(k))
and sections 302, 304, and 406 of the Sarbanes-Oxley Act of
2002 (15 U.S.C. 7241, 7243, 7264), subject to such
requirements as provided by subsection (l) of this section.
``(2) Registered common stock.--An enterprise that has its
common stock registered with the Securities and Exchange
Commission shall maintain such registered status, unless it
provides 60 days prior written notice to the Director stating
its intent to deregister and its understanding that it will
remain subject to the requirements of the sections of the
Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of
2002, subject to such requirements as provided by subsection
(l) of this section.
``(l) Other Matters.--The Director may from time to time
establish standards, by regulation, order, or guideline,
regarding such other corporate governance matters of the
enterprises as the Director considers appropriate.
``(m) Modification of Standards.--In connection with
standards of Federal or State law (including the Revised
Model Corporation Act) or New York Stock Exchange rules that
are made applicable to an enterprise by section 1710.10 of
the Director's rules (12 C.F.R. 1710.10) and by subsections
(a), (b), (g), (i), (j), and (k) of this section, the
Director, in the Director's sole discretion, may modify the
standards contained in this section or in part 1710 of the
Director's rules (12 U.S.C. Part 1710) in accordance with
section 553 of title 5, United States Code, and upon written
notice to the enterprise.''.
SEC. 115. REQUIRED REGISTRATION UNDER SECURITIES EXCHANGE ACT
OF 1934.
The Housing and Community Development Act of 1992 is
amended by adding after section 1322A, as added by the
preceding provisions of this Act, the following new section:
``SEC. 1322B. REQUIRED REGISTRATION UNDER SECURITIES EXCHANGE
ACT OF 1934.
``(a) In General.--Each regulated entity shall register at
least one class of the capital stock of such regulated
entity, and maintain such registration with the Securities
and Exchange Commission, under the Securities Exchange Act of
1934.
``(b) Enterprises.--Each enterprise shall comply with
sections 14 and 16 of the Securities Exchange Act of 1934.''.
SEC. 116. FINANCIAL INSTITUTIONS EXAMINATION COUNCIL.
The Federal Financial Institutions Examination Council Act
of 1978 is amended--
(1) in section 1003 (12 U.S.C. 3302)--
(A) in paragraph (1), by inserting ``Director of the
Federal Housing Finance Agency,'' after ``Supervision,''; and
(B) in paragraph (3), by striking ``or a credit union;''
and inserting ``a credit union, or a regulated entity (as
such term is defined in section 1303 of the Housing and
Community Development Act of 1992 (12 U.S.C. 4502)).'';
(2) in section 1004 (12 U.S.C. 3303)--
(A) in paragraph (4), by inserting a semicolon at the end;
(B) by redesignating paragraph (5) as paragraph (6); and
(C) by inserting after paragraph (4) the following new
paragraph:
``(5) the Director of the Federal Housing Finance Agency;
and''; and
(3) in section 1006(d) (12 U.S.C. 3305(d)), by striking
``and employees of the Federal Housing Finance Board''.
SEC. 117. GUARANTEE FEE STUDY.
(a) In General.--The Comptroller General of the United
States, in consultation with the heads of the federal banking
agencies and the Director of the Office of Federal Housing
Enterprise Oversight of the Department of Housing and Urban
Development, shall, not later than one year after the date of
the enactment of this Act, submit to the Congress a study
concerning the pricing, transparency and reporting of the
[[Page H9148]]
Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, and the Federal home loan banks with
regard to guarantee fees and concerning analogous practices,
transparency and reporting requirements (including advances
pricing practices by the Federal Home Loan Banks) of other
participants in the business of mortgage purchases and
securitization.
(b) Factors.--The study required by this section shall
examine various factors such as credit risk, counterparty
risk considerations, economic value considerations, and
volume considerations used by the regulated entities (as such
term is defined in section 1303 of the Housing and Community
Development Act of 1992) included in the study in setting the
amount of fees they charge.
(c) Contents of Report.--The report required under
subsection (a) shall identify and analyze--
(1) the factors used by each enterprise (as such term is
defined in section 1303 of the Housing and Community
Development Act of 1992) in determining the amount of the
guarantee fees it charges;
(2) the total revenue the enterprises earn from guarantee
fees;
(3) the total costs incurred by the enterprises for
providing guarantees;
(4) the average guarantee fee charged by the enterprises;
(5) an analysis of how and why the guarantee fees charged
differ from such fees charged during the previous year;
(6) a breakdown of the revenue and costs associated with
providing guarantees, based on product type and risk
classifications; and
(7) other relevant information on guarantee fees with other
participants in the mortgage and securitization business.
(d) Protection of Information.--Nothing in this section may
be construed to require or authorize the Government
Accounting Office, in connection with the study mandated by
this section, to disclose information of the enterprises or
other organization that is confidential or proprietary.
SEC. 118. CONFORMING AMENDMENTS.
(a) 1992 Act.--Part 1 of subtitle A of title XIII of the
Housing and Community Development Act of 1992 (12 U.S.C. 4511
et seq.), as amended by the preceding provisions of this Act,
is further amended--
(1) by striking ``an enterprise'' each place such term
appears in such part (except in sections 1313(a)(2)(A),
1313A(b)(2)(B)(ii)(I), and 1316(b)(3)) and inserting ``a
regulated entity'';
(2) by striking ``the enterprise'' each place such term
appears in such part (except in section 1316(b)(3)) and
inserting ``the regulated entity'';
(3) by striking ``the enterprises'' each place such term
appears in such part (except in sections 1312(c)(2),
1312(e)(2), and 1319B(a)(4)(D)) and inserting ``the regulated
entities'';
(4) by striking ``each enterprise'' each place such term
appears in such part and inserting ``each regulated entity'';
(5) by striking ``Office'' each place such term appears in
such part (except in sections 1312(b)(5), 1315(b), and
1316(g), and section 1317(c)) and inserting ``Agency'';
(6) in section 1315 (12 U.S.C. 4515)--
(A) in subsection (a)--
(i) in the subsection heading, by striking ``Office
Personnel'' and inserting ``In General''; and
(ii) by striking ``The'' and inserting ``Subject to titles
III and IV of the Federal Housing Finance Reform Act of 2005,
the'';
(B) by striking subsections (d) and (f); and
(C) by redesignating subsection (e) as subsection (d);
(7) in section 1319A (12 U.S.C. 4520)--
(A) by striking ``(a) In General.--Each enterprise'' and
inserting ``Each regulated entity''; and
(B) by striking subsection (b);
(8) in section 1319B (12 U.S.C. 4521), by striking
``Committee on Banking, Finance and Urban Affairs'' each
place such term appears and inserting ``Committee on
Financial Services''; and
(9) in section 1319F (12 U.S.C. 4525), striking all that
follows ``United States Code'' and inserting ``, the Agency
shall be considered an agency responsible for the regulation
or supervision of financial institutions.''.
(b) Amendments to Fannie Mae Charter Act.--The Federal
National Mortgage Association Charter Act (12 U.S.C. 1716 et
seq.) is amended--
(1) by striking ``Director of the Office of Federal Housing
Enterprise Oversight of the Department of Housing and Urban
Development'' each place such term appears, and inserting
``Director of the Federal Housing Finance Agency'', in--
(A) section 303(c)(2) (12 U.S.C. 1718(c)(2));
(B) section 309(d)(3)(B) (12 U.S.C. 1723a(d)(3)(B)); and
(C) section 309(k)(1); and
(2) in section 309--
(A) in subsections (d)(3)(A) and (n)(1), by striking
``Banking, Finance and Urban Affairs'' each place such term
appears and inserting ``Financial Services''; and
(B) in subsection (m)--
(i) in paragraph (1), by striking ``Secretary'' the second
place such term appears and inserting ``Director'';
(ii) in paragraph (2), by striking ``Secretary'' the second
place such term appears and inserting ``Director''; and
(iii) by striking ``Secretary'' each other place such term
appears and inserting ``Director of the Federal Housing
Finance Agency''; and
(C) in subsection (n), by striking ``Secretary'' each place
such term appears and inserting ``Director of the Federal
Housing Finance Agency''.
(c) Amendments to Freddie Mac Act.--The Federal Home Loan
Mortgage Corporation Act is amended--
(1) by striking ``Director of the Office of Federal Housing
Enterprise Oversight of the Department of Housing and Urban
Development'' each place such term appears, and inserting
``Director of the Federal Housing Finance Agency'', in--
(A) section 303(b)(2) (12 U.S.C. 1452(b)(2));
(B) section 303(h)(2) (12 U.S.C. 1452(h)(2)); and
(C) section 307(c)(1) (12 U.S.C. 1456(c)(1));
(2) in sections 303(h)(1) and 307(f)(1) (12 U.S.C.
1452(h)(1), 1456(f)(1)), by striking ``Banking, Finance and
Urban Affairs'' each place such term appears and inserting
``Financial Services'';
(3) in section 306(i) (12 U.S.C. 1455(i))--
(A) by striking ``1316(c)'' and inserting ``306(c)''; and
(B) by striking ``section 106'' and inserting ``section
1316''; and
(4) in section 307 (12 U.S.C. 1456))--
(A) in subsection (e)--
(i) in paragraph (1), by striking ``Secretary'' the second
place such term appears and inserting ``Director'';
(ii) in paragraph (2), by striking ``Secretary'' the second
place such term appears and inserting ``Director''; and
(iii) by striking ``Secretary'' each other place such term
appears and inserting ``Director of the Federal Housing
Finance Agency''; and
(B) in subsection (f), by striking ``Secretary'' each place
such term appears and inserting ``Director of the Federal
Housing Finance Agency''.
Subtitle B--Improvement of Mission Supervision
SEC. 121. TRANSFER OF PROGRAM AND ACTIVITIES APPROVAL AND
HOUSING GOAL OVERSIGHT.
Part 2 of subtitle A of title XIII of the Housing and
Community Development Act of 1992 (12 U.S.C. 4541 et seq.) is
amended--
(1) by striking the designation and heading for the part
and inserting the following:
``PART 2--PROGRAM AND ACTIVITIES APPROVAL BY DIRECTOR, CORPORATE
GOVERNANCE, AND ESTABLISHMENT OF HOUSING GOALS''; and
(2) by striking sections 1321 and 1322.
SEC. 122. REVIEW BY DIRECTOR OF NEW PROGRAMS AND ACTIVITIES
OF ENTERPRISES.
(a) In General.--Part 2 of subtitle A of title XIII of the
Housing and Community Development Act of 1992 is amended by
inserting before section 1323 (12 U.S.C. 4543) the following
new section:
``SEC. 1321. REVIEW AND APPROVAL BY DIRECTOR OF NEW PROGRAMS
AND BUSINESS ACTIVITIES OF ENTERPRISES.
``(a) Limitation on Authority to Undertake Programs and
Activities.--An enterprise may not undertake any new program,
including a pilot program, or any new business activity
except in accordance with the procedures set forth in this
section and orders and regulations issued under this section.
``(b) New Programs.--
``(1) Prior approval requirement.--An enterprise may not
commence any new program before it has obtained the approval
of the Director, pursuant to this subsection, for the new
program.
``(2) Application.--The Director shall, by order or
regulation, require that an enterprise shall, to obtain a
determination by the Director regarding approval of a new
program by the enterprise, submit to the Director a written
application for the new program in a format as prescribed by
the Director.
``(3) Notice.--Immediately upon receipt of a complete
application for a new program, the Director shall cause to be
published in the Federal Register notice of the receipt of
such application and of the period for public comment
pursuant to paragraph (4) regarding such new program, and a
description of the new program proposed by the application.
``(4) Public comment period.--During the 30-day period
beginning upon publication pursuant to paragraph (3) of a
notice regarding such an application, the Director shall
receive public comments regarding the new program.
``(5) Determination.--Not less than 15 days after the
conclusion of the public comment period pursuant to paragraph
(4) regarding an application but not more than 30 days after
the conclusion of such comment period, the Director shall
approve, conditionally approve, or reject such program, in
writing.
``(6) Standard for approval.--The Director may approve, or
conditionally approve, a new program of an enterprise only if
the Director determines, taking into consideration any
relevant information and comments received during the public
comment period, that such new program--
``(A) does not contravene and is not inconsistent with the
purposes of this title, the Federal National Mortgage
Association Charter Act, or the Federal Home Loan Mortgage
Corporation Act, as such purposes are determined taking into
consideration the definitions of the terms `mortgage loan
origination' and `secondary mortgage market' pursuant to
section 1303;
``(B) is not otherwise inconsistent with the safety and
soundness of the enterprise; and
``(C) is in the public interest.
``(7) Limitation.--The Director, in implementing this
subsection, may not prevent an enterprise from continuing to
offer the automated loan underwriting system in existence on
the date of the enactment of the Federal Housing Finance
Reform Act of 2005 or continuing to engage in counseling and
education activities.
``(c) New Business Activities.--
``(1) Authority of director to prohibit new business
activities.--The Director shall
[[Page H9149]]
have authority to prohibit any new business activity by an
enterprise if the Director determines, in writing, that such
activity--
``(A) contravenes or is inconsistent with the purposes of
this title, the Federal National Mortgage Association Charter
Act, or the Federal Home Loan Mortgage Corporation Act;
``(B) is otherwise inconsistent with the safety and
soundness of the enterprise; or
``(C) is not in the public interest.
``(2) Notification of new business activities.--An
enterprise that undertakes any new business activity shall
provide written notice of the activity to the Director and
may commence the new business activity only in accordance
with paragraph (4).
``(3) Director determination of applicable procedure.--
``(A) Timing.--Immediately upon receipt of any notice under
paragraph (2) regarding a new business activity, the Director
shall undertake a determination under subparagraph (B) of
this paragraph regarding the new business activity.
``(B) Determination and treatment as new program.--If the
Director determines that any new business activity consists
of, relates to, or involves any new program--
``(i) the Director shall notify the enterprise of the
determination;
``(ii) the new business activity described in the notice
shall be considered a new program for purposes of this
section; and
``(iii) the Director shall prohibit the enterprise from
carrying out the activity except to the extent that approval
for the activity is obtained pursuant to subsection (b).
``(4) Commencement.--An enterprise may commence a new
business activity--
``(A) if the Director issues a written approval regarding
such new business activity, immediately upon such issuance or
at such other time as provided by the Director in such
letter; or
``(B) if, during the 30-day period beginning upon receipt
by the Director of notice pursuant to paragraph (2) regarding
a new business activity, the Director has not issued to the
enterprise a written approval or denial of the new business
activity, upon the expiration of such 30-day period.
``(d) Approval and Conditional Approval.--The Director may
at any time conditionally approve the undertaking of a
particular new program or new business activity by an
enterprise and set forth the terms and conditions that apply
to the program or activity with which the enterprise shall
comply if it undertakes the new program or activity. Such
approval may, in the discretion of the Director, be in the
form of a written agreement between the enterprise and the
Director and shall be subject to such terms and conditions
therein. Such a written agreement or conditional approval
shall be enforceable under subtitle C.
``(e) Determination and Treatment of Activity as New
Business Activity.--If the Director determines that any
activity of an enterprise consists of, relates to, or
involves any new business activity--
``(1) the Director shall notify the enterprise of the
determination;
``(2) such activity shall be considered a new business
activity for purposes of this section; and
``(3) the Director shall prohibit the enterprise from
carrying out the activity except to the extent that approval
for the activity is obtained pursuant to subsection (c).
``(f) Effect on Other Authorities.--
``(1) Examinations.--Nothing in this section may be
construed to limit, in any manner, any other authority or
right the Director may have under other provisions of law to
conduct an examination of an enterprise.
``(2) Requests for information.--Nothing in this section
may be construed to limit the right of the Director at any
time to request additional information from an enterprise
concerning any business activity.
``(3) No implied right of action.--This section shall not
create any private right of action against an enterprise or
any director or executive officer of an enterprise, or impair
any private right of action under other applicable law.
``(4) No limitation.--Nothing in this section may be
construed to restrict the general supervisory and regulatory
authority of the Director over all programs, products,
activities, or business operations of any kind.
``(g) Report on Programs and Business Activities.--Not
later than the expiration of the 180-day period beginning on
the effective date under section 185 of the Federal Housing
Finance Reform Act of 2005, each enterprise shall submit to
the Director a report identifying and describing each program
and business activity of the enterprise engaged in or
existing as of the submission of the report.
``(h) Regulations.--The Director shall by order or
regulation issue rules and procedures to implement this
section, including in the discretion of the Director, such
definitions, interpretations, forms, and other guidances as
the Director considers appropriate.''.
(b) Definitions.--Section 1303 of the Housing and Community
Development Act of 1992 (12 U.S.C. 4502), as amended by
section 2 of this Act, is further amended--
(1) by redesignating paragraphs (17) through (23) as
paragraphs (20) through (26), respectively;
(2) by inserting after paragraph (16) the following new
paragraph:
``(19) New business activity.--The term `new business
activity' means, with respect to an enterprise, a business
activity that--
``(A) is materially changed or materially different from
any of the business activities that the enterprise was
engaging in on the effective date under section 185 of the
Federal Housing Finance Reform Act of 2005; and
``(B) the enterprise has not previously obtained
authorization, pursuant to the provisions of section 1321(c),
to offer, undertake, transact, conduct, or engage in.'';
(3) by redesignating paragraphs (15) and (16) as paragraphs
(17) and (18), respectively;
(4) by inserting after paragraph (14) the following new
paragraph:
``(16) Mortgage markets.--The terms `mortgage loan
origination' and `secondary mortgage market' shall have such
meanings as the Director shall, by regulation, prescribe
consistent with the Federal National Mortgage Association
Charter Act and the Federal Home Loan Mortgage Corporation
Act. The Director shall issue such regulations not later than
the expiration of the 12-month period beginning on the
effective date under section 185 of the Federal Housing
Finance Reform Act of 2005, and the Director shall review
such regulations on a periodic basis.'';
(5) by redesignating paragraphs (5) through (14) as
paragraphs (6) through (15), respectively; and
(6) by inserting after paragraph (4) the following new
paragraph:
``(5) Business activity.--The term `business activity'
means, with respect to an enterprise, any offering,
undertaking, transacting, conducting, or engaging in any
conduct, activity, or product by the enterprise, as the
Director shall provide.''.
(c) Conforming Amendments.--
(1) Fannie mae.--Section 302(b)(6) of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1717(b)(6)) is
amended--
(A) by striking ``new program (as such term is'' and
inserting ``new program or new business activity (as such
terms are''; and
(B) by striking ``before obtaining the approval of the
Secretary under section 1322'' and inserting ``except in
accordance with section 1321''.
(2) Freddie mac.--Section 305(c) of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1454(c)) is amended--
(A) by striking ``new program (as such term is'' and
inserting ``new program or new business activity (as such
terms are''; and
(B) by striking ``before obtaining the approval of the
Secretary under section 1322'' and inserting ``except in
accordance with section 1321''.
SEC. 123. CONFORMING LOAN LIMITS.
(a) Fannie Mae.--
(1) General limit.--Section 302(b)(2) of the Federal
National Mortgage Association Charter Act (12 U.S.C.
1717(b)(2)) is amended by striking the 7th and 8th sentences
and inserting the following new sentences: ``Such limitations
shall not exceed $359,650 for a mortgage secured by a single-
family residence, $460,400 for a mortgage secured by a 2-
family residence, $556,500 for a mortgage secured by a 3-
family residence, and $691,600 for a mortgage secured by a 4-
family residence, except that such maximum limitations shall
be adjusted effective January 1 of each year beginning after
the effective date under section 185 of the Federal Housing
Finance Reform Act of 2005, subject to the limitations in
this paragraph. Each adjustment shall be made by adding to or
subtracting from each such amount (as it may have been
previously adjusted) a percentage thereof equal to the
percentage increase or decrease, during the most recent 12-
month or fourth-quarter period ending before the time of
determining such annual adjustment, in the housing price
index maintained by the Director of the Federal Housing
Finance Agency (pursuant to section 1322 of the Housing and
Community Development Act of 1992 (12 U.S.C. 4541)).''.
(2) High-cost area limit.--Section 302(b)(2) of the Federal
National Mortgage Association Charter Act is (12 U.S.C.
1717(b)(2)) is amended by adding after the period at the end
the following: ``Such foregoing limitations shall also be
increased with respect to properties of a particular size
located in any area for which the median price for such size
residence exceeds the foregoing limitation for such size
residence, to the lesser of 150 percent of such foregoing
limitation for such size residence or the amount that is
equal to the median price in such area for such size
residence, except that, subject to the order, if any, issued
by the Director of the Federal Housing Finance Agency
pursuant to section 123(d)(3) of the Federal Housing Finance
Reform Act of 2005, such increase shall apply only with
respect to mortgages on which are based securities issued and
sold by the corporation.''
(b) Freddie Mac.--
(1) General limit.-- Section 305(a)(2) of the Federal Home
Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) is
amended by striking the 6th and 7th sentences and inserting
the following new sentences: ``Such limitations shall not
exceed $359,650 for a mortgage secured by a single-family
residence, $460,400 for a mortgage secured by a 2-family
residence, $556,500 for a mortgage secured by a 3-family
residence, and $691,600 for a mortgage secured by a 4-family
residence, except that such maximum limitations shall be
adjusted effective January 1 of each year beginning after the
effective date under section 185 of the Federal Housing
Finance Reform Act of 2005, subject to the limitations in
this paragraph. Each adjustment shall be made by adding to or
subtracting from each such amount (as it may have been
previously adjusted) a percentage thereof equal to the
percentage increase or decrease, during the most recent 12-
month or fourth-quarter period ending before the time of
determining such annual adjustment, in the housing price
index maintained by the Director of the Federal Housing
Finance Agency (pursuant to section 1322 of the Housing and
Community Development Act of 1992 (12 U.S.C. 4541)).''.
(2) High-cost area limit.--Section 305(a)(2) of the Federal
Home Loan Mortgage Corporation Act is amended by adding after
the period at the end the following: ``Such foregoing
limitations shall also be increased with respect to
properties of a particular size located in any area for which
the median price for such size
[[Page H9150]]
residence exceeds the foregoing limitation for such size
residence, to the lesser of 150 percent of such foregoing
limitation for such size residence or the amount that is
equal to the median price in such area for such size
residence, except that, subject to the order, if any, issued
by the Director of the Federal Housing Finance Agency
pursuant to section 123(d)(3) of the Federal Housing Finance
Reform Act of 2005, such increase shall apply only with
respect to mortgages on which are based securities issued and
sold by the Corporation.''
(c) Housing Price Index.--Subpart A of part 2 of subtitle A
of title XIII of the Housing and Community Development Act of
1992 (as amended by the preceding provisions of this Act) is
amended by inserting after section 1321 (as added by section
122 of this Act) the following new section:
``SEC. 1322. HOUSING PRICE INDEX.
``(a) In General.--The Director shall establish and
maintain a method of assessing the national average 1-family
house price for use for adjusting the conforming loan
limitations of the enterprises. In establishing such method,
the Director shall take into consideration the monthly survey
of all major lenders conducted by the Federal Housing Finance
Agency to determine the national average 1-family house
price, the House Price Index maintained by the Office of
Federal Housing Enterprise Oversight of the Department of
Housing and Urban Development before the effective date under
section 185 of the Federal Housing Finance Reform Act of
2005, any appropriate house price indexes of the Bureau of
the Census of the Department of Commerce, and any other
indexes or measures that the Director considers appropriate.
``(b) GAO Audit.--
``(1) In general.--At such times as are required under
paragraph (2), the Comptroller General of the United States
shall conduct an audit of the methodology established by the
Director under subsection (a) to determine whether the
methodology established is an accurate and appropriate means
of measuring changes to the national average 1-family house
price.
``(2) Timing.--An audit referred to in paragraph (1) shall
be conducted and completed not later than the expiration of
the 180-day period that begins upon each of the following
dates:
``(A) Establishment.--The date upon which such methodology
is initially established under subsection (a) in final form
by the Director.
``(B) Modification or amendment.--Each date upon which any
modification or amendment to such methodology is adopted in
final form by the Director.
``(3) Report.--Within 30 days of the completion of any
audit conducted under this subsection, the Comptroller
General shall submit a report detailing the results and
conclusions of the audit to the Director, the Committee on
Financial Services of the House of Representatives, and the
Committee on Banking, Housing, and Urban Affairs of the
Senate.''.
(d) Conditions on Conforming Loan Limit for High-Cost
Areas.--
(1) Study.--The Director of the Federal Housing Finance
Agency shall conduct a study under this subsection during the
six-month period beginning on the effective date under
section 185 of this Act.
(2) Issues.--The study under this subsection shall
determine--
(A) the effect that restricting the conforming loan limits
for high-cost areas only to mortgages on which are based
securities issued and sold by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation
(as provided in the last sentence of section 302(b)(2) of the
Federal National Mortgage Association Charter Act and the
last sentence of section 305(a)(2) of the Federal Home Loan
Mortgage Corporation Act, pursuant to the amendments made by
subsections (a)(2) and (b)(2) of this section) would have on
the cost to borrowers for mortgages on housing in such high-
cost areas;
(B) the effects that such restrictions would have on the
availability of mortgages for housing in such high-cost
areas; and
(C) the extent to which the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation
will be able to issue and sell securities based on mortgages
for housing located in such high-cost areas.
(3) Determination.--
(A) In general.--Not later than the expiration of the six-
month period specified in paragraph (1), the Director of the
Federal Housing Finance Agency shall make a determination,
based on the results of the study under this subsection, of
whether the restriction of conforming loan limits for high-
cost areas only to mortgages on which are based securities
issued and sold by the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation (as provided
in the amendments made by subsections (a)(2) and (b)(2) of
this section) will result in an increase in the cost to
borrowers for mortgages on housing in such high-cost areas.
(B) Order.-- If such determination is that costs to
borrowers on housing in such high-cost areas will be
increased by such restrictions, the Director may issue an
order terminating such restrictions, in whole or in part.
(4) Publication.-- Not later than the expiration of the
six-month period specified in paragraph (1), the Director of
the Federal Housing Finance Agency shall cause to be
published in the Federal Register--
(A) a report that--
(i) describes the study under this subsection; and
(ii) sets forth the conclusions of the study regarding the
issues to be determined under paragraph (2); and
(B) notice of the determination of the Director under
paragraph (3); and
(C) the order of the Director under paragraph (3).
(5) Definition.--For purposes of this subsection, the term
``conforming loan limits for high-cost areas'' means the
dollar amount limitations applicable under the section
302(b)(2) of the Federal National Mortgage Association
Charter Act and section 305(a)(2) of the Federal Home Loan
Mortgage Corporation Act (as amended by subsections (a) and
(b) of this section) for areas described in the last sentence
of such sections (as so amended).
(e) Regular Adjustment of Conforming Loan Limits.--
(1) Adjustment for year intervening before effective
date.--Notwithstanding section 302(b)(2) of the Federal
National Mortgage Association Charter Act and section
305(a)(2) of the Federal Home Loan Mortgage Corporation Act,
as amended by this section, the maximum dollar amount
limitations in such sections shall be adjusted on the
effective date under section 185 of this Act, and the
limitations as so adjusted shall be immediately effective, so
that the limitations under such sections applicable to the
year in which such effective date occurs are equal to the
limitations in effect under such sections immediately before
such effective date.
(2) Further adjustments.--After such effective date, the
dollar amount limitations as adjusted pursuant to paragraph
(1) shall be considered ``such amount (as it may have been
previously adjusted'' for purposes of section 302(b)(2) of
the Federal National Mortgage Association Charter Act and
section 305(a)(2) of the Federal Home Loan Mortgage
Corporation Act.
SEC. 124. ANNUAL HOUSING REPORT REGARDING REGULATED ENTITIES.
(a) In General.--The Housing and Community Development Act
of 1992 is amended by striking section 1324 (12 U.S.C. 4544)
and inserting the following new section:
``SEC. 1324. ANNUAL HOUSING REPORT REGARDING REGULATED
ENTITIES.
``(a) In General.--After reviewing and analyzing the
reports submitted under section 309(n) of the Federal
National Mortgage Association Charter Act, section 307(f) of
the Federal Home Loan Mortgage Corporation Act, and section
10(j)(11) of the Federal Home Loan Bank Act (12 U.S.C.
1430(j)(11)), the Director shall submit a report, not later
than October 30 of each year, to the Committee on Financial
Services of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate, on the
activities of each regulated entity.
``(b) Contents.--The report shall--
``(1) discuss the extent to which--
``(A) each enterprise is achieving the annual housing goals
established under subpart B of this part;
``(B) each enterprise is complying with section 1337;
``(C) each Federal home loan bank is complying with section
10(j) of the Federal Home Loan Bank Act; and
``(D) each regulated entity is achieving the purposes of
the regulated entity established by law;
``(2) aggregate and analyze relevant data on income to
assess the compliance by each enterprise with the housing
goals established under subpart B;
``(3) aggregate and analyze data on income, race, and
gender by census tract and other relevant classifications,
and compare such data with larger demographic, housing, and
economic trends;
``(4) examine actions that--
``(A) each enterprise has undertaken or could undertake to
promote and expand the annual goals established under subpart
B and the purposes of the enterprise established by law; and
``(B) each Federal home loan bank has taken or could
undertake to promote and expand the community investment
program and affordable housing program of the bank
established under section subsections (i) and (j) of section
10 of the Federal Home Loan Bank Act;
``(5) examine the primary and secondary multifamily housing
mortgage markets and describe--
``(A) the availability and liquidity of mortgage credit;
``(B) the status of efforts to provide standard credit
terms and underwriting guidelines for multifamily housing and
to securitize such mortgage products; and
``(C) any factors inhibiting such standardization and
securitization;
``(6) examine actions each regulated entity has undertaken
and could undertake to promote and expand opportunities for
first-time homebuyers;
``(7) describe any actions taken under section 1325(5) with
respect to originators found to violate fair lending
procedures;
``(8) discuss and analyze existing conditions and trends,
including conditions and trends relating to pricing, in the
housing markets and mortgage markets; and
``(9) identify the extent to which each enterprise is
involved in mortgage purchases and secondary market
activities involving subprime loans (as identified in
accordance with the regulations issued pursuant to section
124(b) of the Federal Housing Finance Reform Act of 2005) and
compare the characteristics of subprime loans purchased and
securitized by the enterprises to other loans purchased and
securitized by the enterprises
``(c) Data Collection and Reporting.--
``(1) In general.--To assist the Director in analyzing the
matters described in subsection (b) and establishing the
methodology described in section 1322, the Director shall
conduct, on a monthly basis, a survey of mortgage markets in
accordance with this subsection.
``(2) Data points.--Each monthly survey conducted by the
Director under paragraph (1) shall collect data on--
``(A) the characteristics of individual mortgages that are
eligible for purchase by the enterprises and the
characteristics of individual
[[Page H9151]]
mortgages that are not eligible for purchase by the
enterprises including, in both cases, information
concerning--
``(i) the price of the house that secures the mortgage;
``(ii) the loan-to-value ratio of the mortgage, which shall
reflect any secondary liens on the relevant property;
``(iii) the terms of the mortgage;
``(iv) the creditworthiness of the borrower or borrowers;
and
``(v) whether the mortgage, in the case of a conforming
mortgage, was purchased by an enterprise; and
``(B) such other matters as the Director determines to be
appropriate.
``(3) Public availability.--The Director shall make any
data collected by the Director in connection with the conduct
of a monthly survey available to the public in a timely
manner, provided that the Director may modify the data
released to the public to ensure that the data is not
released in an identifiable form.
``(4) Definition.--For purposes of this subsection, the
term `identifiable form' means any representation of
information that permits the identity of a borrower to which
the information relates to be reasonably inferred by either
direct or indirect means.''.
(b) Standards for Subprime Loans.--The Director shall, not
later than one year after the effective date under section
185, by regulations issued under section 1316G of the Housing
and Community Development Act of 1992, establish standards by
which mortgages purchased and mortgages purchased and
securitized shall be characterized as subprime for the
purpose of, and only for the purpose of, complying with the
reporting requirement under section 1324(b)(9) of such Act.
SEC. 125. REVISION OF HOUSING GOALS.
(a) Housing Goals.--The Housing and Community Development
Act of 1992 is amended by striking sections 1331 through 1334
(12 U.S.C. 4561-4) and inserting the following new sections:
``SEC. 1331. ESTABLISHMENT OF HOUSING GOALS.
``(a) In General.--The Director shall establish, effective
for the first year that begins after the effective date under
section 185 of the Federal Housing Finance Reform Act of 2005
and each year thereafter, annual housing goals, with respect
to the mortgage purchases by the enterprises, as follows:
``(1) Single family housing goals.--Three single-family
housing goals under section 1332.
``(2) Multifamily special affordable housing goals.--A
multifamily special affordable housing goal under section
1333.
``(b) Eliminating Interest Rate Disparities.--
``(1) In general.--In establishing and implementing the
housing goals under this subpart, the Director shall require
the enterprises to disclose appropriate information to allow
the Director to assess if there are any disparities in
interest rates charged on mortgages to borrowers who are
minorities as compared with borrowers of similar
creditworthiness who are not minorities, as evidenced in
reports pursuant to the Home Mortgage Disclosure Act of 1975.
``(2) Report and remedy.--Upon a finding by the Director,
pursuant to the information provided by an enterprise in
paragraph (1), that a pattern of disparities in interest
rates exists, the Director shall--
``(A) submit to the Committee on Financial Services of the
House of Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate a report detailing
the disparities; and
``(B) require the enterprise to take such action as the
Director deems appropriate pursuant to this Act to remedy the
interest rate disparities identified.
``(3) Protection of identity.--In carrying out this
subsection, the Director shall ensure that no information is
made public that would reasonably allow identification,
directly or indirectly, of an individual borrower.
``(c) Timing.--The Director shall establish an annual
deadline by which the Director shall establish the annual
housing goals under this subpart for each year, taking into
consideration the need for the enterprises to reasonably and
sufficiently plan their operations and activities in advance,
including operations and activities necessary to meet such
annual goals.
``SEC. 1332. SINGLE-FAMILY HOUSING GOALS.
``(a) In General.--The Director shall establish an annual
goal for the purchase by each enterprise of conventional,
conforming, single-family, owner-occupied, purchase money
mortgages financing housing for each of the following
categories of families:
``(1) Low-income families.
``(2) Families that reside in low-income areas.
``(3) Very low-income families.
``(b) Determination of Compliance.--The Director shall
determine, for each year that the housing goal under this
section is in effect pursuant to section 1331(a), whether
each enterprise has complied with the single-family housing
goal established under this section for such year. An
enterprise shall be considered to be in compliance with such
a goal for a year only if--
``(1) for each of the types of families described in
subsection (a), the percentage of the number of conventional,
conforming, single-family, owner-occupied, purchase money
mortgages purchased by each enterprise in such year that
serve such families, meets or exceeds
``(2) the target for the year for such type of family that
is established under subsection (c).
``(c) Annual Targets.--
``(1) In general.--Except as provided in paragraph (2), for
each of the types of families described in subsection (a),
the target under this subsection for a year shall be the
average percentage, for the three years that most recently
precede such year and for which information under the Home
Mortgage Disclosure Act of 1975 is publicly available, of the
number of conventional, conforming, single-family, owner-
occupied, purchase money mortgages originated in such year
that serves such type of family, as determined by the
Director using the information obtained and determined
pursuant to paragraphs (3) and (4).
``(2) Authority to increase targets.--
``(A) In general.--The Director may, for any year,
establish by regulation, for any or all of the types of
families described in subsection (a), percentage targets that
are higher than the percentages for such year determined
pursuant to paragraph (1), to reflect expected changes in
market performance related to such information under the Home
Mortgage Disclosure Act of 1975.
``(B) Factors.--In establishing any targets pursuant to
subparagraph (A), the Director shall consider the following
factors:
``(i) National housing needs.
``(ii) Economic, housing, and demographic conditions.
``(iii) The performance and effort of the enterprises
toward achieving the housing goals under this section in
previous years.
``(iv) The size of the conventional mortgage market serving
each of the types of families described in subsection (a)
relative to the size of the overall conventional mortgage
market.
``(v) The need to maintain the sound financial condition of
the enterprises.
``(3) HMDA information.--The Director shall annually obtain
information submitted in compliance with the Home Mortgage
Disclosure Act of 1975 regarding conventional, conforming,
single-family, owner-occupied, purchase money mortgages
originated and purchased for the previous year.
``(4) Conforming mortgages.--In determining whether a
mortgage is a conforming mortgage for purposes of this
paragraph, the Director shall consider the original principal
balance of the mortgage loan to be the principal balance as
reported in the information referred to in paragraph (3), as
rounded to the nearest thousand dollars.
``(d) Notice of Determination and Enterprise Comment.--
``(1) Notice.--Within 30 days of making a determination
under subsection (b) regarding a compliance of an enterprise
for a year with the housing goal established under this
section and before any public disclosure thereof, the
Director shall provide notice of the determination to the
enterprise, which shall include an analysis and comparison,
by the Director, of the performance of the enterprise for the
year and the targets for the year under subsection (c).
``(2) Comment period.--The Director shall provide each
enterprise an opportunity to comment on the determination
during the 30-day period beginning upon receipt by the
enterprise of the notice.
``(e) Use of Borrower Income.--In monitoring the
performance of each enterprise pursuant to the housing goals
under this section and evaluating such performance (for
purposes of section 1336), the Director shall consider a
mortgagor's income to be such income at the time of
origination of the mortgage.
``SEC. 1333. MULTIFAMILY SPECIAL AFFORDABLE GOAL.
``(a) Establishment.--
``(1) In general.--The Director shall establish, by
regulation, an annual goal for the purchase by each
enterprise of each of the following types of mortgages on
multifamily housing:
``(A) Mortgages that finance dwelling units for very low-
income families.
``(B) Mortgages that finance dwelling units assisted by the
low-income housing tax credit under section 42 of the
Internal Revenue Code of 1986.
``(2) Additional requirements for smaller projects.--The
Director shall establish, within the goal under this section,
additional requirements for the purchase by each enterprise
of mortgages described in paragraph (1) for multifamily
housing projects of a smaller or limited size, which may be
based on the number of dwelling units in the project or the
amount of the mortgage, or both, and shall include
multifamily housing projects of such smaller sizes as are
typical among such projects that serve rural areas.
``(3) Factors.--In establishing the goal under this section
relating to mortgages on multifamily housing for an
enterprise, the Director shall consider--
``(A) national multifamily mortgage credit needs;
``(B) the performance and effort of the enterprise in
making mortgage credit available for multifamily housing in
previous years;
``(C) the size of the multifamily mortgage market;
``(D) the ability of the enterprise to lead the industry in
making mortgage credit available, especially for underserved
markets, such as for small multifamily projects of 5 to 50
units, multifamily properties in need of rehabilitation, and
multifamily properties located in rural areas; and
``(E) the need to maintain the sound financial condition of
the enterprise.
``(b) Units Financed by Housing Finance Agency Bonds.--The
Director shall give full credit toward the achievement of the
multifamily special affordable housing goal under this
section (for purposes of section 1336) to dwelling units in
multifamily housing that otherwise qualifies under such goal
and that is financed by tax-exempt or taxable bonds issued by
a State or local housing finance agency, but only if--
``(1) such bonds are secured by a guarantee of the
enterprise; or
``(2) are not investment grade and are purchased by the
enterprise.
[[Page H9152]]
``(c) Use of Tenant Income or Rent.--The Director shall
monitor the performance of each enterprise in meeting the
goals established under this section and shall evaluate such
performance (for purposes of section 1336) based on--
``(1) the income of the prospective or actual tenants of
the property, where such data are available; or
``(2) where the data referred to in paragraph (1) are not
available, rent levels affordable to low-income and very low-
income families.
A rent level shall be considered to be affordable for
purposes of this subsection for an income category referred
to in this subsection if it does not exceed 30 percent of the
maximum income level of such income category, with
appropriate adjustments for unit size as measured by the
number of bedrooms.
``(d) Determination of Compliance.--The Director shall, for
each year that the housing goal under this section is in
effect pursuant to section 1331(a), determine whether each
enterprise has complied with such goal and the additional
requirements under subsection (a)(2).
``SEC. 1334. DISCRETIONARY ADJUSTMENT OF HOUSING GOALS.
``(a) Authority.--An enterprise may petition the Director
in writing at any time during a year to reduce the level of
any goal for such year established pursuant to this subpart.
``(b) Standard for Reduction.--The Director may reduce the
level for a goal pursuant to such a petition only if--
``(1) market and economic conditions or the financial
condition of the enterprise require such action; or
``(2) efforts to meet the goal would result in the
constraint of liquidity, over-investment in certain market
segments, or other consequences contrary to the intent of
this subpart, or section 301(3) of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1716(3)) or
section 301(3) of the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1451 note), as applicable.
``(c) Determination.--The Director shall make a
determination regarding any proposed reduction within 30 days
of receipt of the petition regarding the reduction. The
Director may extend such period for a single additional 15-
day period, but only if the Director requests additional
information from the enterprise. A denial by the Director to
reduce the level of any goal under this section may be
appealed to the United States District Court for the District
of Columbia or the United States district court in the
jurisdiction in which the headquarters of an enterprise is
located.''.
(b) Conforming Amendments.--The Housing and Community
Development Act of 1992 is amended----
(1) in section 1335(a) (12 U.S.C. 4565(a)), in the matter
preceding paragraph (1), by striking ``low- and moderate-
income housing goal'' and all that follows through ``section
1334'' and inserting ``housing goals established under this
subpart''; and
(2) in section 1336(a)(1) (12 U.S.C. 4566(a)(1)), by
striking ``sections 1332, 1333, and 1334,'' and inserting
``this subpart'' .
(c) Definitions.--Section 1303 of the Housing and Community
Development Act of 1992 (12 U.S.C. 4502), as amended by the
preceding provisions of this Act, is further amended--
(1) in paragraph (26), by striking ``60 percent'' each
place such term appears and inserting ``50 percent'';
(2) by redesignating paragraphs (23) through (26) as
paragraphs (27) through (30), respectively;
(3) by inserting after paragraph (22) the following new
paragraph:
``(26) Rural areas.--The term `rural areas' means any areas
that are non-metropolitan areas (as such term is defined by
the Director of the Office of Management and Budget),
including micropolitan areas and tribal trust lands.''.
(4) by redesignating paragraphs (14) through (22) as
paragraphs (17) through (25), respectively; and
(5) by inserting after paragraph (13) the following new
paragraph:
``(16) Low-income area.--The term `low income area' means a
census tract or block numbering area in which the median
income does not exceed 80 percent of the median income for
the area in which such census tract or block numbering area
is located, and, for the purposes of section 1332(a)(2),
shall include families having incomes not greater than 100
percent of the area median income who reside in minority
census tracts.'';
(6) by redesignating paragraphs (12) and (13) as paragraphs
(14) and (15), respectively;
(7) by inserting after paragraph (11) the following new
paragraph:
``(13) Extremely low-income.--The term `extremely low-
income' means--
``(A) in the case of owner-occupied units, income not in
excess of 30 percent of the area median income; and
``(B) in the case of rental units, income not in excess of
30 percent of the area median income, with adjustments for
smaller and larger families, as determined by the
Secretary.'';
(8) by redesignating paragraphs (8) through (11) as
paragraphs (9) through (12), respectively; and
(9) by inserting after paragraph (7) the following new
paragraph:
``(8) Conforming mortgage.--The term `conforming mortgage'
means, with respect to an enterprise, a conventional mortgage
having an original principal obligation that does not exceed
the dollar limitation, in effect at the time of such
origination, under, as applicable--
``(A) section 302(b)(2) of the Federal National Mortgage
Association Charter Act; or
``(B) section 305(a)(2) of the Federal Home Loan Mortgage
Corporation Act.''.
SEC. 126. DUTY TO SERVE UNDERSERVED MARKETS.
(a) Establishment and Evaluation of Performance.--Section
1335 of the Housing and Community Development Act of 1992 (12
U.S.C. 4565) is amended--
(1) in the section heading, by inserting ``DUTY TO SERVE
UNDERSERVED MARKETS AND'' before ``OTHER'';
(2) by striking subsection (b);
(3) in subsection (a)--
(A) in the matter preceding paragraph (1), by inserting
``and to carry out the duty under subsection (a) of this
section'' before ``, each enterprise shall'';
(B) in paragraph (3), by inserting ``and'' after the
semicolon at the end;
(C) in paragraph (4), by striking ``; and'' and inserting a
period;
(D) by striking paragraph (5); and
(E) by redesignating such subsection as subsection (b);
(4) by inserting before subsection (b) (as so redesignated
by paragraph (3)(E) of this subsection) the following new
subsection:
``(a) Duty to Serve Underserved Markets.--
``(1) Duty.--In accordance with the purpose of the
enterprises under section 301(3) of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1716) and section
301(b)(3) of the Federal Home Loan Mortgage Corporation Act
(12 U.S.C. 1451 note) to undertake activities relating to
mortgages on housing for very low-, low-, and moderate-income
families involving a reasonable economic return that may be
less than the return earned on other activities, each
enterprise shall have the duty to increase the liquidity of
mortgage investments and improve the distribution of
investment capital available for mortgage financing for
underserved markets.
``(2) Underserved markets.--To meet its duty under
paragraph (1), each enterprise shall comply with the
following requirements with respect to the following
underserved markets:
``(A) Manufactured housing.--The enterprise shall lead the
industry in developing loan products and flexible
underwriting guidelines to facilitate a secondary market for
mortgages on manufactured homes for very low-, low-, and
moderate-income families.
``(B) Affordable housing preservation.--The enterprise
shall lead the industry in developing loan products and
flexible underwriting guidelines to facilitate a secondary
market to preserve housing affordable to very low-, low-, and
moderate-income families, including housing projects
subsidized under--
``(i) the project-based and tenant-based rental assistance
programs under section 8 of the United States Housing Act of
1937;
``(ii) the program under section 236 of the National
Housing Act;
``(iii) the below-market interest rate mortgage program
under section 221(d)(4) of the National Housing Act;
``(iv) the supportive housing for the elderly program under
section 202 of the Housing Act of 1959;
``(v) the supportive housing program for persons with
disabilities under section 811 of the Cranston-Gonzalez
National Affordable Housing Act; and
``(vi) the rural rental housing program under section 515
of the Housing Act of 1949.
``(C) Rural and other underserved markets.--The enterprise
shall lead the industry in developing loan products and
flexible underwriting guidelines to facilitate a secondary
market for mortgages on housing for very low-, low-, and
moderate-income families in rural areas, and for mortgages
for housing for any other underserved market for very low-,
low-, and moderate-income families that the Secretary
identifies as lacking adequate credit through conventional
lending sources. Such underserved markets may be identified
by borrower type, market segment, or geographic area.''; and
(5) by adding at the end the following new subsection:
``(c) Evaluation and Reporting of Compliance.--
``(1) In general.--Not later than 6 months after the
effective date under section 185 of the Federal Housing
Finance Reform Act of 2005, the Director shall establish a
manner for evaluating whether, and the extent to which, the
enterprises have complied with the duty under subsection (a)
to serve underserved markets and for rating the extent of
such compliance. Using such method, the Director shall, for
each year, evaluate such compliance and rate the performance
of each enterprise as to extent of compliance. The Director
shall include such evaluation and rating for each enterprise
for a year in the report for that year submitted pursuant to
section 1319B(a).
``(2) Separate evaluations.--In determining whether an
enterprise has complied with the duty referred to in
paragraph (1), the Director shall separately evaluate whether
the enterprise has complied with such duty with respect to
each of the underserved markets identified in subsection (a),
taking into consideration--
``(A) the development of loan products and more flexible
underwriting guidelines;
``(B) the extent of outreach to qualified loan sellers in
each of such underserved markets; and
``(C) the volume of loans purchased in each of such
underserved markets.''.
(b) Enforcement.--Subsection (a) of section 1336 of the
Housing and Community Development Act of 1992 (12 U.S.C.
4566(a)) is amended--
(1) in paragraph (1), by inserting ``and with the duty
under section 1335A of each enterprise with respect to
underserved markets,'' before ``as provided in this
section,''; and
(2) by adding at the end of such subsection, as amended by
the preceding provisions of this title, the following new
paragraph:
``(4) Enforcement of duty to provide mortgage credit to
underserved markets.--The duty under section 1335(a) of each
enterprise to serve underserved markets (as determined in
accordance with section 1335(c)) shall
[[Page H9153]]
be enforceable under this section to the same extent and
under the same provisions that the housing goals established
under sections 1332, 1333, and 1334 are enforceable. Such
duty shall not be enforceable under any other provision of
this title (including subpart C of this part) other than this
section or under any provision of the Federal National
Mortgage Association Charter Act or the Federal Home Loan
Mortgage Corporation Act.''.
SEC. 127. MONITORING AND ENFORCING COMPLIANCE WITH HOUSING
GOALS.
Section 1336 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4566) is amended--
(1) in subsection (b)--
(A) in the subsection heading, by inserting ``Preliminary''
before ``Determination'';
(B) by striking paragraph (1) and inserting the following
new paragraph:
``(1) Notice.--If the Director preliminarily determines
that an enterprise has failed, or that there is a substantial
probability that an enterprise will fail, to meet any housing
goal established under this subpart, the Director shall
provide written notice to the enterprise of such a
preliminary determination, the reasons for such
determination, and the information on which the Director
based the determination.'';
(C) in paragraph (2)--
(i) in subparagraph (A), by inserting ``finally'' before
``determining'';
(ii) by striking subparagraphs (B) and (C) and inserting
the following new subparagraph:
``(B) Extension or shortening of period.--The Director
may--
``(i) extend the period under subparagraph (A) for good
cause for not more than 30 additional days; and
``(ii) shorten the period under subparagraph (A) for good
cause.''; and
(iii) by redesignating subparagraph (D) as subparagraph
(C); and
(D) in paragraph (3)--
(i) in subparagraph (A), by striking ``determine'' and
inserting ``issue a final determination of'';
(ii) in subparagraph (B), by inserting ``final'' before
``determinations''; and
(iii) in subparagraph (C)--
(I) by striking ``Committee on Banking, Finance and Urban
Affairs'' and inserting ``Committee on Financial Services'';
and
(II) by inserting ``final'' before ``determination'' each
place such term appears; and
(2) in subsection (c)--
(A) by striking the subsection designation and heading and
all that follows through the end of paragraph (1) and
inserting the following:
``(c) Cease and Desist Orders, Civil Money Penalties, and
Remedies Including Housing Plans.--
``(1) Requirement.--If the Director finds, pursuant to
subsection (b), that there is a substantial probability that
an enterprise will fail, or has actually failed, to meet any
housing goal under this subpart and that the achievement of
the housing goal was or is feasible, the Director may require
that the enterprise submit a housing plan under this
subsection. If the Director makes such a finding and the
enterprise refuses to submit such a plan, submits an
unacceptable plan, fails to comply with the plan or the
Director finds that the enterprise has failed to meet any
housing goal under this subpart, in addition to requiring an
enterprise to submit a housing plan, the Director may issue a
cease and desist order in accordance with section 1341,
impose civil money penalties in accordance with section 1345,
or order other remedies as set forth in paragraph (7) of this
subsection.'';
(B) in paragraph (2)--
(i) by striking ``CONTENTS.--Each housing plan'' and
inserting ``HOUSING PLAN.--If the Director requires a housing
plan under this section, such a plan''; and
(ii) in subparagraph (B), by inserting ``and changes in its
operations'' after ``improvements'';
(C) in paragraph (3)--
(i) by inserting ``comply with any remedial action or''
before ``submit a housing plan''; and
(ii) by striking ``under subsection (b)(3) that a housing
plan is required'';
(D) in paragraph (4), by striking the first two sentences
and inserting the following: ``The Director shall review each
submission by an enterprise, including a housing plan
submitted under this subsection, and not later than 30 days
after submission, approve or disapprove the plan or other
action. The Director may extend the period for approval or
disapproval for a single additional 30-day period if the
Director determines such extension necessary.''; and
(E) by adding at the end the following new paragraph:
``(7) Additional remedies for failure to meet goals.--In
addition to ordering a housing plan under this section,
issuing cease and desist orders under section 1341, and
ordering civil money penalties under section 1345, the
Director may seek other actions when an enterprise fails to
meet a goal, and exercise appropriate enforcement authority
available to the Director under this Act to prohibit the
enterprise from entering into new programs and new business
activities and to order the enterprise to suspend programs
and business activities pending its achievement of the
goal.''.
SEC. 128. AFFORDABLE HOUSING FUND.
(a) In General.--The Housing and Community Development Act
of 1992 is amended by striking sections 1337 and 1338 (12
U.S.C. 4562 note) and inserting the following new section:
``SEC. 1337. AFFORDABLE HOUSING FUND.
``(a) Establishment and Purpose.--Each enterprise shall
establish and manage an affordable housing fund in accordance
with this section. The purpose of the affordable housing fund
shall be--
``(1) to increase homeownership for extremely low-and very
low-income families;
``(2) to increase investment in housing in low-income
areas, and areas designated as qualified census tracts or an
area of chronic economic distress pursuant to section 143(j)
of the Internal Revenue Code of 1986 (26 U.S.C. 143(j));
``(3) to increase and preserve the supply of rental and
owner-occupied housing for extremely low- and very low-income
families; and
``(4) to increase investment in economic and community
development in economically underserved areas.
``(b) Allocation of Amounts by Enterprises.--
``(1) In general.--In accordance with regulations issued by
the Director under subsection (l) and subject to paragraph
(2) of this subsection, each enterprise shall allocate to the
affordable housing fund established under subsection (a) by
the enterprise, in each year beginning after the effective
date under section 185 of the Federal Housing Finance Reform
Act of 2005, 5 percent of the after-tax income of the
enterprise for the preceding year.
``(2) Limitation.--An enterprise shall not be required to
make an allocation for a year to the affordable housing fund
of the enterprise established under subsection (a) unless--
``(A) the enterprise is classified by the Director at the
time of such allocation as adequately capitalized; and
``(B) the enterprise generated after-tax income for the
preceding year.
``(3) Determination of after-tax income.--For purposes of
this section, the term `after-tax income' means, with respect
to an enterprise for a year, the amount reported by the
enterprise for such year in the enterprise's annual report
for such year that is filed with the Securities and Exchange
Commission, except that for any year in which no such filing
is made by an enterprise or such filing is not timely made,
such term means the amount determined by the Director based
on the income tax return filings of the enterprise.
``(c) Selection of Activities Funded Using Affordable
Housing Fund Amounts.--Amounts from the affordable housing
fund of the enterprise may be used, or committed for use,
only for activities that--
``(1) are eligible under subsection (d) for such use; and
``(2) are selected for funding by the enterprise in
accordance with the process and criteria for such selection
established pursuant to subsection (l)(2)(C).
``(d) Eligible Activities.--Amounts from the affordable
housing fund of an enterprise shall be eligible for use, or
for commitment for use, only for assistance for--
``(1) the production, preservation, and rehabilitation of
rental housing, including housing under the programs
identified in section 1335(a)(2)(B), except that amounts
provided from the Fund may be used for the benefit only of
extremely low- and very low-income families;
``(2) the production, preservation, and rehabilitation of
housing for homeownership, including such forms as
downpayment assistance, closing cost assistance, and
assistance for interest-rate buy-downs, that--
``(A) is available for purchase only for use as a principal
residence by families that qualify both as--
``(i) extremely low- and very-low income families at the
times described in subparagraphs (A) through (C) of section
215(b)(2) of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12745(b)(2)); and
``(ii) first-time homebuyers, as such term is defined in
section 104 of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12704), except that any reference in
such section to assistance under title II of such Act shall
for purposes of this section be considered to refer to
assistance from the affordable housing fund of the
enterprise;
``(B) has an initial purchase price that meets the
requirements of section 215(b)(1) of the Cranston-Gonzalez
National Affordable Housing Act; and
``(C) is subject to the same resale restrictions
established under section 215(b)(3) of the Cranston-Gonzalez
National Affordable Housing Act and applicable to the
participating jurisdiction that is the State in which such
housing is located; and
``(3) leveraged grants under subsection (e).
``(e) Leveraged Grants.--
``(1) In general.--Pursuant to regulations issued by the
Director, each enterprise shall carry out a program under
this subsection to make leveraged grants from amounts in the
affordable housing fund of the enterprise, subject to the
requirements under this subsection.
``(2) Eligible purposes.--Amounts from the affordable
housing fund of an enterprise may be used only for leveraged
grants under paragraph (4) for--
``(A) the development, preservation, rehabilitation, or
purchase of affordable housing that meets underserved needs
for affordable housing;
``(B) community or economic development activities in
economically underserved areas; or
``(C) a combination of the activities identified in
subparagraphs (A) and (B).
``(3) Eligible sponsors.--A leveraged grant under this
subsection may be made only on behalf of a sponsor that meets
such requirements as the Director shall establish for
experience and success in carrying out the types of
activities proposed under the application of the sponsor,
such as the following entities:
``(A) A low-income housing fund.
``(B) A housing finance agency of a State or unit of
general local government.
``(C) A non-profit organization having as one of its
principal purposes the development or management of
affordable housing.
``(D) A community development financial institution.
``(E) A national non-profit housing intermediary.
[[Page H9154]]
``(F) A community development corporation.
``(G) A community development entity.
``(4) Eligible uses.--Amounts from the affordable housing
fund of an enterprise may be used under this subsection only
for the following types of leveraged grants:
``(A) To provide loan loss reserves.
``(B) To capitalize a revolving loan fund.
``(C) To provide equity capitalization of an affordable
housing fund.
``(D) To provide equity capitalization of a community
development or economic development fund.
``(E) For risk sharing loans.
``(F) For the funding of a specific, detailed investment
plan that identifies the specific types of uses and the
expected timeframes with respect to such uses.
``(5) Applications.--The Director shall provide, in the
application process established pursuant to subsection
(l)(2)(C), for eligible sponsors under paragraph (3) of this
subsection to submit applications to an enterprise for
leveraged grants pursuant to this subsection, which shall
include a detailed description of--
``(A) the types of affordable housing or community or
economic development activities for which the leveraged grant
is made;
``(B) the type of eligible leveraged grants under paragraph
(4) to be made in the project;
``(C) the types, sources, and amounts of other funding for
the project;
``(D) and the expected time frame of the leveraged grant
under this subsection.
``(6) Limitations.--The Director shall by regulation--
``(A) ensure that leveraged grants pursuant to this
subsection are designed to alleviate need for affordable
housing in underserved markets identified in section 1335(a)
having the greatest need for such housing or to address
community and economic development needs in economically
underserved areas having the greatest need; and
``(B) ensure that any returns from leveraged grants under
this subsection accrue to the affordable housing fund of the
enterprise and are available for use only as provided under
this section.
``(f) Limitations on Use.--
``(1) Amounts for homeownership.--Of any amounts allocated
pursuant to subsection (b) in each year to the affordable
housing fund of an enterprise, not less than 10 percent shall
be used for activities under paragraph (2) of subsection (d).
``(2) Amounts for leveraged grants.--Of any amounts
allocated pursuant to subsection (b) in each year to the
affordable housing fund of an enterprise, not more than 12.5
percent shall be used for leveraged grants under subsection
(e).
``(3) Deadline for commitment or use.--Any amounts
allocated to the affordable housing fund of an enterprise
shall be used or committed for use within two years of the
date of such allocation.
``(4) Use of returns.--Any return on investment of any
amounts allocated pursuant to subsection (b) to the
affordable housing fund of an enterprise shall be available
for use by the enterprise only for eligible activities under
subsection (d).
``(5) Administrative costs.--The Director shall, by
regulation--
``(A) provide that, except as provided in subparagraph (B),
amounts allocated to the affordable housing fund of an
enterprise may not be used for administrative, outreach, or
other costs of--
``(i) the enterprise; or
``(ii) any recipient of amounts from the affordable housing
fund; and
``(B) limit the amount of any such contributions that may
be used for administrative costs of the enterprise of
maintaining the affordable housing fund and carrying out the
program under this section.
``(6) Prohibition of consideration of use for meeting
housing goals.--In determining compliance with the housing
goals under this subpart, the Director may not consider
amounts used under this section for eligible activities under
subsection (d). The Director shall give credit toward the
achievement of such housing goals to purchases of mortgages
for housing that receives funding under this section, but
only to the extent that such purchases are funded other than
under this section.
``(7) Prohibition of certain subgrants.--The Director
shall, by regulation, ensure that amounts from the affordable
housing fund of an enterprise awarded under this section to a
national non-profit housing intermediary are not used for the
purpose of distributing subgrants to other non-profit
entities.
``(g) Consistency of Use With Housing Needs.--
``(1) Quarterly reports.--The Director shall require each
enterprise to submit a report, on a quarterly basis, to the
Director and the affordable housing board established under
subsection (j) describing the activities funded under this
section during such quarter with amounts from the affordable
housing fund of the enterprise established under this
section. The Director shall make such reports publicly
available. The affordable housing board shall review each
report by an enterprise to determine the consistency of such
activities funded with the criteria for selection of such
activities established pursuant to subsection (l)(2)(C).
``(2) Replenishment.--If the affordable housing board
determines that an activity funded by an enterprise with
amounts from the affordable housing fund of the enterprise is
not consistent with the criteria established pursuant to
subsection (l)(2)(C), the board shall notify the Director and
the Director shall require the enterprise to allocate to such
affordable housing fund (in addition to amounts allocated in
compliance with subsection (b)) an amount equal to the sum of
the amounts from the affordable housing fund used and further
committed for use for such activity.
``(h) Capital Requirements.--The utilization or commitment
of amounts from the affordable housing fund of an enterprise
shall not be subject to the risk-based capital requirements
established pursuant to section 1361(a).
``(i) Reporting Requirement.--Each enterprise shall
include, in the report required under section 309(m) of the
Federal National Mortgage Association Charter Act or section
307(f) of the Federal Home Loan Mortgage Corporation Act, as
applicable, a description of the actions taken by the
enterprise to utilize or commit amounts allocated under this
section to the affordable housing fund of the enterprise
established under this section.
``(j) Affordable Housing Board.--
``(1) Appointment.--The Director shall appoint an
affordable housing board of 7, 9, or 11 persons, who shall
include--
``(A) the Director, or the Director's designee;
``(B) the Secretary of Housing and Urban Development, or
the Secretary's designee;
``(C) the Secretary of Agriculture, or the Secretary's
designee;
``(D) 2 persons from for-profit organizations or businesses
actively involved in providing or promoting affordable
housing for extremely low- and very low-income households;
and
``(E) 2 persons from nonprofit organizations actively
involved in providing or promoting affordable housing for
extremely low- and very low-income households.
``(2) Terms.--
``(A) In general.--Except as provided in subparagraph (B),
the term of each member of the affordable housing board
appointed pursuant to paragraph (1) (but not including
members appointed pursuant to subparagraphs (A), (B), and
(C)) shall be 3 years.
``(B) Initial appointees.--The Director shall appoint the
initial members of the affordable housing board not later
than the expiration of the 60-day period beginning on the
date of the enactment of this Act. As designated by the
Director at the time of appointment, of the members of the
affordable housing board first appointed pursuant to
paragraph (1) (but not including members appointed pursuant
to subparagraphs (A), (B), and (C))--
``(i) in the case of a board having 7 members--
``(I) one shall be appointed for a term of one year; and
``(II) one shall be appointed for a term of two years;
``(ii) in the case of a board having 9 members--
``(I) two shall be appointed for a term of one year; and
``(II) two shall be appointed for a term of two years; and
``(iii) in the case of a board having 11 members--
``(I) two shall be appointed for a term of one year; and
``(II) three shall be appointed for a term of two years;
``(3) Duties.--The affordable housing board shall meet not
less than quarterly--
``(A) to determine extremely low- and very low-income
housing needs;
``(B) to advise the Director with respect to--
``(i) establishment of the selection criteria under
subsection (l)(2)(C) that provide for appropriate use of
amounts from the affordable housing funds of the enterprises
to meet such needs; and
``(ii) operation of, and changes to, the program under this
section appropriate to meet such needs; and
``(C) to review the reports submitted by the enterprises
pursuant to subsection (g)(1) to determine whether the
activities funded using amounts from the affordable housing
funds of the enterprises comply with the regulations issued
pursuant to subsection (l)(2)(C) and inform the Director of
such determinations, for purposes of subsection (g)(2).
``(4) Expenses and per diem.--Members of the board shall
receive travel expenses, including per diem in lieu of
subsistence, in accordance with sections 5702 and 5703 of
title 5, United States Code.
``(5) Advisory committee.--The board shall be considered an
advisory committee for purposes of the Federal Advisory
Committee Act (5 U.S.C. App.).
``(6) Duration.-- The board shall have continued existence
until terminated by law.
``(k) Definition.--For purposes of this section, the term
`economically underserved area' means an area that
predominantly includes census tracts for which--
``(1) at least 20 percent of the population is below the
poverty line (as such term is defined in section 673(2) of
the Omnibus Budget Reconciliation Act of 1981 (42 U.S.C.
9902(2)), including any revision required by such section),
applicable to a family of the size involved; or
``(2) median family income does not exceed the greater of--
``(A) 80 percent of the median family income for the
metropolitan statistical area in which such census tracts are
located; or
``(B) 80 percent of the median family income for the State
in which such census tracts are located.
``(l) Regulations.--
``(1) In general.--The Director shall issue regulations to
carry out this section.
``(2) Required contents.--The regulations issued under this
subsection shall include--
``(A) authority for the Director to audit, provide for an
audit, or otherwise verify an enterprise's activities, to
ensure compliance with this section;
``(B) a requirement that the Director ensure that the
affordable housing fund of each enterprise is audited not
less than annually to ensure compliance with this section;
``(C) requirements for a process for application to, and
selection by, an enterprise for activities
[[Page H9155]]
to be funded with amounts from the affordable housing fund,
which shall provide that--
``(i) selection shall based upon specific criteria,
including a prioritization of funding based upon--
``(I) greatest impact;
``(II) geographic diversity;
``(III) ability to obligate amounts and undertake
activities so funded in a timely manner;
``(IV) in the case of rental housing projects under
subsection (d)(1), the extent to which rents for units in the
project funded are affordable, especially for extremely low-
income families; and
``(V) in the case of rental housing projects under
subsection (d)(1), the extent of the duration for which such
rents will remain affordable; and
``(ii) an enterprise may not require for such selection
that an activity involve financing or underwriting of any
kind by the enterprise (other than funding through the
affordable housing fund of the enterprise) and may not give
preference in such selection to activities that involve such
financing; and
``(D) requirements to ensure that amounts from the
affordable housing funds of the enterprises used for rental
housing under subsection (d)(1) are used only for the benefit
of extremely low- and very-low income families.
``(3) Limitation.--Any regulations issued by the Director
pursuant to this section shall be no more restrictive on the
enterprises' activities in connection with the allocation of
after-tax income under this section than the regulations
issued to implement the affordable housing program of the
Federal home loan banks pursuant to section 10(j) of the
Federal Home Loan Bank Act (12 U.S.C. 1430(j)).''.
(b) Contributions for 2006.--
(1) Reservation and contribution.--In 2006, each enterprise
(as such term is defined in section 1303 of the Housing and
Community Development Act of 1992) shall reserve for
contribution to the affordable housing fund to be established
by the enterprise pursuant to section 1337 of such Act (as
amended by subsection (a) of this section), an amount equal
to 3.5 percent of the after-tax income of the enterprise for
2005. Upon the establishment of such affordable housing fund,
each enterprise shall allocate to such fund the amounts
reserved under this subsection by the enterprise.
(2) Exception to deadline for commitment.--Section
1337(e)(2) of the Housing and Community Development Act of
1992 (as amended by subsection (a) of this section) shall not
apply to amounts allocated to the affordable housing fund of
an enterprise pursuant to paragraph (1).
(3) After-tax income.--For purposes of this subsection, the
term ``after-tax income'' has the meaning provided in
subsection (b)(3) of the new section 1337 to be inserted by
the amendment made by subsection (a) of this section.
(4) Effective date.--This subsection shall take effect on
the date of the enactment of this Act.
SEC. 129. CONSISTENCY WITH MISSION.
Subpart B of part 2 of subtitle A of title XIII of the
Housing and Community Development Act of 1992 (12 U.S.C. 4561
et seq.) is amended by adding after section 1337, as added by
section 127 of this Act, the following new section:
``SEC. 1338. CONSISTENCY WITH MISSION.
``This subpart may not be construed to authorize an
enterprise to engage in any program or activity that
contravenes or is inconsistent with the Federal National
Mortgage Association Charter Act or the Federal Home Loan
Mortgage Corporation Act.''.
SEC. 130. ENFORCEMENT.
(a) Cease-and-Desist Proceedings.--Section 1341 of the
Housing and Community Development Act of 1992 (12 U.S.C.
4581) is amended--
(1) by striking subsection (a) and inserting the following
new subsection:
``(a) Grounds for Issuance.--The Director may issue and
serve a notice of charges under this section upon an
enterprise if the Director determines--
``(1) the enterprise has failed to meet any housing goal
established under subpart B, following a written notice and
determination of such failure in accordance with section
1336;
``(2) the enterprise has failed to submit a report under
section 1314, following a notice of such failure, an
opportunity for comment by the enterprise, and a final
determination by the Director;
``(3) the enterprise has failed to submit the information
required under subsection (m) or (n) of section 309 of the
Federal National Mortgage Association Charter Act, or
subsection (e) or (f) of section 307 of the Federal Home Loan
Mortgage Corporation Act;
``(4) the enterprise has violated any provision of this
part or any order, rule or regulation under this part;
``(5) the enterprise has failed to submit a housing plan
that complies with section 1336(c) within the applicable
period; or
``(6) the enterprise has failed to comply with a housing
plan under section 1336(c).'';
(2) in subsection (b)(2), by striking ``requiring the
enterprise to'' and all that follows through the end of the
paragraph and inserting the following: ``requiring the
enterprise to--
``(A) comply with the goal or goals;
``(B) submit a report under section 1314;
``(C) comply with any provision this part or any order,
rule or regulation under such part;
``(D) submit a housing plan in compliance with section
1336(c);
``(E) comply with a housing plan submitted under section
1336(c); or
``(F) provide the information required under subsection (m)
or (n) of section 309 of the Federal National Mortgage
Association Charter Act or subsection (e) or (f) of section
307 of the Federal Home Loan Mortgage Corporation Act, as
applicable.'';
(3) in subsection (c), by inserting ``date of the'' before
``service of the order''; and
(4) by striking subsection (d).
(b) Authority of Director to Enforce Notices and Orders.--
Section 1344 of the Housing and Community Development Act of
1992 (12 U.S.C. 4584) is amended by striking subsection (a)
and inserting the following new subsection:
``(a) Enforcement.--The Director may, in the discretion of
the Director, apply to the United States District Court for
the District of Columbia, or the United States district court
within the jurisdiction of which the headquarters of the
enterprise is located, for the enforcement of any effective
and outstanding notice or order issued under section 1341 or
1345, or request that the Attorney General of the United
States bring such an action. Such court shall have
jurisdiction and power to order and require compliance with
such notice or order.''.
(c) Civil Money Penalties.--Section 1345 of the Housing and
Community Development Act of 1992 (12 U.S.C. 4585) is
amended--
(1) by striking subsections (a) and (b) and inserting the
following new subsections:
``(a) Authority.--The Director may impose a civil money
penalty, in accordance with the provisions of this section,
on any enterprise that has failed to--
``(1) meet any housing goal established under subpart B,
following a written notice and determination of such failure
in accordance with section 1336(b);
``(2) submit a report under section 1314, following a
notice of such failure, an opportunity for comment by the
enterprise, and a final determination by the Director;
``(3) submit the information required under subsection (m)
or (n) of section 309 of the Federal National Mortgage
Association Charter Act, or subsection (e) or (f) of section
307 of the Federal Home Loan Mortgage Corporation Act;
``(4) comply with any provision of this part or any order,
rule or regulation under this part;
``(5) submit a housing plan pursuant to section 1336(c)
within the required period; or
``(6) comply with a housing plan for the enterprise under
section 1336(c).
``(b) Amount of Penalty.--The amount of the penalty, as
determined by the Director, may not exceed--
``(1) for any failure described in paragraph (1), (5), or
(6) of subsection (a), $50,000 for each day that the failure
occurs; and
``(2) for any failure described in paragraph (2), (3), or
(4) of subsection (a), $20,000 for each day that the failure
occurs.'';
(2) in subsection (c)--
(A) in paragraph (1)--
(i) in subparagraph (A), by inserting ``and'' after the
semicolon at the end;
(ii) in subparagraph (B), by striking ``; and'' and
inserting a period; and
(iii) by striking subparagraph (C); and
(B) in paragraph (2), by inserting after the period at the
end the following: ``In determining the penalty under
subsection (a)(1), the Director shall give consideration to
the length of time the enterprise should reasonably take to
achieve the goal.'';
(3) in the first sentence of subsection (d)--
(A) by striking ``request the Attorney General of the
United States to'' and inserting ``, in the discretion of the
Director,''; and
(B) by inserting ``, or request that the Attorney General
of the United States bring such an action'' before the period
at the end;
(4) by striking subsection (f); and
(5) by redesignating subsection (g) as subsection (f).
(d) Enforcement of Subpoenas.--Section 1348(c) of the
Housing and Community Development Act of 1992 (12 U.S.C.
4588(c)) is amended--
(1) by striking ``request the Attorney General of the
United States to'' and inserting ``, in the discretion of the
Director,''; and
(2) by inserting ``or request that the Attorney General of
the United States bring such an action,'' after ``District of
Columbia,''
(e) Conforming Amendment.--The heading for subpart C of
part 2 of subtitle A of the Housing and Community Development
Act of 1992 is amended to read as follows:
``Subpart C--Enforcement''.
SEC. 131. CONFORMING AMENDMENTS.
Part 2 of subtitle A of title XIII of the Housing and
Community Development Act of 1992 (12 U.S.C. 4541 et seq.) is
amended--
(1) by striking ``Secretary'' each place such term appears
in such part and inserting ``Director'';
(2) in the section heading for section 1323 (12 U.S.C.
4543), by inserting ``OF ENTERPRISES'' before the period at
the end;
(3) by striking section 1327 (12 U.S.C. 4547);
(4) by striking section 1328 (12 U.S.C. 4548);
(5) in sections 1345(c)(1)(A) and 1346(b) (12 U.S.C.
4585(c)(1)(A), 4586(b)), by striking ``Secretary's'' each
place such term appears and inserting ``Director's''; and
(6) by striking section 1349 (12 U.S.C. 4589).
Subtitle C--Prompt Corrective Action
SEC. 141. CAPITAL CLASSIFICATIONS.
(a) In General.--Section 1364 of the Housing and Community
Development Act of 1992 (12 U.S.C. 4614) is amended--
(1) in the heading for subsection (a) by striking ``In
General'' and inserting ``Enterprises'';
(2) in subsection (c)--
(A) by striking ``subsection (b)'' and inserting
``subsection (c)'';
(B) by striking ``enterprises'' and inserting ``regulated
entities''; and
(C) by striking the last sentence;
(3) by redesignating subsections (c) (as so amended by
paragraph (2) of this subsection) and (d) as subsections (d)
and (f), respectively;
(4) by striking subsection (b) and inserting the following
new subsections:
[[Page H9156]]
``(b) Federal Home Loan Banks.--
``(1) Establishment and criteria.--For purposes of this
subtitle, the Director shall, by regulation--
``(A) establish the capital classifications specified under
paragraph (2) for the Federal home loan banks;
``(B) establish criteria for each such capital
classification based on the amount and types of capital held
by a bank and the risk-based, minimum, and critical capital
levels for the banks and taking due consideration of the
capital classifications established under subsection (a) for
the enterprises, with such modifications as the Director
determines to be appropriate to reflect the difference in
operations between the banks and the enterprises; and
``(C) shall classify the Federal home loan banks according
to such capital classifications.
``(2) Classifications.--The capital classifications
specified under this paragraph are--
``(A) adequately capitalized;
``(B) undercapitalized;
``(C) significantly undercapitalized; and
``(D) critically undercapitalized.
``(c) Discretionary Classification.--
``(1) Grounds for reclassification.--The Director may
reclassify a regulated entity under paragraph (2) if--
``(A) at any time, the Director determines in writing that
the regulated entity is engaging in conduct that could result
in a rapid depletion of core or total capital or, in the case
of an enterprise, that the value of the property subject to
mortgages held or securitized by the enterprise has decreased
significantly;
``(B) after notice and an opportunity for hearing, the
Director determines that the regulated entity is in an unsafe
or unsound condition; or
``(C) pursuant to section 1371(b), the Director deems the
regulated entity to be engaging in an unsafe or unsound
practice.
``(2) Reclassification.--In addition to any other action
authorized under this title, including the reclassification
of a regulated entity for any reason not specified in this
subsection, if the Director takes any action described in
paragraph (1) the Director may classify a regulated entity--
``(A) as undercapitalized, if the regulated entity is
otherwise classified as adequately capitalized;
``(B) as significantly undercapitalized, if the regulated
entity is otherwise classified as undercapitalized; and
``(C) as critically undercapitalized, if the regulated
entity is otherwise classified as significantly
undercapitalized.''; and
(5) by inserting after subsection (d) (as so redesignated
by paragraph (3) of this subsection), the following new
subsection:
``(e) Restriction on Capital Distributions.--
``(1) In general.--A regulated entity shall make no capital
distribution if, after making the distribution, the regulated
entity would be undercapitalized.
``(2) Exception.--Notwithstanding paragraph (1), the
Director may permit a regulated entity, to the extent
appropriate or applicable, to repurchase, redeem, retire, or
otherwise acquire shares or ownership interests if the
repurchase, redemption, retirement, or other acquisition--
``(A) is made in connection with the issuance of additional
shares or obligations of the regulated entity in at least an
equivalent amount; and
``(B) will reduce the financial obligations of the
regulated entity or otherwise improve the financial condition
of the entity.''.
(b) Regulations.--Not later than the expiration of the 180-
day period beginning on the effective date under section 185,
the Director of the Federal Housing Finance Agency shall
issue regulations to carry out section 1364(b) of the Housing
and Community Development Act of 1992 (as added by paragraph
(4) of this subsection), relating to capital classifications
for the Federal home loan banks.
SEC. 142. SUPERVISORY ACTIONS APPLICABLE TO UNDERCAPITALIZED
REGULATED ENTITIES.
Section 1365 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4615) is amended--
(1) in the section heading, by striking ``ENTERPRISES'' and
inserting ``REGULATED ENTITIES'';
(2) in subsection (a)--
(A) by redesignating paragraphs (1) and (2) as paragraphs
(2) and (3), respectively;
(B) by inserting before paragraph (2) the following
paragraph:
``(1) Required monitoring.--The Director shall--
``(A) closely monitor the condition of any regulated entity
that is classified as undercapitalized;
``(B) closely monitor compliance with the capital
restoration plan, restrictions, and requirements imposed
under this section; and
``(C) periodically review the plan, restrictions, and
requirements applicable to the undercapitalized regulated
entity to determine whether the plan, restrictions, and
requirements are achieving the purpose of this section.'';
and
(C) by inserting at the end the following new paragraphs:
``(4) Restriction of asset growth.--A regulated entity that
is classified as undercapitalized shall not permit its
average total assets (as such term is defined in section
1316(b) during any calendar quarter to exceed its average
total assets during the preceding calendar quarter unless--
``(A) the Director has accepted the capital restoration
plan of the regulated entity;
``(B) any increase in total assets is consistent with the
plan; and
``(C) the ratio of total capital to assets for the
regulated entity increases during the calendar quarter at a
rate sufficient to enable the entity to become adequately
capitalized within a reasonable time.
``(5) Prior approval of acquisitions, new programs, and new
business activities.--A regulated entity that is classified
as undercapitalized shall not, directly or indirectly,
acquire any interest in any entity or engage in any new
program or new business activity unless--
``(A) the Director has accepted the capital restoration
plan of the regulated entity, the entity is implementing the
plan, and the Director determines that the proposed action is
consistent with and will further the achievement of the plan;
or
``(B) the Director determines that the proposed action will
further the purpose of this section.'';
(3) in the subsection heading for subsection (b), by
striking ``From Undercapitalized to Significantly
Undercapitalized''; and
(4) by striking subsection (c) and inserting the following
new subsection:
``(c) Other Discretionary Safeguards.--The Director may
take, with respect to a regulated entity that is classified
as undercapitalized, any of the actions authorized to be
taken under section 1366 with respect to a regulated entity
that is classified as significantly undercapitalized, if the
Director determines that such actions are necessary to carry
out the purpose of this subtitle.''.
SEC. 143. SUPERVISORY ACTIONS APPLICABLE TO SIGNIFICANTLY
UNDERCAPITALIZED REGULATED ENTITIES.
Section 1366 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4616) is amended--
(1) in the section heading, by striking ``ENTERPRISES'' and
inserting ``ENTITIES'';
(2) in subsection (a)(2)(A), by striking ``enterprise'' the
last place such term appears;
(3) in subsection (b)--
(A) in the subsection heading, by striking ``Discretionary
Supervisory Actions'' and inserting ``Specific Actions'';
(B) in the matter preceding paragraph (1), by striking
``may, at any time, take any'' and inserting ``shall carry
out this section by taking, at any time, one or more'';
(C) by redesignating paragraphs (5) and (6) as paragraphs
(6) and (7), respectively;
(D) by inserting after paragraph (4) the following new
paragraph:
``(5) Improvement of management.--Take one or more of the
following actions:
``(A) New election of board.--Order a new election for the
board of directors of the regulated entity.
``(B) Dismissal of directors or executive officers.--
Require the regulated entity to dismiss from office any
director or executive officer who had held office for more
than 180 days immediately before the entity became
undercapitalized. Dismissal under this subparagraph shall not
be construed to be a removal pursuant to the Director's
enforcement powers provided in section 1377.
``(C) Employ qualified executive officers.--Require the
regulated entity to employ qualified executive officers (who,
if the Director so specifies, shall be subject to approval by
the Director).''; and
(E) by inserting at the end the following new paragraph:
``(8) Other action.--Require the regulated entity to take
any other action that the Director determines will better
carry out the purpose of this section than any of the actions
specified in this paragraph.'';
(4) by redesignating subsection (c) as subsection (d); and
(5) by inserting after subsection (b) the following new
subsection:
``(c) Restriction on Compensation of Executive Officers.--A
regulated entity that is classified as significantly
undercapitalized may not, without prior written approval by
the Director--
``(1) pay any bonus to any executive officer; or
``(2) provide compensation to any executive officer at a
rate exceeding that officer's average rate of compensation
(excluding bonuses, stock options, and profit sharing) during
the 12 calendar months preceding the calendar month in which
the regulated entity became undercapitalized.''.
SEC. 144. AUTHORITY OVER CRITICALLY UNDERCAPITALIZED
REGULATED ENTITIES.
(a) In General.--Section 1367 of the Housing and Community
Development Act of 1992 (12 U.S.C. 4617) is amended to read
as follows:
``SEC. 1367. AUTHORITY OVER CRITICALLY UNDERCAPITALIZED
REGULATED ENTITIES.
``(a) Appointment of Agency as Conservator or Receiver.--
``(1) In general.--Notwithstanding any other provision of
Federal or State law, if any of the grounds under paragraph
(3) exist, at the discretion of the Director, the Director
may establish a conservatorship or receivership, as
appropriate, for the purpose of reorganizing, rehabilitating,
or winding up the affairs of a regulated entity.
``(2) Appointment.--In any conservatorship or receivership
established under this section, the Director shall appoint
the Agency as conservator or receiver.
``(3) Grounds for appointment.--The grounds for appointing
a conservator or receiver for a regulated entity are as
follows:
``(A) Assets insufficient for obligations.--The assets of
the regulated entity are less than the obligations of the
regulated entity to its creditors and others.
``(B) Substantial dissipation.--Substantial dissipation of
assets or earnings due to--
``(i) any violation of any provision of Federal or State
law; or
``(ii) any unsafe or unsound practice.
``(C) Unsafe or unsound condition.--An unsafe or unsound
condition to transact business.
[[Page H9157]]
``(D) Cease-and-desist orders.--Any willful violation of a
cease-and-desist order that has become final.
``(E) Concealment.--Any concealment of the books, papers,
records, or assets of the regulated entity, or any refusal to
submit the books, papers, records, or affairs of the
regulated entity, for inspection to any examiner or to any
lawful agent of the Director.
``(F) Inability to meet obligations.--The regulated entity
is likely to be unable to pay its obligations or meet the
demands of its creditors in the normal course of business.
``(G) Losses.--The regulated entity has incurred or is
likely to incur losses that will deplete all or substantially
all of its capital, and there is no reasonable prospect for
the regulated entity to become adequately capitalized (as
defined in section 1364(a)(1)).
``(H) Violations of law.--Any violation of any law or
regulation, or any unsafe or unsound practice or condition
that is likely to--
``(i) cause insolvency or substantial dissipation of assets
or earnings; or
``(ii) weaken the condition of the regulated entity.
``(I) Consent.--The regulated entity, by resolution of its
board of directors or its shareholders or members, consents
to the appointment.
``(J) Undercapitalization.--The regulated entity is
undercapitalized or significantly undercapitalized (as
defined in section 1364(a)(3) or in regulations issued
pursuant to section 1364(b), as applicable), and--
``(i) has no reasonable prospect of becoming adequately
capitalized;
``(ii) fails to become adequately capitalized, as required
by--
``(I) section 1365(a)(1) with respect to an
undercapitalized regulated entity; or
``(II) section 1366(a)(1) with respect to a significantly
undercapitalized regulated entity;
``(iii) fails to submit a capital restoration plan
acceptable to the Agency within the time prescribed under
section 1369C; or
``(iv) materially fails to implement a capital restoration
plan submitted and accepted under section 1369C.
``(K) Critical undercapitalization.--The regulated entity
is critically undercapitalized, as defined in section
1364(a)(4) or in regulations issued pursuant to section
1364(b), as applicable.
``(L) Money laundering.--The Attorney General notifies the
Director in writing that the regulated entity has been found
guilty of a criminal offense under section 1956 or 1957 of
title 18, United States Code, or section 5322 or 5324 of
title 31, United States Code.
``(4) Judicial review.--
``(A) In general.--If the Agency is appointed conservator
or receiver under this section, the regulated entity may,
within 30 days of such appointment, bring an action in the
United States District Court for the judicial district in
which the principal place of business of such regulated
entity is located, or in the United States District Court for
the District of Columbia, for an order requiring the Agency
to remove itself as conservator or receiver.
``(B) Review.--Upon the filing of an action under
subparagraph (A), the court shall, upon the merits, dismiss
such action or direct the Agency to remove itself as such
conservator or receiver.
``(5) Directors not liable for acquiescing in appointment
of conservator or receiver.--The members of the board of
directors of a regulated entity shall not be liable to the
shareholders or creditors of the regulated entity for
acquiescing in or consenting in good faith to the appointment
of the Agency as conservator or receiver for that regulated
entity.
``(6) Agency not subject to any other federal agency.--When
acting as conservator or receiver, the Agency shall not be
subject to the direction or supervision of any other agency
of the United States or any State in the exercise of the
rights, powers, and privileges of the Agency.
``(b) Powers and Duties of the Agency as Conservator or
Receiver.--
``(1) Rulemaking authority of the agency.--The Agency may
prescribe such regulations as the Agency determines to be
appropriate regarding the conduct of conservatorships or
receiverships.
``(2) General powers.--
``(A) Successor to regulated entity.--The Agency shall, as
conservator or receiver, and by operation of law, immediately
succeed to--
``(i) all rights, titles, powers, and privileges of the
regulated entity, and of any stockholder, officer, or
director of such regulated entity with respect to the
regulated entity and the assets of the regulated entity; and
``(ii) title to the books, records, and assets of any other
legal custodian of such regulated entity.
``(B) Operate the regulated entity.--The Agency may, as
conservator or receiver--
``(i) take over the assets of and operate the regulated
entity with all the powers of the shareholders, the
directors, and the officers of the regulated entity and
conduct all business of the regulated entity;
``(ii) collect all obligations and money due the regulated
entity;
``(iii) perform all functions of the regulated entity in
the name of the regulated entity which are consistent with
the appointment as conservator or receiver; and
``(iv) preserve and conserve the assets and property of
such regulated entity.
``(C) Functions of officers, directors, and shareholders of
a regulated entity.--The Agency may, by regulation or order,
provide for the exercise of any function by any stockholder,
director, or officer of any regulated entity for which the
Agency has been named conservator or receiver.
``(D) Powers as conservator.--The Agency may, as
conservator, take such action as may be--
``(i) necessary to put the regulated entity in a sound and
solvent condition; and
``(ii) appropriate to carry on the business of the
regulated entity and preserve and conserve the assets and
property of the regulated entity.
``(E) Additional powers as receiver.--The Agency may, as
receiver, place the regulated entity in liquidation and
proceed to realize upon the assets of the regulated entity,
having due regard to the conditions of the housing finance
market.
``(F) Organization of new regulated entities.--The Agency
may, as receiver, organize a successor regulated entity that
will operate pursuant to subsection (i).
``(G) Transfer of assets and liabilities.--The Agency may,
as conservator or receiver, transfer any asset or liability
of the regulated entity in default without any approval,
assignment, or consent with respect to such transfer. Any
Federal home loan bank may, with the approval of the Agency,
acquire the assets of any Bank in conservatorship or
receivership, and assume the liabilities of such Bank
``(H) Payment of valid obligations.--The Agency, as
conservator or receiver, shall, to the extent of proceeds
realized from the performance of contracts or sale of the
assets of a regulated entity, pay all valid obligations of
the regulated entity in accordance with the prescriptions and
limitations of this section.
``(I) Subpoena authority.--
``(i) In general.--
``(I) In general.--The Agency may, as conservator or
receiver, and for purposes of carrying out any power,
authority, or duty with respect to a regulated entity
(including determining any claim against the regulated entity
and determining and realizing upon any asset of any person in
the course of collecting money due the regulated entity),
exercise any power established under section 1348.
``(II) Applicability of law.--The provisions of section
1348 shall apply with respect to the exercise of any power
exercised under this subparagraph in the same manner as such
provisions apply under that section.
``(ii) Authority of director.--A subpoena or subpoena duces
tecum may be issued under clause (i) only by, or with the
written approval of, the Director, or the designee of the
Director.
``(iii) Rule of construction.--This subsection shall not be
construed to limit any rights that the Agency, in any
capacity, might otherwise have under section 1317 or 1379D.
``(J) Contracting for services.--The Agency may, as
conservator or receiver, provide by contract for the carrying
out of any of its functions, activities, actions, or duties
as conservator or receiver.
``(K) Incidental powers.--The Agency may, as conservator or
receiver--
``(i) exercise all powers and authorities specifically
granted to conservators or receivers, respectively, under
this section, and such incidental powers as shall be
necessary to carry out such powers; and
``(ii) take any action authorized by this section, which
the Agency determines is in the best interests of the
regulated entity or the Agency.
``(3) Authority of receiver to determine claims.--
``(A) In general.--The Agency may, as receiver, determine
claims in accordance with the requirements of this subsection
and any regulations prescribed under paragraph (4).
``(B) Notice requirements.--The receiver, in any case
involving the liquidation or winding up of the affairs of a
closed regulated entity, shall--
``(i) promptly publish a notice to the creditors of the
regulated entity to present their claims, together with
proof, to the receiver by a date specified in the notice
which shall be not less than 90 days after the publication of
such notice; and
``(ii) republish such notice approximately 1 month and 2
months, respectively, after the publication under clause (i).
``(C) Mailing required.--The receiver shall mail a notice
similar to the notice published under subparagraph (B)(i) at
the time of such publication to any creditor shown on the
books of the regulated entity--
``(i) at the last address of the creditor appearing in such
books; or
``(ii) upon discovery of the name and address of a claimant
not appearing on the books of the regulated entity within 30
days after the discovery of such name and address.
``(4) Rulemaking authority relating to determination of
claims.--Subject to subsection (c), the Director may
prescribe regulations regarding the allowance or disallowance
of claims by the receiver and providing for administrative
determination of claims and review of such determination.
``(5) Procedures for determination of claims.--
``(A) Determination period.--
``(i) In general.--Before the end of the 180-day period
beginning on the date on which any claim against a regulated
entity is filed with the Agency as receiver, the Agency shall
determine whether to allow or disallow the claim and shall
notify the claimant of any determination with respect to such
claim.
``(ii) Extension of time.--The period described in clause
(i) may be extended by a written agreement between the
claimant and the Agency.
``(iii) Mailing of notice sufficient.--The notification
requirements of clause (i) shall be deemed to be satisfied if
the notice of any determination with respect to any claim is
mailed to the last address of the claimant which appears--
``(I) on the books of the regulated entity;
``(II) in the claim filed by the claimant; or
``(III) in documents submitted in proof of the claim.
[[Page H9158]]
``(iv) Contents of notice of disallowance.--If any claim
filed under clause (i) is disallowed, the notice to the
claimant shall contain--
``(I) a statement of each reason for the disallowance; and
``(II) the procedures available for obtaining agency review
of the determination to disallow the claim or judicial
determination of the claim.
``(B) Allowance of proven claim.--The receiver shall allow
any claim received on or before the date specified in the
notice published under paragraph (3)(B)(i), or the date
specified in the notice required under paragraph (3)(C),
which is proved to the satisfaction of the receiver.
``(C) Disallowance of claims filed after end of filing
period.--Claims filed after the date specified in the notice
published under paragraph (3)(B)(i), or the date specified
under paragraph (3)(C), shall be disallowed and such
disallowance shall be final.
``(D) Authority to disallow claims.--
``(i) In general.--The receiver may disallow any portion of
any claim by a creditor or claim of security, preference, or
priority which is not proved to the satisfaction of the
receiver.
``(ii) Payments to less than fully secured creditors.--In
the case of a claim of a creditor against a regulated entity
which is secured by any property or other asset of such
regulated entity, the receiver--
``(I) may treat the portion of such claim which exceeds an
amount equal to the fair market value of such property or
other asset as an unsecured claim against the regulated
entity; and
``(II) may not make any payment with respect to such
unsecured portion of the claim other than in connection with
the disposition of all claims of unsecured creditors of the
regulated entity.
``(iii) Exceptions.--No provision of this paragraph shall
apply with respect to any extension of credit from any
Federal Reserve Bank, Federal home loan bank, or the Treasury
of the United States.
``(E) No judicial review of determination pursuant to
subparagraph (D).--No court may review the determination of
the Agency under subparagraph (D) to disallow a claim. This
subparagraph shall not effect the authority of a claimant to
obtain de novo judicial review of a claim pursuant to
paragraph (6).
``(F) Legal effect of filing.--
``(i) Statute of limitation tolled.--For purposes of any
applicable statute of limitations, the filing of a claim with
the receiver shall constitute a commencement of an action.
``(ii) No prejudice to other actions.--Subject to paragraph
(10), the filing of a claim with the receiver shall not
prejudice any right of the claimant to continue any action
which was filed before the date of the appointment of the
receiver, subject to the determination of claims by the
receiver.
``(6) Provision for judicial determination of claims.--
``(A) In general.--The claimant may file suit on a claim
(or continue an action commenced before the appointment of
the receiver) in the district or territorial court of the
United States for the district within which the principal
place of business of the regulated entity is located or the
United States District Court for the District of Columbia
(and such court shall have jurisdiction to hear such claim),
before the end of the 60-day period beginning on the earlier
of--
``(i) the end of the period described in paragraph
(5)(A)(i) with respect to any claim against a regulated
entity for which the Agency is receiver; or
``(ii) the date of any notice of disallowance of such claim
pursuant to paragraph (5)(A)(i).
``(B) Statute of limitations.--A claim shall be deemed to
be disallowed (other than any portion of such claim which was
allowed by the receiver), and such disallowance shall be
final, and the claimant shall have no further rights or
remedies with respect to such claim, if the claimant fails,
before the end of the 60-day period described under
subparagraph (A), to file suit on such claim (or continue an
action commenced before the appointment of the receiver).
``(7) Review of claims.--
``(A) Other review procedures.--
``(i) In general.--The Agency shall establish such
alternative dispute resolution processes as may be
appropriate for the resolution of claims filed under
paragraph (5)(A)(i).
``(ii) Criteria.--In establishing alternative dispute
resolution processes, the Agency shall strive for procedures
which are expeditious, fair, independent, and low cost.
``(iii) Voluntary binding or nonbinding procedures.--The
Agency may establish both binding and nonbinding processes,
which may be conducted by any government or private party.
All parties, including the claimant and the Agency, must
agree to the use of the process in a particular case.
``(B) Consideration of incentives.--The Agency shall seek
to develop incentives for claimants to participate in the
alternative dispute resolution process.
``(8) Expedited determination of claims.--
``(A) Establishment required.--The Agency shall establish a
procedure for expedited relief outside of the routine claims
process established under paragraph (5) for claimants who--
``(i) allege the existence of legally valid and enforceable
or perfected security interests in assets of any regulated
entity for which the Agency has been appointed receiver; and
``(ii) allege that irreparable injury will occur if the
routine claims procedure is followed.
``(B) Determination period.--Before the end of the 90-day
period beginning on the date any claim is filed in accordance
with the procedures established under subparagraph (A), the
Director shall--
``(i) determine--
``(I) whether to allow or disallow such claim; or
``(II) whether such claim should be determined pursuant to
the procedures established under paragraph (5); and
``(ii) notify the claimant of the determination, and if the
claim is disallowed, provide a statement of each reason for
the disallowance and the procedure for obtaining agency
review or judicial determination.
``(C) Period for filing or renewing suit.--Any claimant who
files a request for expedited relief shall be permitted to
file a suit, or to continue a suit filed before the
appointment of the receiver, seeking a determination of the
rights of the claimant with respect to such security interest
after the earlier of--
``(i) the end of the 90-day period beginning on the date of
the filing of a request for expedited relief; or
``(ii) the date the Agency denies the claim.
``(D) Statute of limitations.--If an action described under
subparagraph (C) is not filed, or the motion to renew a
previously filed suit is not made, before the end of the 30-
day period beginning on the date on which such action or
motion may be filed under subparagraph (B), the claim shall
be deemed to be disallowed as of the end of such period
(other than any portion of such claim which was allowed by
the receiver), such disallowance shall be final, and the
claimant shall have no further rights or remedies with
respect to such claim.
``(E) Legal effect of filing.--
``(i) Statute of limitation tolled.--For purposes of any
applicable statute of limitations, the filing of a claim with
the receiver shall constitute a commencement of an action.
``(ii) No prejudice to other actions.--Subject to paragraph
(10), the filing of a claim with the receiver shall not
prejudice any right of the claimant to continue any action
that was filed before the appointment of the receiver,
subject to the determination of claims by the receiver.
``(9) Payment of claims.--
``(A) In general.--The receiver may, in the discretion of
the receiver, and to the extent funds are available from the
assets of the regulated entity, pay creditor claims, in such
manner and amounts as are authorized under this section,
which are--
``(i) allowed by the receiver;
``(ii) approved by the Agency pursuant to a final
determination pursuant to paragraph (7) or (8); or
``(iii) determined by the final judgment of any court of
competent jurisdiction.
``(B) Agreements against the interest of the agency.--No
agreement that tends to diminish or defeat the interest of
the Agency in any asset acquired by the Agency as receiver
under this section shall be valid against the Agency unless
such agreement is in writing, and executed by an authorized
official of the regulated entity, except that such
requirements for qualified financial contracts shall be
applied in a manner consistent with reasonable business
trading practices in the financial contracts market.
``(C) Payment of dividends on claims.--The receiver may, in
the sole discretion of the receiver, pay from the assets of
the regulated entity dividends on proved claims at any time,
and no liability shall attach to the Agency, by reason of any
such payment, for failure to pay dividends to a claimant
whose claim is not proved at the time of any such payment.
``(D) Rulemaking authority of the director.--The Director
may prescribe such rules, including definitions of terms, as
the Director deems appropriate to establish a single uniform
interest rate for, or to make payments of post-insolvency
interest to creditors holding proven claims against the
receivership estates of regulated entities following
satisfaction by the receiver of the principal amount of all
creditor claims.
``(10) Suspension of legal actions.--
``(A) In general.--After the appointment of a conservator
or receiver for a regulated entity, the conservator or
receiver may, in any judicial action or proceeding to which
such regulated entity is or becomes a party, request a stay
for a period not to exceed--
``(i) 45 days, in the case of any conservator; and
``(ii) 90 days, in the case of any receiver.
``(B) Grant of stay by all courts required.--Upon receipt
of a request by any conservator or receiver under
subparagraph (A) for a stay of any judicial action or
proceeding in any court with jurisdiction of such action or
proceeding, the court shall grant such stay as to all
parties.
``(11) Additional rights and duties.--
``(A) Prior final adjudication.--The Agency shall abide by
any final unappealable judgment of any court of competent
jurisdiction which was rendered before the appointment of the
Agency as conservator or receiver.
``(B) Rights and remedies of conservator or receiver.--In
the event of any appealable judgment, the Agency as
conservator or receiver shall--
``(i) have all the rights and remedies available to the
regulated entity (before the appointment of such conservator
or receiver) and the Agency, including removal to Federal
court and all appellate rights; and
``(ii) not be required to post any bond in order to pursue
such remedies.
``(C) No attachment or execution.--No attachment or
execution may issue by any court upon assets in the
possession of the receiver.
``(D) Limitation on judicial review.--Except as otherwise
provided in this subsection, no court shall have jurisdiction
over--
``(i) any claim or action for payment from, or any action
seeking a determination of rights with respect to, the assets
of any regulated entity for which the Agency has been
appointed receiver; or
``(ii) any claim relating to any act or omission of such
regulated entity or the Agency as receiver.
[[Page H9159]]
``(E) Disposition of assets.--In exercising any right,
power, privilege, or authority as conservator or receiver in
connection with any sale or disposition of assets of a
regulated entity for which the Agency has been appointed
conservator or receiver, the Agency shall conduct its
operations in a manner which maintains stability in the
housing finance markets and, to the extent consistent with
that goal--
``(i) maximizes the net present value return from the sale
or disposition of such assets;
``(ii) minimizes the amount of any loss realized in the
resolution of cases; and
``(iii) ensures adequate competition and fair and
consistent treatment of offerors.
``(12) Statute of limitations for actions brought by
conservator or receiver.--
``(A) In general.--Notwithstanding any provision of any
contract, the applicable statute of limitations with regard
to any action brought by the Agency as conservator or
receiver shall be--
``(i) in the case of any contract claim, the longer of--
``(I) the 6-year period beginning on the date the claim
accrues; or
``(II) the period applicable under State law; and
``(ii) in the case of any tort claim, the longer of--
``(I) the 3-year period beginning on the date the claim
accrues; or
``(II) the period applicable under State law.
``(B) Determination of the date on which a claim accrues.--
For purposes of subparagraph (A), the date on which the
statute of limitations begins to run on any claim described
in such subparagraph shall be the later of--
``(i) the date of the appointment of the Agency as
conservator or receiver; or
``(ii) the date on which the cause of action accrues.
``(13) Revival of expired state causes of action.--
``(A) In general.--In the case of any tort claim described
under subparagraph (B) for which the statute of limitations
applicable under State law with respect to such claim has
expired not more than 5 years before the appointment of the
Agency as conservator or receiver, the Agency may bring an
action as conservator or receiver on such claim without
regard to the expiration of the statute of limitation
applicable under State law.
``(B) Claims described.--A tort claim referred to under
subparagraph (A) is a claim arising from fraud, intentional
misconduct resulting in unjust enrichment, or intentional
misconduct resulting in substantial loss to the regulated
entity.
``(14) Accounting and recordkeeping requirements.--
``(A) In general.--The Agency as conservator or receiver
shall, consistent with the accounting and reporting practices
and procedures established by the Agency, maintain a full
accounting of each conservatorship and receivership or other
disposition of a regulated entity in default.
``(B) Annual accounting or report.--With respect to each
conservatorship or receivership, the Agency shall make an
annual accounting or report available to the Board, the
Comptroller General of the United States, the Committee on
Banking, Housing, and Urban Affairs of the Senate, and the
Committee on Financial Services of the House of
Representatives.
``(C) Availability of reports.--Any report prepared under
subparagraph (B) shall be made available by the Agency upon
request to any shareholder of a regulated entity or any
member of the public.
``(D) Recordkeeping requirement.--After the end of the 6-
year period beginning on the date that the conservatorship or
receivership is terminated by the Director, the Agency may
destroy any records of such regulated entity which the
Agency, in the discretion of the Agency, determines to be
unnecessary unless directed not to do so by a court of
competent jurisdiction or governmental agency, or prohibited
by law.
``(15) Fraudulent transfers.--
``(A) In general.--The Agency, as conservator or receiver,
may avoid a transfer of any interest of a regulated entity-
affiliated party, or any person who the conservator or
receiver determines is a debtor of the regulated entity, in
property, or any obligation incurred by such party or person,
that was made within 5 years of the date on which the Agency
was appointed conservator or receiver, if such party or
person voluntarily or involuntarily made such transfer or
incurred such liability with the intent to hinder, delay, or
defraud the regulated entity, the Agency, the conservator, or
receiver.
``(B) Right of recovery.--To the extent a transfer is
avoided under subparagraph (A), the conservator or receiver
may recover, for the benefit of the regulated entity, the
property transferred, or, if a court so orders, the value of
such property (at the time of such transfer) from--
``(i) the initial transferee of such transfer or the
regulated entity-affiliated party or person for whose benefit
such transfer was made; or
``(ii) any immediate or mediate transferee of any such
initial transferee.
``(C) Rights of transferee or obligee.--The conservator or
receiver may not recover under subparagraph (B) from--
``(i) any transferee that takes for value, including
satisfaction or securing of a present or antecedent debt, in
good faith; or
``(ii) any immediate or mediate good faith transferee of
such transferee.
``(D) Rights under this paragraph.--The rights under this
paragraph of the conservator or receiver described under
subparagraph (A) shall be superior to any rights of a trustee
or any other party (other than any party which is a Federal
agency) under title 11, United States Code.
``(16) Attachment of assets and other injunctive relief.--
Subject to paragraph (17), any court of competent
jurisdiction may, at the request of the conservator or
receiver, issue an order in accordance with Rule 65 of the
Federal Rules of Civil Procedure, including an order placing
the assets of any person designated by the Agency or such
conservator under the control of the court, and appointing a
trustee to hold such assets.
``(17) Standards of proof.--Rule 65 of the Federal Rules of
Civil Procedure shall apply with respect to any proceeding
under paragraph (16) without regard to the requirement of
such rule that the applicant show that the injury, loss, or
damage is irreparable and immediate.
``(18) Treatment of claims arising from breach of contracts
executed by the receiver or conservator.--
``(A) In general.--Notwithstanding any other provision of
this subsection, any final and unappealable judgment for
monetary damages entered against a receiver or conservator
for the breach of an agreement executed or approved in
writing by such receiver or conservator after the date of its
appointment, shall be paid as an administrative expense of
the receiver or conservator.
``(B) No limitation of power.--Nothing in this paragraph
shall be construed to limit the power of a receiver or
conservator to exercise any rights under contract or law,
including to terminate, breach, cancel, or otherwise
discontinue such agreement.
``(19) General exceptions.--
``(A) Limitations.--The rights of a conservator or receiver
appointed under this section shall be subject to the
limitations on the powers of a receiver under sections 402
through 407 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (12 U.S.C. 4402 through 4407).
``(B) Mortgages held in trust.--
``(i) In general.--Any mortgage, pool of mortgages, or
interest in a pool of mortgages, held in trust, custodial, or
agency capacity by a regulated entity for the benefit of
persons other than the regulated entity shall not be
available to satisfy the claims of creditors generally.
``(ii) Holding of mortgages.--Any mortgage, pool of
mortgages, or interest in a pool of mortgages, described
under clause (i) shall be held by the conservator or receiver
appointed under this section for the beneficial owners of
such mortgage, pool of mortgages, or interest in a pool of
mortgages in accordance with the terms of the agreement
creating such trust, custodial, or other agency arrangement.
``(iii) Liability of receiver.--The liability of a receiver
appointed under this section for damages shall, in the case
of any contingent or unliquidated claim relating to the
mortgages held in trust, be estimated in accordance set forth
in the regulations of the Director.
``(c) Priority of Expenses and Unsecured Claims.--
``(1) In general.--Unsecured claims against a regulated
entity, or a receiver, that are proven to the satisfaction of
the receiver shall have priority in the following order:
``(A) Administrative expenses of the receiver.
``(B) Any other general or senior liability of the
regulated entity and claims of other Federal home loan banks
arising from their payment obligations (including joint and
several payment obligations).
``(C) Any obligation subordinated to general creditors.
``(D) Any obligation to shareholders or members arising as
a result of their status as shareholder or members.
``(2) Creditors similarly situated.--All creditors that are
similarly situated under paragraph (1) shall be treated in a
similar manner, except that the Agency may make such other
payments to creditors necessary to maximize the present value
return from the sale or disposition or such regulated
entity's assets or to minimize the amount of any loss
realized in the resolution of cases so long as all creditors
similarly situated receive not less than the amount provided
under subsection (e)(2).
``(3) Definition.--The term `administrative expenses of the
receiver' shall include the actual, necessary costs and
expenses incurred by the receiver in preserving the assets of
the regulated entity or liquidating or otherwise resolving
the affairs of the regulated entity. Such expenses shall
include obligations that are incurred by the receiver after
appointment as receiver that the Director determines are
necessary and appropriate to facilitate the smooth and
orderly liquidation or other resolution of the regulated
entity.
``(d) Provisions Relating to Contracts Entered Into Before
Appointment of Conservator or Receiver.--
``(1) Authority to repudiate contracts.--In addition to any
other rights a conservator or receiver may have, the
conservator or receiver for any regulated entity may
disaffirm or repudiate any contract or lease--
``(A) to which such regulated entity is a party;
``(B) the performance of which the conservator or receiver,
in its sole discretion, determines to be burdensome; and
``(C) the disaffirmance or repudiation of which the
conservator or receiver determines, in its sole discretion,
will promote the orderly administration of the affairs of the
regulated entity.
``(2) Timing of repudiation.--The conservator or receiver
shall determine whether or not to exercise the rights of
repudiation under this subsection within a reasonable period
following such appointment.
``(3) Claims for damages for repudiation.--
``(A) In general.--Except as otherwise provided under
subparagraph (C) and paragraphs (4), (5), and (6), the
liability of the conservator or receiver for the
disaffirmance or repudiation of any contract pursuant to
paragraph (1) shall be--
[[Page H9160]]
``(i) limited to actual direct compensatory damages; and
``(ii) determined as of--
``(I) the date of the appointment of the conservator or
receiver; or
``(II) in the case of any contract or agreement referred to
in paragraph (8), the date of the disaffirmance or
repudiation of such contract or agreement.
``(B) No liability for other damages.--For purposes of
subparagraph (A), the term `actual direct compensatory
damages' shall not include--
``(i) punitive or exemplary damages;
``(ii) damages for lost profits or opportunity; or
``(iii) damages for pain and suffering.
``(C) Measure of damages for repudiation of financial
contracts.--In the case of any qualified financial contract
or agreement to which paragraph (8) applies, compensatory
damages shall be--
``(i) deemed to include normal and reasonable costs of
cover or other reasonable measures of damages utilized in the
industries for such contract and agreement claims; and
``(ii) paid in accordance with this subsection and
subsection (e), except as otherwise specifically provided in
this section.
``(4) Leases under which the regulated entity is the
lessee.--
``(A) In general.--If the conservator or receiver
disaffirms or repudiates a lease under which the regulated
entity was the lessee, the conservator or receiver shall not
be liable for any damages (other than damages determined
under subparagraph (B)) for the disaffirmance or repudiation
of such lease.
``(B) Payments of rent.--Notwithstanding subparagraph (A),
the lessor under a lease to which that subparagraph applies
shall--
``(i) be entitled to the contractual rent accruing before
the later of the date--
``(I) the notice of disaffirmance or repudiation is mailed;
or
``(II) the disaffirmance or repudiation becomes effective,
unless the lessor is in default or breach of the terms of the
lease;
``(ii) have no claim for damages under any acceleration
clause or other penalty provision in the lease; and
``(iii) have a claim for any unpaid rent, subject to all
appropriate offsets and defenses, due as of the date of the
appointment, which shall be paid in accordance with this
subsection and subsection (e).
``(5) Leases under which the regulated entity is the
lessor.--
``(A) In general.--If the conservator or receiver
repudiates an unexpired written lease of real property of the
regulated entity under which the regulated entity is the
lessor and the lessee is not, as of the date of such
repudiation, in default, the lessee under such lease may
either--
``(i) treat the lease as terminated by such repudiation; or
``(ii) remain in possession of the leasehold interest for
the balance of the term of the lease, unless the lessee
defaults under the terms of the lease after the date of such
repudiation.
``(B) Provisions applicable to lessee remaining in
possession.--If any lessee under a lease described under
subparagraph (A) remains in possession of a leasehold
interest under clause (ii) of such subparagraph--
``(i) the lessee--
``(I) shall continue to pay the contractual rent pursuant
to the terms of the lease after the date of the repudiation
of such lease; and
``(II) may offset against any rent payment which accrues
after the date of the repudiation of the lease, and any
damages which accrue after such date due to the
nonperformance of any obligation of the regulated entity
under the lease after such date; and
``(ii) the conservator or receiver shall not be liable to
the lessee for any damages arising after such date as a
result of the repudiation other than the amount of any offset
allowed under clause (i)(II).
``(6) Contracts for the sale of real property.--
``(A) In general.--If the conservator or receiver
repudiates any contract for the sale of real property and the
purchaser of such real property under such contract is in
possession, and is not, as of the date of such repudiation,
in default, such purchaser may either--
``(i) treat the contract as terminated by such repudiation;
or
``(ii) remain in possession of such real property.
``(B) Provisions applicable to purchaser remaining in
possession.--If any purchaser of real property under any
contract described under subparagraph (A) remains in
possession of such property under clause (ii) of such
subparagraph--
``(i) the purchaser--
``(I) shall continue to make all payments due under the
contract after the date of the repudiation of the contract;
and
``(II) may offset against any such payments any damages
which accrue after such date due to the nonperformance (after
such date) of any obligation of the regulated entity under
the contract; and
``(ii) the conservator or receiver shall--
``(I) not be liable to the purchaser for any damages
arising after such date as a result of the repudiation other
than the amount of any offset allowed under clause (i)(II);
``(II) deliver title to the purchaser in accordance with
the provisions of the contract; and
``(III) have no obligation under the contract other than
the performance required under subclause (II).
``(C) Assignment and sale allowed.--
``(i) In general.--No provision of this paragraph shall be
construed as limiting the right of the conservator or
receiver to assign the contract described under subparagraph
(A), and sell the property subject to the contract and the
provisions of this paragraph.
``(ii) No liability after assignment and sale.--If an
assignment and sale described under clause (i) is
consummated, the conservator or receiver shall have no
further liability under the contract described under
subparagraph (A), or with respect to the real property which
was the subject of such contract.
``(7) Provisions applicable to service contracts.--
``(A) Services performed before appointment.--In the case
of any contract for services between any person and any
regulated entity for which the Agency has been appointed
conservator or receiver, any claim of such person for
services performed before the appointment of the conservator
or the receiver shall be--
``(i) a claim to be paid in accordance with subsections (b)
and (e); and
``(ii) deemed to have arisen as of the date the conservator
or receiver was appointed.
``(B) Services performed after appointment and prior to
repudiation.--If, in the case of any contract for services
described under subparagraph (A), the conservator or receiver
accepts performance by the other person before the
conservator or receiver makes any determination to exercise
the right of repudiation of such contract under this
section--
``(i) the other party shall be paid under the terms of the
contract for the services performed; and
``(ii) the amount of such payment shall be treated as an
administrative expense of the conservatorship or
receivership.
``(C) Acceptance of performance no bar to subsequent
repudiation.--The acceptance by any conservator or receiver
of services referred to under subparagraph (B) in connection
with a contract described in such subparagraph shall not
affect the right of the conservator or receiver to repudiate
such contract under this section at any time after such
performance.
``(8) Certain qualified financial contracts.--
``(A) Rights of parties to contracts.--Subject to
paragraphs (9) and (10) and notwithstanding any other
provision of this Act, any other Federal law, or the law of
any State, no person shall be stayed or prohibited from
exercising--
``(i) any right such person has to cause the termination,
liquidation, or acceleration of any qualified financial
contract with a regulated entity that arises upon the
appointment of the Agency as receiver for such regulated
entity at any time after such appointment;
``(ii) any right under any security agreement or
arrangement or other credit enhancement relating to one or
more qualified financial contracts described in clause (i);
or
``(iii) any right to offset or net out any termination
value, payment amount, or other transfer obligation arising
under or in connection with 1 or more contracts and
agreements described in clause (i), including any master
agreement for such contracts or agreements.
``(B) Applicability of other provisions.--Paragraph (10) of
subsection (b) shall apply in the case of any judicial action
or proceeding brought against any receiver referred to under
subparagraph (A), or the regulated entity for which such
receiver was appointed, by any party to a contract or
agreement described under subparagraph (A)(i) with such
regulated entity.
``(C) Certain transfers not avoidable.--
``(i) In general.--Notwithstanding paragraph (11) or any
other Federal or State laws relating to the avoidance of
preferential or fraudulent transfers, the Agency, whether
acting as such or as conservator or receiver of a regulated
entity, may not avoid any transfer of money or other property
in connection with any qualified financial contract with a
regulated entity.
``(ii) Exception for certain transfers.--Clause (i) shall
not apply to any transfer of money or other property in
connection with any qualified financial contract with a
regulated entity if the Agency determines that the transferee
had actual intent to hinder, delay, or defraud such regulated
entity, the creditors of such regulated entity, or any
conservator or receiver appointed for such regulated entity.
``(D) Certain contracts and agreements defined.--In this
subsection:
``(i) Qualified financial contract.--The term `qualified
financial contract' means any securities contract, commodity
contract, forward contract, repurchase agreement, swap
agreement, and any similar agreement that the Agency
determines by regulation, resolution, or order to be a
qualified financial contract for purposes of this paragraph.
``(ii) Securities contract.--The term `securities
contract'--
``(I) means a contract for the purchase, sale, or loan of a
security, a certificate of deposit, a mortgage loan, or any
interest in a mortgage loan, a group or index of securities,
certificates of deposit, or mortgage loans or interests
therein (including any interest therein or based on the value
thereof) or any option on any of the foregoing, including any
option to purchase or sell any such security, certificate of
deposit, mortgage loan, interest, group or index, or option,
and including any repurchase or reverse repurchase
transaction on any such security, certificate of deposit,
mortgage loan, interest, group or index, or option;
``(II) does not include any purchase, sale, or repurchase
obligation under a participation in a commercial mortgage
loan unless the Agency determines by regulation, resolution,
or order to include any such agreement within the meaning of
such term;
``(III) means any option entered into on a national
securities exchange relating to foreign currencies;
``(IV) means the guarantee by or to any securities clearing
agency of any settlement of cash,
[[Page H9161]]
securities, certificates of deposit, mortgage loans or
interests therein, group or index of securities, certificates
of deposit, or mortgage loans or interests therein (including
any interest therein or based on the value thereof) or option
on any of the foregoing, including any option to purchase or
sell any such security, certificate of deposit, mortgage
loan, interest, group or index, or option;
``(V) means any margin loan;
``(VI) means any other agreement or transaction that is
similar to any agreement or transaction referred to in this
clause;
``(VII) means any combination of the agreements or
transactions referred to in this clause;
``(VIII) means any option to enter into any agreement or
transaction referred to in this clause;
``(IX) means a master agreement that provides for an
agreement or transaction referred to in subclause (I), (III),
(IV), (V), (VI), (VII), or (VIII), together with all
supplements to any such master agreement, without regard to
whether the master agreement provides for an agreement or
transaction that is not a securities contract under this
clause, except that the master agreement shall be considered
to be a securities contract under this clause only with
respect to each agreement or transaction under the master
agreement that is referred to in subclause (I), (III), (IV),
(V), (VI), (VII), or (VIII); and
``(X) means any security agreement or arrangement or other
credit enhancement related to any agreement or transaction
referred to in this clause, including any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in this clause.
``(iii) Commodity contract.--The term `commodity contract'
means--
``(I) with respect to a futures commission merchant, a
contract for the purchase or sale of a commodity for future
delivery on, or subject to the rules of, a contract market or
board of trade;
``(II) with respect to a foreign futures commission
merchant, a foreign future;
``(III) with respect to a leverage transaction merchant, a
leverage transaction;
``(IV) with respect to a clearing organization, a contract
for the purchase or sale of a commodity for future delivery
on, or subject to the rules of, a contract market or board of
trade that is cleared by such clearing organization, or
commodity option traded on, or subject to the rules of, a
contract market or board of trade that is cleared by such
clearing organization;
``(V) with respect to a commodity options dealer, a
commodity option;
``(VI) any other agreement or transaction that is similar
to any agreement or transaction referred to in this clause;
``(VII) any combination of the agreements or transactions
referred to in this clause;
``(VIII) any option to enter into any agreement or
transaction referred to in this clause;
``(IX) a master agreement that provides for an agreement or
transaction referred to in subclause (I), (II), (III), (IV),
(V), (VI), (VII), or (VIII), together with all supplements to
any such master agreement, without regard to whether the
master agreement provides for an agreement or transaction
that is not a commodity contract under this clause, except
that the master agreement shall be considered to be a
commodity contract under this clause only with respect to
each agreement or transaction under the master agreement that
is referred to in subclause (I), (II), (III), (IV), (V),
(VI), (VII), or (VIII); or
``(X) any security agreement or arrangement or other credit
enhancement related to any agreement or transaction referred
to in this clause, including any guarantee or reimbursement
obligation in connection with any agreement or transaction
referred to in this clause.
``(iv) Forward contract.--The term `forward contract'
means--
``(I) a contract (other than a commodity contract) for the
purchase, sale, or transfer of a commodity or any similar
good, article, service, right, or interest which is presently
or in the future becomes the subject of dealing in the
forward contract trade, or product or byproduct thereof, with
a maturity date more than 2 days after the date the contract
is entered into, including, a repurchase transaction, reverse
repurchase transaction, consignment, lease, swap, hedge
transaction, deposit, loan, option, allocated transaction,
unallocated transaction, or any other similar agreement;
``(II) any combination of agreements or transactions
referred to in subclauses (I) and (III);
``(III) any option to enter into any agreement or
transaction referred to in subclause (I) or (II);
``(IV) a master agreement that provides for an agreement or
transaction referred to in subclauses (I), (II), or (III),
together with all supplements to any such master agreement,
without regard to whether the master agreement provides for
an agreement or transaction that is not a forward contract
under this clause, except that the master agreement shall be
considered to be a forward contract under this clause only
with respect to each agreement or transaction under the
master agreement that is referred to in subclause (I), (II),
or (III); or
``(V) any security agreement or arrangement or other credit
enhancement related to any agreement or transaction referred
to in subclause (I), (II), (III), or (IV), including any
guarantee or reimbursement obligation in connection with any
agreement or transaction referred to in any such subclause.
``(v) Repurchase agreement.--The term `repurchase
agreement' (which definition also applies to a reverse
repurchase agreement)--
``(I) means an agreement, including related terms, which
provides for the transfer of one or more certificates of
deposit, mortgage-related securities (as such term is defined
in the Securities Exchange Act of 1934), mortgage loans,
interests in mortgage-related securities or mortgage loans,
eligible bankers' acceptances, qualified foreign government
securities or securities that are direct obligations of, or
that are fully guaranteed by, the United States or any agency
of the United States against the transfer of funds by the
transferee of such certificates of deposit, eligible bankers'
acceptances, securities, mortgage loans, or interests with a
simultaneous agreement by such transferee to transfer to the
transferor thereof certificates of deposit, eligible bankers'
acceptances, securities, mortgage loans, or interests as
described above, at a date certain not later than 1 year
after such transfers or on demand, against the transfer of
funds, or any other similar agreement;
``(II) does not include any repurchase obligation under a
participation in a commercial mortgage loan unless the Agency
determines by regulation, resolution, or order to include any
such participation within the meaning of such term;
``(III) means any combination of agreements or transactions
referred to in subclauses (I) and (IV);
``(IV) means any option to enter into any agreement or
transaction referred to in subclause (I) or (III);
``(V) means a master agreement that provides for an
agreement or transaction referred to in subclause (I), (III),
or (IV), together with all supplements to any such master
agreement, without regard to whether the master agreement
provides for an agreement or transaction that is not a
repurchase agreement under this clause, except that the
master agreement shall be considered to be a repurchase
agreement under this subclause only with respect to each
agreement or transaction under the master agreement that is
referred to in subclause (I), (III), or (IV); and
``(VI) means any security agreement or arrangement or other
credit enhancement related to any agreement or transaction
referred to in subclause (I), (III), (IV), or (V), including
any guarantee or reimbursement obligation in connection with
any agreement or transaction referred to in any such
subclause.
For purposes of this clause, the term `qualified foreign
government security' means a security that is a direct
obligation of, or that is fully guaranteed by, the central
government of a member of the Organization for Economic
Cooperation and Development (as determined by regulation or
order adopted by the appropriate Federal banking authority).
``(vi) Swap agreement.--The term `swap agreement' means--
``(I) any agreement, including the terms and conditions
incorporated by reference in any such agreement, which is an
interest rate swap, option, future, or forward agreement,
including a rate floor, rate cap, rate collar, cross-currency
rate swap, and basis swap; a spot, same day-tomorrow,
tomorrow-next, forward, or other foreign exchange or precious
metals agreement; a currency swap, option, future, or forward
agreement; an equity index or equity swap, option, future, or
forward agreement; a debt index or debt swap, option, future,
or forward agreement; a total return, credit spread or credit
swap, option, future, or forward agreement; a commodity index
or commodity swap, option, future, or forward agreement; or a
weather swap, weather derivative, or weather option;
``(II) any agreement or transaction that is similar to any
other agreement or transaction referred to in this clause and
that is of a type that has been, is presently, or in the
future becomes, the subject of recurrent dealings in the swap
markets (including terms and conditions incorporated by
reference in such agreement) and that is a forward, swap,
future, or option on one or more rates, currencies,
commodities, equity securities or other equity instruments,
debt securities or other debt instruments, quantitative
measures associated with an occurrence, extent of an
occurrence, or contingency associated with a financial,
commercial, or economic consequence, or economic or financial
indices or measures of economic or financial risk or value;
``(III) any combination of agreements or transactions
referred to in this clause;
``(IV) any option to enter into any agreement or
transaction referred to in this clause;
``(V) a master agreement that provides for an agreement or
transaction referred to in subclause (I), (II), (III), or
(IV), together with all supplements to any such master
agreement, without regard to whether the master agreement
contains an agreement or transaction that is not a swap
agreement under this clause, except that the master agreement
shall be considered to be a swap agreement under this clause
only with respect to each agreement or transaction under the
master agreement that is referred to in subclause (I), (II),
(III), or (IV); and
``(VI) any security agreement or arrangement or other
credit enhancement related to any agreements or transactions
referred to in subclause (I), (II), (III), (IV), or (V),
including any guarantee or reimbursement obligation in
connection with any agreement or transaction referred to in
any such subclause.
Such term is applicable for purposes of this subsection only
and shall not be construed or applied so as to challenge or
affect the characterization, definition, or treatment of any
swap agreement under any other statute, regulation, or rule,
including the Securities Act of 1933, the Securities Exchange
Act of 1934, the Public Utility Holding Company Act of 1935,
the Trust Indenture Act of 1939, the Investment Company Act
of 1940, the Investment Advisers Act of 1940, the Securities
Investor Protection Act of 1970, the Commodity Exchange Act,
the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank
Products Act of 2000.
``(vii) Treatment of master agreement as one agreement.--
Any master agreement for any contract or agreement described
in any preceding clause of this subparagraph (or any master
agreement for such master agreement or agreements), together
with all supplements to such master agreement, shall be
treated as a single agreement and a single qualified
financial
[[Page H9162]]
contract. If a master agreement contains provisions relating
to agreements or transactions that are not themselves
qualified financial contracts, the master agreement shall be
deemed to be a qualified financial contract only with respect
to those transactions that are themselves qualified financial
contracts.
``(viii) Transfer.--The term `transfer' means every mode,
direct or indirect, absolute or conditional, voluntary or
involuntary, of disposing of or parting with property or with
an interest in property, including retention of title as a
security interest and foreclosure of the regulated entity's
equity of redemption.
``(E) Certain protections in event of appointment of
conservator.--Notwithstanding any other provision of this Act
(other than paragraph (13) of this subsection), any other
Federal law, or the law of any State, no person shall be
stayed or prohibited from exercising--
``(i) any right such person has to cause the termination,
liquidation, or acceleration of any qualified financial
contract with a regulated entity in a conservatorship based
upon a default under such financial contract which is
enforceable under applicable noninsolvency law;
``(ii) any right under any security agreement or
arrangement or other credit enhancement relating to one or
more such qualified financial contracts; or
``(iii) any right to offset or net out any termination
values, payment amounts, or other transfer obligations
arising under or in connection with such qualified financial
contracts.
``(F) Clarification.--No provision of law shall be
construed as limiting the right or power of the Agency, or
authorizing any court or agency to limit or delay, in any
manner, the right or power of the Agency to transfer any
qualified financial contract in accordance with paragraphs
(9) and (10) of this subsection or to disaffirm or repudiate
any such contract in accordance with subsection (d)(1) of
this section.
``(G) Walkaway clauses not effective.--
``(i) In general.--Notwithstanding the provisions of
subparagraphs (A) and (E), and sections 403 and 404 of the
Federal Deposit Insurance Corporation Improvement Act of
1991, no walkaway clause shall be enforceable in a qualified
financial contract of a regulated entity in default.
``(ii) Walkaway clause defined.--For purposes of this
subparagraph, the term `walkaway clause' means a provision in
a qualified financial contract that, after calculation of a
value of a party's position or an amount due to or from 1 of
the parties in accordance with its terms upon termination,
liquidation, or acceleration of the qualified financial
contract, either does not create a payment obligation of a
party or extinguishes a payment obligation of a party in
whole or in part solely because of such party's status as a
nondefaulting party.
``(9) Transfer of qualified financial contracts.--In making
any transfer of assets or liabilities of a regulated entity
in default which includes any qualified financial contract,
the conservator or receiver for such regulated entity shall
either--
``(A) transfer to 1 person--
``(i) all qualified financial contracts between any person
(or any affiliate of such person) and the regulated entity in
default;
``(ii) all claims of such person (or any affiliate of such
person) against such regulated entity under any such contract
(other than any claim which, under the terms of any such
contract, is subordinated to the claims of general unsecured
creditors of such regulated entity);
``(iii) all claims of such regulated entity against such
person (or any affiliate of such person) under any such
contract; and
``(iv) all property securing or any other credit
enhancement for any contract described in clause (i) or any
claim described in clause (ii) or (iii) under any such
contract; or
``(B) transfer none of the financial contracts, claims, or
property referred to under subparagraph (A) (with respect to
such person and any affiliate of such person).
``(10) Notification of transfer.--
``(A) In general.--If--
``(i) the conservator or receiver for a regulated entity in
default makes any transfer of the assets and liabilities of
such regulated entity, and
``(ii) the transfer includes any qualified financial
contract,
the conservator or receiver shall notify any person who is a
party to any such contract of such transfer by 5:00 p.m.
(eastern time) on the business day following the date of the
appointment of the receiver in the case of a receivership, or
the business day following such transfer in the case of a
conservatorship.
``(B) Certain rights not enforceable.--
``(i) Receivership.--A person who is a party to a qualified
financial contract with a regulated entity may not exercise
any right that such person has to terminate, liquidate, or
net such contract under paragraph (8)(A) of this subsection
or section 403 or 404 of the Federal Deposit Insurance
Corporation Improvement Act of 1991, solely by reason of or
incidental to the appointment of a receiver for the regulated
entity (or the insolvency or financial condition of the
regulated entity for which the receiver has been appointed)--
``(I) until 5:00 p.m. (eastern time) on the business day
following the date of the appointment of the receiver; or
``(II) after the person has received notice that the
contract has been transferred pursuant to paragraph (9)(A).
``(ii) Conservatorship.--A person who is a party to a
qualified financial contract with a regulated entity may not
exercise any right that such person has to terminate,
liquidate, or net such contract under paragraph (8)(E) of
this subsection or section 403 or 404 of the Federal Deposit
Insurance Corporation Improvement Act of 1991, solely by
reason of or incidental to the appointment of a conservator
for the regulated entity (or the insolvency or financial
condition of the regulated entity for which the conservator
has been appointed).
``(iii) Notice.--For purposes of this paragraph, the Agency
as receiver or conservator of a regulated entity shall be
deemed to have notified a person who is a party to a
qualified financial contract with such regulated entity if
the Agency has taken steps reasonably calculated to provide
notice to such person by the time specified in subparagraph
(A).
``(C) Business day defined.--For purposes of this
paragraph, the term `business day' means any day other than
any Saturday, Sunday, or any day on which either the New York
Stock Exchange or the Federal Reserve Bank of New York is
closed.
``(11) Disaffirmance or repudiation of qualified financial
contracts.--In exercising the rights of disaffirmance or
repudiation of a conservator or receiver with respect to any
qualified financial contract to which a regulated entity is a
party, the conservator or receiver for such institution shall
either--
``(A) disaffirm or repudiate all qualified financial
contracts between--
``(i) any person or any affiliate of such person; and
``(ii) the regulated entity in default; or
``(B) disaffirm or repudiate none of the qualified
financial contracts referred to in subparagraph (A) (with
respect to such person or any affiliate of such person).
``(12) Certain security interests not avoidable.--No
provision of this subsection shall be construed as permitting
the avoidance of any legally enforceable or perfected
security interest in any of the assets of any regulated
entity, except where such an interest is taken in
contemplation of the insolvency of the regulated entity, or
with the intent to hinder, delay, or defraud the regulated
entity or the creditors of such regulated entity.
``(13) Authority to enforce contracts.--
``(A) In general.--Notwithstanding any provision of a
contract providing for termination, default, acceleration, or
exercise of rights upon, or solely by reason of, insolvency
or the appointment of a conservator or receiver, the
conservator or receiver may enforce any contract or regulated
entity bond entered into by the regulated entity.
``(B) Certain rights not affected.--No provision of this
paragraph may be construed as impairing or affecting any
right of the conservator or receiver to enforce or recover
under a director's or officer's liability insurance contract
or surety bond under other applicable law.
``(C) Consent requirement.--
``(i) In general.--Except as otherwise provided under this
section, no person may exercise any right or power to
terminate, accelerate, or declare a default under any
contract to which a regulated entity is a party, or to obtain
possession of or exercise control over any property of the
regulated entity, or affect any contractual rights of the
regulated entity, without the consent of the conservator or
receiver, as appropriate, for a period of--
``(I) 45 days after the date of appointment of a
conservator; or
``(II) 90 days after the date of appointment of a receiver.
``(ii) Exceptions.--This paragraph shall--
``(I) not apply to a director's or officer's liability
insurance contract;
``(II) not apply to the rights of parties to any qualified
financial contracts under subsection (d)(8); and
``(III) not be construed as permitting the conservator or
receiver to fail to comply with otherwise enforceable
provisions of such contracts.
``(14) Savings clause.--The meanings of terms used in this
subsection are applicable for purposes of this subsection
only, and shall not be construed or applied so as to
challenge or affect the characterization, definition, or
treatment of any similar terms under any other statute,
regulation, or rule, including the Gramm-Leach-Bliley Act,
the Legal Certainty for Bank Products Act of 2000, the
securities laws (as that term is defined in section 3(a)(47)
of the Securities Exchange Act of 1934), and the Commodity
Exchange Act
``(15) Exception for federal reserve and federal home loan
banks.--No provision of this subsection shall apply with
respect to--
``(A) any extension of credit from any Federal home loan
bank or Federal Reserve Bank to any regulated entity; or
``(B) any security interest in the assets of the regulated
entity securing any such extension of credit.
``(e) Valuation of Claims in Default.--
``(1) In general.--Notwithstanding any other provision of
Federal law or the law of any State, and regardless of the
method which the Agency determines to utilize with respect to
a regulated entity in default or in danger of default,
including transactions authorized under subsection (i), this
subsection shall govern the rights of the creditors of such
regulated entity.
``(2) Maximum liability.--The maximum liability of the
Agency, acting as receiver or in any other capacity, to any
person having a claim against the receiver or the regulated
entity for which such receiver is appointed shall equal the
lesser of--
``(A) the amount such claimant would have received if the
Agency had liquidated the assets and liabilities of such
regulated entity without exercising the authority of the
Agency under subsection (i) of this section; or
``(B) the amount of proceeds realized from the performance
of contracts or sale of the assets of the regulated entity.
``(f) Limitation on Court Action.--Except as provided in
this section or at the request of the Director, no court may
take any action to restrain or affect the exercise of powers
or functions of the Agency as a conservator or a receiver.
[[Page H9163]]
``(g) Liability of Directors and Officers.--
``(1) In general.--A director or officer of a regulated
entity may be held personally liable for monetary damages in
any civil action by, on behalf of, or at the request or
direction of the Agency, which action is prosecuted wholly or
partially for the benefit of the Agency--
``(A) acting as conservator or receiver of such regulated
entity, or
``(B) acting based upon a suit, claim, or cause of action
purchased from, assigned by, or otherwise conveyed by such
receiver or conservator,
for gross negligence, including any similar conduct or
conduct that demonstrates a greater disregard of a duty of
care (than gross negligence) including intentional tortious
conduct, as such terms are defined and determined under
applicable State law.
``(2) No limitation.--Nothing in this paragraph shall
impair or affect any right of the Agency under other
applicable law.
``(h) Damages.--In any proceeding related to any claim
against a director, officer, employee, agent, attorney,
accountant, appraiser, or any other party employed by or
providing services to a regulated entity, recoverable damages
determined to result from the improvident or otherwise
improper use or investment of any assets of the regulated
entity shall include principal losses and appropriate
interest.
``(i) Limited-Life Regulated Entities.--
``(1) Organization.--
``(A) Purpose.--If a regulated entity is in default, or if
the Agency anticipates that a regulated entity will default,
the Agency may organize a limited-life regulated entity with
those powers and attributes of the regulated entity in
default or in danger of default that the Director determines
necessary, subject to the provisions of this subsection. The
Director shall grant a temporary charter to the limited-life
regulated entity, and the limited-life regulated entity shall
operate subject to that charter.
``(B) Authorities.--Upon the creation of a limited-life
regulated entity under subparagraph (A), the limited-life
regulated entity may--
``(i) assume such liabilities of the regulated entity that
is in default or in danger of default as the Agency may, in
its discretion, determine to be appropriate, provided that
the liabilities assumed shall not exceed the amount of assets
of the limited-life regulated entity;
``(ii) purchase such assets of the regulated entity that is
in default, or in danger of default, as the Agency may, in
its discretion, determine to be appropriate; and
``(iii) perform any other temporary function which the
Agency may, in its discretion, prescribe in accordance with
this section.
``(2) Charter.--
``(A) Conditions.--The Agency may grant a temporary charter
if the Agency determines that the continued operation of the
regulated entity in default or in danger of default is in the
best interest of the national economy and the housing
markets.
``(B) Treatment as being in default for certain purposes.--
A limited-life regulated entity shall be treated as a
regulated entity in default at such times and for such
purposes as the Agency may, in its discretion, determine.
``(C) Management.--A limited-life regulated entity, upon
the granting of its charter, shall be under the management of
a board of directors consisting of not fewer than 5 nor more
than 10 members appointed by the Agency.
``(D) Bylaws.--The board of directors of a limited-life
regulated entity shall adopt such bylaws as may be approved
by the Agency.
``(3) Capital stock.--No capital stock need be paid into a
limited-life regulated entity by the Agency.
``(4) Investments.--Funds of a limited-life regulated
entity shall be kept on hand in cash, invested in obligations
of the United States or obligations guaranteed as to
principal and interest by the United States, or deposited
with the Agency, or any Federal Reserve bank.
``(5) Exempt status.--Notwithstanding any other provision
of Federal or State law, the limited-life regulated entity,
its franchise, property, and income shall be exempt from all
taxation now or hereafter imposed by the United States, by
any territory, dependency, or possession thereof, or by any
State, county, municipality, or local taxing authority.
``(6) Winding up.--
``(A) In general.--Subject to subparagraph (B), unless
Congress authorizes the sale of the capital stock of the
limited-life regulated entity, not later than 2 years after
the date of its organization, the Agency shall wind up the
affairs of the limited-life regulated entity.
``(B) Extension.--The Director may, in the discretion of
the Director, extend the status of the limited-life regulated
entity for 3 additional 1-year periods.
``(7) Transfer of assets and liabilities.--
``(A) In general.--
``(i) Transfer of assets and liabilities.--The Agency, as
receiver, may transfer any assets and liabilities of a
regulated entity in default, or in danger of default, to the
limited-life regulated entity in accordance with paragraph
(1).
``(ii) Subsequent transfers.--At any time after a charter
is transferred to a limited-life regulated entity, the
Agency, as receiver, may transfer any assets and liabilities
of such regulated entity in default, or in danger in default,
as the Agency may, in its discretion, determine to be
appropriate in accordance with paragraph (1).
``(iii) Effective without approval.--The transfer of any
assets or liabilities of a regulated entity in default, or in
danger of default, transferred to a limited-life regulated
entity shall be effective without any further approval under
Federal or State law, assignment, or consent with respect
thereto.
``(8) Proceeds.--To the extent that available proceeds from
the limited-life regulated entity exceed amounts required to
pay obligations, such proceeds may be paid to the regulated
entity in default, or in danger of default.
``(9) Powers.--
``(A) In general.--Each limited-life regulated entity
created under this subsection shall have all corporate powers
of, and be subject to the same provisions of law as, the
regulated entity in default or in danger of default to which
it relates, except that--
``(i) the Agency may--
``(I) remove the directors of a limited-life regulated
entity; and
``(II) fix the compensation of members of the board of
directors and senior management, as determined by the Agency
in its discretion, of a limited-life regulated entity;
``(ii) the Agency may indemnify the representatives for
purposes of paragraph (1)(B), and the directors, officers,
employees, and agents of a limited-life regulated entity on
such terms as the Agency determines to be appropriate; and
``(iii) the board of directors of a limited-life regulated
entity--
``(I) shall elect a chairperson who may also serve in the
position of chief executive officer, except that such person
shall not serve either as chairperson or as chief executive
officer without the prior approval of the Agency; and
``(II) may appoint a chief executive officer who is not
also the chairperson, except that such person shall not serve
as chief executive officer without the prior approval of the
Agency.
``(B) Stay of judicial action.--Any judicial action to
which a limited-life regulated entity becomes a party by
virtue of its acquisition of any assets or assumption of any
liabilities of a regulated entity in default shall be stayed
from further proceedings for a period of up to 45 days at the
request of the limited-life regulated entity. Such period may
be modified upon the consent of all parties.
``(10) Obtaining of credit and incurring of debt.--
``(A) In general.--The limited-life regulated entity may
obtain unsecured credit and incur unsecured debt in the
ordinary course of business.
``(B) Inability to obtain credit.--If the limited-life
regulated entity is unable to obtain unsecured credit the
Director may authorize the obtaining of credit or the
incurring of debt--
``(i) with priority over any or all administrative
expenses;
``(ii) secured by a lien on property that is not otherwise
subject to a lien; or
``(iii) secured by a junior lien on property that is
subject to a lien.
``(C) Limitations.--
``(i) In general.--The Director, after notice and a
hearing, may authorize the obtaining of credit or the
incurring of debt secured by a senior or equal lien on
property that is subject to a lien (other than mortgages that
collateralize the mortgage-backed securities issued or
guaranteed by the regulated entity) only if--
``(I) the limited-life regulated entity is unable to obtain
such credit otherwise; and
``(II) there is adequate protection of the interest of the
holder of the lien on the property which such senior or equal
lien is proposed to be granted.
``(ii) Burden of proof.--In any hearing under this
subsection, the Director has the burden of proof on the issue
of adequate protection.
``(D) Affect on debts and liens.--The reversal or
modification on appeal of an authorization under this
paragraph to obtain credit or incur debt, or of a grant under
this section of a priority or a lien, does not affect the
validity of any debt so incurred, or any priority or lien so
granted, to an entity that extended such credit in good
faith, whether or not such entity knew of the pendency of the
appeal, unless such authorization and the incurring of such
debt, or the granting of such priority or lien, were stayed
pending appeal.
``(11) Issuance of preferred debt.--A limited-life
regulated entity may, subject to the approval of the Director
and subject to such terms and conditions as the Director may
prescribe, issue notes, bonds, or other debt obligations of a
class to which all other debt obligations of the limited-life
regulated entity shall be subordinate in right and payment.
``(12) No federal status.--
``(A) Agency status.--A limited-life regulated entity is
not an agency, establishment, or instrumentality of the
United States.
``(B) Employee status.--Representatives for purposes of
paragraph (1)(B), interim directors, directors, officers,
employees, or agents of a limited-life regulated entity are
not, solely by virtue of service in any such capacity,
officers or employees of the United States. Any employee of
the Agency or of any Federal instrumentality who serves at
the request of the Agency as a representative for purposes of
paragraph (1)(B), interim director, director, officer,
employee, or agent of a limited-life regulated entity shall
not--
``(i) solely by virtue of service in any such capacity lose
any existing status as an officer or employee of the United
States for purposes of title 5, United States Code, or any
other provision of law; or
``(ii) receive any salary or benefits for service in any
such capacity with respect to a limited-life regulated entity
in addition to such salary or benefits as are obtained
through employment with the Agency or such Federal
instrumentality.
``(13) Additional powers.--In addition to any other powers
granted under this subsection, a limited-life regulated
entity may--
``(A) extend a maturity date or change in an interest rate
or other term of outstanding securities;
``(B) issue securities of the limited-life regulated
entity, for cash, for property, for existing securities, or
in exchange for claims or interests, or for any other
appropriate purposes; and
[[Page H9164]]
``(C) take any other action not inconsistent with this
section.
``(j) Other Exemptions.--When acting as a receiver, the
following provisions shall apply with respect to the Agency:
``(1) Exemption from taxation.--The Agency, including its
franchise, its capital, reserves, and surplus, and its
income, shall be exempt from all taxation imposed by any
State, country, municipality, or local taxing authority,
except that any real property of the Agency shall be subject
to State, territorial, county, municipal, or local taxation
to the same extent according to its value as other real
property is taxed, except that, notwithstanding the failure
of any person to challenge an assessment under State law of
the value of such property, and the tax thereon, shall be
determined as of the period for which such tax is imposed.
``(2) Exemption from attachment and liens.--No property of
the Agency shall be subject to levy, attachment, garnishment,
foreclosure, or sale without the consent of the Agency, nor
shall any involuntary lien attach to the property of the
Agency.
``(3) Exemption from penalties and fines.--The Agency shall
not be liable for any amounts in the nature of penalties or
fines, including those arising from the failure of any person
to pay any real property, personal property, probate, or
recording tax or any recording or filing fees when due.
``(k) Prohibition of Charter Revocation.--In no case may a
receiver appointed pursuant to this section revoke, annul, or
terminate the charter of a regulated entity.''.
(b) Conforming Amendments.--Subtitle B of title XIII of the
Housing and Community Development Act of 1992 is amended by
striking sections 1369 (12 U.S.C. 4619), 1369A (12 U.S.C.
4620), and 1369B (12 U.S.C. 4621).
SEC. 145. CONFORMING AMENDMENTS.
Title XIII of the Housing and Community Development Act of
1992, as amended by the preceding provisions of this Act, is
further amended--
(1) in sections 1365 (12 U.S.C. 4615) through 1369D (12
U.S.C. 4623), but not including section 1367 (12 U.S.C. 4617)
as added by section 144 of this Act--
(A) by striking ``An enterprise'' each place such term
appears and inserting ``A regulated entity'';
(B) by striking ``an enterprise'' each place such term
appears and inserting ``a regulated entity''; and
(C) by striking ``the enterprise'' each place such term
appears and inserting ``the regulated entity'';
(2) in section 1366 (12 U.S.C. 4616)--
(A) in subsection (b)(7), by striking ``section 1369
(excluding subsection (a)(1) and (2))'' and inserting
``section 1367''; and
(B) in subsection (d), by striking ``the enterprises'' and
inserting ``the regulated entities'';
(3) in section 1368(d) (12 U.S.C. 4618(d)), by striking
``Committee on Banking, Finance and Urban Affairs'' and
inserting ``Committee on Financial Services'';
(4) in section 1369C(c) (12 U.S.C. 4622(c)), by striking
``any enterprise'' and inserting ``any regulated entity'';
and
(5) in subsections (a) and (d) of section 1369D, by
striking ``section 1366 or 1367 or action under section
1369)'' each place such phrase appears and inserting
``section 1367)''.
Subtitle D--Enforcement Actions
SEC. 161. CEASE-AND-DESIST PROCEEDINGS.
Section 1371 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4631) is amended--
(1) by striking subsections (a) and (b) and inserting the
following new subsections:
``(a) Issuance for Unsafe or Unsound Practices and
Violations of Rules or Laws.--If, in the opinion of the
Director, a regulated entity or any regulated entity-
affiliated party is engaging or has engaged, or the Director
has reasonable cause to believe that the regulated entity or
any regulated entity-affiliated party is about to engage, in
an unsafe or unsound practice in conducting the business of
the regulated entity or is violating or has violated, or the
Director has reasonable cause to believe that the regulated
entity or any regulated entity-affiliated party is about to
violate, a law, rule, or regulation, or any condition imposed
in writing by the Director in connection with the granting of
any application or other request by the regulated entity or
any written agreement entered into with the Director, the
Director may issue and serve upon the regulated entity or
such party a notice of charges in respect thereof. The
Director may not, pursuant to this section, enforce
compliance with any housing goal established under subpart B
of part 2 of subtitle A of this title, with section 1336 or
1337 of this title, with subsection (m) or (n) of section 309
of the Federal National Mortgage Association Charter Act (12
U.S.C. 1723a(m), (n)), with subsection (e) or (f) of section
307 of the Federal Home Loan Mortgage Corporation Act (12
U.S.C. 1456(e), (f)), or with paragraph (5) of section 10(j)
of the Federal Home Loan Bank Act (12 U.S.C. 1430(j)).
``(b) Issuance for Unsatisfactory Rating.--If a regulated
entity receives, in its most recent report of examination, a
less-than-satisfactory rating for asset quality, management,
earnings, or liquidity, the Director may (if the deficiency
is not corrected) deem the regulated entity to be engaging in
an unsafe or unsound practice for purposes of this
subsection.'';
(2) in subsection (c)(2), by striking ``enterprise,
executive officer, or director'' and inserting ``regulated
entity or regulated entity-affiliated party''; and
(3) in subsection (d)--
(A) in the matter preceding paragraph (1), by striking
``enterprise, executive officer, or director'' and inserting
``regulated entity or regulated entity-affiliated party'';
(B) in paragraph (1)--
(i) by striking ``an executive officer or director'' and
inserting ``a regulated entity affiliated party''; and
(ii) by inserting ``(including reimbursement of
compensation under section 1318)'' after ``reimbursement'';
(C) in paragraph (6), by striking ``and'' at the end;
(D) by redesignating paragraph (7) as paragraph (8); and
(E) by inserting after paragraph (6) the following new
paragraph:
``(7) to effect an attachment on a regulated entity or
regulated entity-affiliated party subject to an order under
this section or section 1372; and''.
SEC. 162. TEMPORARY CEASE-AND-DESIST PROCEEDINGS.
Section 1372 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4632) is amended--
(1) by striking subsection (a) and inserting the following
new subsection:
``(a) Grounds for Issuance.--Whenever the Director
determines that the violation or threatened violation or the
unsafe or unsound practice or practices specified in the
notice of charges served upon the regulated entity or any
regulated entity-affiliated party pursuant to section
1371(a), or the continuation thereof, is likely to cause
insolvency or significant dissipation of assets or earnings
of the regulated entity, or is likely to weaken the condition
of the regulated entity prior to the completion of the
proceedings conducted pursuant to sections 1371 and 1373, the
Director may issue a temporary order requiring the regulated
entity or such party to cease and desist from any such
violation or practice and to take affirmative action to
prevent or remedy such insolvency, dissipation, condition, or
prejudice pending completion of such proceedings. Such order
may include any requirement authorized under section
1371(d).'';
(2) in subsection (b), by striking ``enterprise, executive
officer, or director'' and inserting ``regulated entity or
regulated entity-affiliated party'';
(3) in subsection (d)--
(A) by striking ``An enterprise, executive officer, or
director'' and inserting ``A regulated entity or regulated
entity-affiliated party''; and
(B) by striking ``the enterprise, executive officer, or
director'' and inserting ``the regulated entity or regulated
entity-affiliated party''; and
(4) by striking subsection (e) and in inserting the
following new subsection:
``(e) Enforcement.--In the case of violation or threatened
violation of, or failure to obey, a temporary cease-and-
desist order issued pursuant to this section, the Director
may apply to the United States District Court for the
District of Columbia or the United States district court
within the jurisdiction of which the headquarters of the
regulated entity is located, for an injunction to enforce
such order, and, if the court determines that there has been
such violation or threatened violation or failure to obey, it
shall be the duty of the court to issue such injunction.''.
SEC. 163. PREJUDGMENT ATTACHMENT.
The Housing and Community Development Act of 1992 is
amended by inserting after section 1375 (12 U.S.C. 4635) the
following new section:
``SEC. 1375A. PREJUDGMENT ATTACHMENT.
``(a) In General.--In any action brought pursuant to this
title, or in actions brought in aid of, or to enforce an
order in, any administrative or other civil action for money
damages, restitution, or civil money penalties brought
pursuant to this title, the court may, upon application of
the Director or Attorney General, as applicable, issue a
restraining order that--
``(1) prohibits any person subject to the proceeding from
withdrawing, transferring, removing, dissipating, or
disposing of any funds, assets or other property; and
``(2) appoints a person on a temporary basis to administer
the restraining order.
``(b) Standard.--
``(1) Showing.--Rule 65 of the Federal Rules of Civil
Procedure shall apply with respect to any proceeding under
subsection (a) without regard to the requirement of such rule
that the applicant show that the injury, loss, or damage is
irreparable and immediate.
``(2) State proceeding.--If, in the case of any proceeding
in a State court, the court determines that rules of civil
procedure available under the laws of such State provide
substantially similar protections to a party's right to due
process as Rule 65 (as modified with respect to such
proceeding by paragraph (1)), the relief sought under
subsection (a) may be requested under the laws of such
State.''.
SEC. 164. ENFORCEMENT AND JURISDICTION.
Section 1375 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4635) is amended--
(1) by striking subsection (a) and inserting the following
new subsection:
``(a) Enforcement.--The Director may, in the discretion of
the Director, apply to the United States District Court for
the District of Columbia, or the United States district court
within the jurisdiction of which the headquarters of the
regulated entity is located, for the enforcement of any
effective and outstanding notice or order issued under this
subtitle or subtitle B, or request that the Attorney General
of the United States bring such an action. Such court shall
have jurisdiction and power to order and require compliance
with such notice or order.''; and
(2) in subsection (b), by striking ``or 1376'' and
inserting ``1376, or 1377''.
SEC. 165. CIVIL MONEY PENALTIES.
Section 1376 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4636) is amended--
(1) in subsection (a)--
[[Page H9165]]
(A) in the matter preceding paragraph (1), by striking ``or
any executive officer or'' and inserting ``any executive
officer of a regulated entity, any regulated entity-
affiliated party, or any''; and
(B) in paragraph (1)--
(i) by striking ``the Federal National Mortgage Association
Charter Act, the Federal Home Loan Mortgage Corporation Act''
and inserting ``any provision of any of the authorizing
statutes'';
(ii) by striking ``or Act'' and inserting ``or statute'';
(iii) by striking ``or subsection'' and inserting ``,
subsection''; and
(iv) by inserting ``, or paragraph (5) or (12) of section
10(j) of the Federal Home Loan Bank Act'' before the
semicolon at the end;
(2) by striking subsection (b) and inserting the following
new subsection:
``(b) Amount of Penalty.--
``(1) First tier.--Any regulated entity which, or any
regulated entity-affiliated party who--
``(A) violates any provision of this title, any provision
of any of the authorizing statutes, or any order, condition,
rule, or regulation under any such title or statute, except
that the Director may not, pursuant to this section, enforce
compliance with any housing goal established under subpart B
of part 2 of subtitle A of this title, with section 1336 or
1337 of this title, with subsection (m) or (n) of section 309
of the Federal National Mortgage Association Charter Act (12
U.S.C. 1723a(m), (n)), with subsection (e) or (f) of section
307 of the Federal Home Loan Mortgage Corporation Act (12
U.S.C. 1456(e), (f)), or with paragraph (5) or (12) of
section 10(j) of the Federal Home Loan Bank Act;
``(B) violates any final or temporary order or notice
issued pursuant to this title;
``(C) violates any condition imposed in writing by the
Director in connection with the grant of any application or
other request by such regulated entity;
``(D) violates any written agreement between the regulated
entity and the Director; or
``(E) engages in any conduct the Director determines to be
an unsafe or unsound practice, shall forfeit and pay a civil
penalty of not more than $10,000 for each day during which
such violation continues.
``(2) Second tier.--Notwithstanding paragraph (1)--
``(A) if a regulated entity, or a regulated entity-
affiliated party--
``(i) commits any violation described in any subparagraph
of paragraph (1);
``(ii) recklessly engages in an unsafe or unsound practice
in conducting the affairs of such regulated entity; or
``(iii) breaches any fiduciary duty; and
``(B) the violation, practice, or breach--
``(i) is part of a pattern of misconduct;
``(ii) causes or is likely to cause more than a minimal
loss to such regulated entity; or
``(iii) results in pecuniary gain or other benefit to such
party, the regulated entity or regulated entity-affiliated
party shall forfeit and pay a civil penalty of not more than
$50,000 for each day during which such violation, practice,
or breach continues.
``(3) Third tier.--Notwithstanding paragraphs (1) and (2),
any regulated entity which, or any regulated entity-
affiliated party who--
``(A) knowingly--
``(i) commits any violation or engages in any conduct
described in any subparagraph of paragraph (1);
``(ii) engages in any unsafe or unsound practice in
conducting the affairs of such regulated entity; or
``(iii) breaches any fiduciary duty; and
``(B) knowingly or recklessly causes a substantial loss to
such regulated entity or a substantial pecuniary gain or
other benefit to such party by reason of such violation,
practice, or breach, shall forfeit and pay a civil penalty in
an amount not to exceed the applicable maximum amount
determined under paragraph (4) for each day during which such
violation, practice, or breach continues.
``(4) Maximum amounts of penalties for any violation
described in paragraph (3).--The maximum daily amount of any
civil penalty which may be assessed pursuant to paragraph (3)
for any violation, practice, or breach described in such
paragraph is--
``(A) in the case of any person other than a regulated
entity, an amount not to exceed $2,000,000; and
``(B) in the case of any regulated entity, $2,000,000.'';
(3) in subsection (c)(1)(B), by striking ``enterprise,
executive officer, or director'' and inserting ``regulated
entity or regulated entity-affiliated party'';
(4) in subsection (d), by striking the first sentence and
inserting the following: ``If a regulated entity or regulated
entity-affiliated party fails to comply with an order of the
Director imposing a civil money penalty under this section,
after the order is no longer subject to review as provided
under subsection (c)(1) and section 1374, the Director may,
in the discretion of the Director, bring an action in the
United States District Court for the District of Columbia, or
the United States district court within the jurisdiction of
which the headquarters of the regulated entity is located, to
obtain a monetary judgment against the regulated entity or
regulated entity affiliated party and such other relief as
may be available, or request that the Attorney General of the
United States bring such an action.''; and
(5) in subsection (g), by striking ``subsection (b)(3)''
and inserting ``this section, unless authorized by the
Director by rule, regulation, or order''.
SEC. 166. REMOVAL AND PROHIBITION AUTHORITY.
(a) In General.--Subtitle C of title XIII of the Housing
and Community Development Act of 1992 is amended--
(1) by redesignating sections 1377, 1378, 1379, 1379A, and
1379B (12 U.S.C. 4637-41) as sections 1379, 1379A, 1379B,
1379C, and 1379D, respectively; and
(2) by inserting after section 1376 (12 U.S.C. 4636) the
following new section:
``SEC. 1377. REMOVAL AND PROHIBITION AUTHORITY.
``(a) Authority to Issue Order.--Whenever the Director
determines that--
``(1) any regulated entity-affiliated party has, directly
or indirectly--
``(A) violated--
``(i) any law or regulation;
``(ii) any cease-and-desist order which has become final;
``(iii) any condition imposed in writing by the Director in
connection with the grant of any application or other request
by such regulated entity; or
``(iv) any written agreement between such regulated entity
and the Director;
``(B) engaged or participated in any unsafe or unsound
practice in connection with any regulated entity; or
``(C) committed or engaged in any act, omission, or
practice which constitutes a breach of such party's fiduciary
duty;
``(2) by reason of the violation, practice, or breach
described in any subparagraph of paragraph (1)--
``(A) such regulated entity has suffered or will probably
suffer financial loss or other damage; or
``(B) such party has received financial gain or other
benefit by reason of such violation, practice, or breach; and
``(3) such violation, practice, or breach--
``(A) involves personal dishonesty on the part of such
party; or
``(B) demonstrates willful or continuing disregard by such
party for the safety or soundness of such regulated entity,
the Director may serve upon such party a written notice of
the Director's intention to remove such party from office or
to prohibit any further participation by such party, in any
manner, in the conduct of the affairs of any regulated
entity.
``(b) Suspension Order.--
``(1) Suspension or prohibition authority.--If the Director
serves written notice under subsection (a) to any regulated
entity-affiliated party of the Director's intention to issue
an order under such subsection, the Director may--
``(A) suspend such party from office or prohibit such party
from further participation in any manner in the conduct of
the affairs of the regulated entity, if the Director--
``(i) determines that such action is necessary for the
protection of the regulated entity; and
``(ii) serves such party with written notice of the
suspension order; and
``(B) prohibit the regulated entity from releasing to or on
behalf of the regulated entity-affiliated party any
compensation or other payment of money or other thing of
current or potential value in connection with any
resignation, removal, retirement, or other termination of
employment or office of the party.
``(2) Effective period.--Any suspension order issued under
this subsection--
``(A) shall become effective upon service; and
``(B) unless a court issues a stay of such order under
subsection (g) of this section, shall remain in effect and
enforceable until--
``(i) the date the Director dismisses the charges contained
in the notice served under subsection (a) with respect to
such party; or
``(ii) the effective date of an order issued by the
Director to such party under subsection (a).
``(3) Copy of order.--If the Director issues a suspension
order under this subsection to any regulated entity-
affiliated party, the Director shall serve a copy of such
order on any regulated entity with which such party is
affiliated at the time such order is issued.
``(c) Notice, Hearing, and Order.--A notice of intention to
remove a regulated entity-affiliated party from office or to
prohibit such party from participating in the conduct of the
affairs of a regulated entity shall contain a statement of
the facts constituting grounds for such action, and shall fix
a time and place at which a hearing will be held on such
action. Such hearing shall be fixed for a date not earlier
than 30 days nor later than 60 days after the date of service
of such notice, unless an earlier or a later date is set by
the Director at the request of (1) such party, and for good
cause shown, or (2) the Attorney General of the United
States. Unless such party shall appear at the hearing in
person or by a duly authorized representative, such party
shall be deemed to have consented to the issuance of an order
of such removal or prohibition. In the event of such consent,
or if upon the record made at any such hearing the Director
shall find that any of the grounds specified in such notice
have been established, the Director may issue such orders of
suspension or removal from office, or prohibition from
participation in the conduct of the affairs of the regulated
entity, as it may deem appropriate, together with an order
prohibiting compensation described in subsection (b)(1)(B).
Any such order shall become effective at the expiration of 30
days after service upon such regulated entity and such party
(except in the case of an order issued upon consent, which
shall become effective at the time specified therein). Such
order shall remain effective and enforceable except to such
extent as it is stayed, modified, terminated, or set aside by
action of the Director or a reviewing court.
``(d) Prohibition of Certain Specific Activities.--Any
person subject to an order issued under this section shall
not--
``(1) participate in any manner in the conduct of the
affairs of any regulated entity;
``(2) solicit, procure, transfer, attempt to transfer,
vote, or attempt to vote any proxy,
[[Page H9166]]
consent, or authorization with respect to any voting rights
in any regulated entity;
``(3) violate any voting agreement previously approved by
the Director; or
``(4) vote for a director, or serve or act as a regulated
entity-affiliated party.
``(e) Industry-Wide Prohibition.--
``(1) In general.--Except as provided in paragraph (2), any
person who, pursuant to an order issued under this section,
has been removed or suspended from office in a regulated
entity or prohibited from participating in the conduct of the
affairs of a regulated entity may not, while such order is in
effect, continue or commence to hold any office in, or
participate in any manner in the conduct of the affairs of,
any regulated entity.
``(2) Exception if director provides written consent.--If,
on or after the date an order is issued under this section
which removes or suspends from office any regulated entity-
affiliated party or prohibits such party from participating
in the conduct of the affairs of a regulated entity, such
party receives the written consent of the Director, the order
shall, to the extent of such consent, cease to apply to such
party with respect to the regulated entity described in the
written consent. If the Director grants such a written
consent, it shall publicly disclose such consent.
``(3) Violation of paragraph (1) treated as violation of
order.--Any violation of paragraph (1) by any person who is
subject to an order described in such subsection shall be
treated as a violation of the order.
``(f) Applicability.--This section shall only apply to a
person who is an individual, unless the Director specifically
finds that it should apply to a corporation, firm, or other
business enterprise.
``(g) Stay of Suspension and Prohibition of Regulated
Entity-Affiliated Party.--Within 10 days after any regulated
entity-affiliated party has been suspended from office and/or
prohibited from participation in the conduct of the affairs
of a regulated entity under this section, such party may
apply to the United States District Court for the District of
Columbia, or the United States district court for the
judicial district in which the headquarters of the regulated
entity is located, for a stay of such suspension and/or
prohibition and any prohibition under subsection (b)(1)(B)
pending the completion of the administrative proceedings
pursuant to the notice served upon such party under this
section, and such court shall have jurisdiction to stay such
suspension and/or prohibition.
``(h) Suspension or Removal of Regulated Entity-Affiliated
Party Charged With Felony.--
``(1) Suspension or prohibition.--
``(A) In general.--Whenever any regulated entity-affiliated
party is charged in any information, indictment, or
complaint, with the commission of or participation in a crime
involving dishonesty or breach of trust which is punishable
by imprisonment for a term exceeding one year under State or
Federal law, the Director may, if continued service or
participation by such party may pose a threat to the
regulated entity or impair public confidence in the regulated
entity, by written notice served upon such party--
``(i) suspend such party from office or prohibit such party
from further participation in any manner in the conduct of
the affairs of any regulated entity; and
``(ii) prohibit the regulated entity from releasing to or
on behalf of the regulated entity-affiliated party any
compensation or other payment of money or other thing of
current or potential value in connection with the period of
any such suspension or with any resignation, removal,
retirement, or other termination of employment or office of
the party.
``(B) Provisions applicable to notice.--
``(i) Copy.--A copy of any notice under paragraph (1)(A)
shall also be served upon the regulated entity.
``(ii) Effective period.--A suspension or prohibition under
subparagraph (A) shall remain in effect until the
information, indictment, or complaint referred to in such
subparagraph is finally disposed of or until terminated by
the Director.
``(2) Removal or prohibition.--
``(A) In general.--If a judgment of conviction or an
agreement to enter a pretrial diversion or other similar
program is entered against a regulated entity-affiliated
party in connection with a crime described in paragraph
(1)(A), at such time as such judgment is not subject to
further appellate review, the Director may, if continued
service or participation by such party may pose a threat to
the regulated entity or impair public confidence in the
regulated entity, issue and serve upon such party an order
that--
``(i) removes such party from office or prohibits such
party from further participation in any manner in the conduct
of the affairs of the regulated entity without the prior
written consent of the Director; and
``(ii) prohibits the regulated entity from releasing to or
on behalf of the regulated entity-affiliated party any
compensation or other payment of money or other thing of
current or potential value in connection with the termination
of employment or office of the party.
``(B) Provisions applicable to order.--
``(i) Copy.--A copy of any order under paragraph (2)(A)
shall also be served upon the regulated entity, whereupon the
regulated entity-affiliated party who is subject to the order
(if a director or an officer) shall cease to be a director or
officer of such regulated entity.
``(ii) Effect of acquittal.--A finding of not guilty or
other disposition of the charge shall not preclude the
Director from instituting proceedings after such finding or
disposition to remove such party from office or to prohibit
further participation in regulated entity affairs, and to
prohibit compensation or other payment of money or other
thing of current or potential value in connection with any
resignation, removal, retirement, or other termination of
employment or office of the party, pursuant to subsections
(a), (d), or (e) of this section.
``(iii) Effective period.--Any notice of suspension or
order of removal issued under this subsection shall remain
effective and outstanding until the completion of any hearing
or appeal authorized under paragraph (4) unless terminated by
the Director.
``(3) Authority of remaining board members.--If at any
time, because of the suspension of one or more directors
pursuant to this section, there shall be on the board of
directors of a regulated entity less than a quorum of
directors not so suspended, all powers and functions vested
in or exercisable by such board shall vest in and be
exercisable by the director or directors on the board not so
suspended, until such time as there shall be a quorum of the
board of directors. In the event all of the directors of a
regulated entity are suspended pursuant to this section, the
Director shall appoint persons to serve temporarily as
directors in their place and stead pending the termination of
such suspensions, or until such time as those who have been
suspended cease to be directors of the regulated entity and
their respective successors take office.
``(4) Hearing regarding continued participation.--Within 30
days from service of any notice of suspension or order of
removal issued pursuant to paragraph (1) or (2) of this
subsection, the regulated entity-affiliated party concerned
may request in writing an opportunity to appear before the
Director to show that the continued service to or
participation in the conduct of the affairs of the regulated
entity by such party does not, or is not likely to, pose a
threat to the interests of the regulated entity or threaten
to impair public confidence in the regulated entity. Upon
receipt of any such request, the Director shall fix a time
(not more than 30 days after receipt of such request, unless
extended at the request of such party) and place at which
such party may appear, personally or through counsel, before
one or more members of the Director or designated employees
of the Director to submit written materials (or, at the
discretion of the Director, oral testimony) and oral
argument. Within 60 days of such hearing, the Director shall
notify such party whether the suspension or prohibition from
participation in any manner in the conduct of the affairs of
the regulated entity will be continued, terminated, or
otherwise modified, or whether the order removing such party
from office or prohibiting such party from further
participation in any manner in the conduct of the affairs of
the regulated entity, and prohibiting compensation in
connection with termination will be rescinded or otherwise
modified. Such notification shall contain a statement of the
basis for the Director's decision, if adverse to such party.
The Director is authorized to prescribe such rules as may be
necessary to effectuate the purposes of this subsection.
``(i) Hearings and Judicial Review.--
``(1) Venue and procedure.--Any hearing provided for in
this section shall be held in the District of Columbia or in
the Federal judicial district in which the headquarters of
the regulated entity is located, unless the party afforded
the hearing consents to another place, and shall be conducted
in accordance with the provisions of chapter 5 of title 5,
United States Code. After such hearing, and within 90 days
after the Director has notified the parties that the case has
been submitted to it for final decision, it shall render its
decision (which shall include findings of fact upon which its
decision is predicated) and shall issue and serve upon each
party to the proceeding an order or orders consistent with
the provisions of this section. Judicial review of any such
order shall be exclusively as provided in this subsection.
Unless a petition for review is timely filed in a court of
appeals of the United States, as provided in paragraph (2),
and thereafter until the record in the proceeding has been
filed as so provided, the Director may at any time, upon such
notice and in such manner as it shall deem proper, modify,
terminate, or set aside any such order. Upon such filing of
the record, the Director may modify, terminate, or set aside
any such order with permission of the court.
``(2) Review of order.--Any party to any proceeding under
paragraph (1) may obtain a review of any order served
pursuant to paragraph (1) (other than an order issued with
the consent of the regulated entity or the regulated entity-
affiliated party concerned, or an order issued under
subsection (h) of this section) by the filing in the United
States Court of Appeals for the District of Columbia Circuit
or court of appeals of the United States for the circuit in
which the headquarters of the regulated entity is located,
within 30 days after the date of service of such order, a
written petition praying that the order of the Director be
modified, terminated, or set aside. A copy of such petition
shall be forthwith transmitted by the clerk of the court to
the Director, and thereupon the Director shall file in the
court the record in the proceeding, as provided in section
2112 of title 28, United States Code. Upon the filing of such
petition, such court shall have jurisdiction, which upon the
filing of the record shall (except as provided in the last
sentence of paragraph (1)) be exclusive, to affirm, modify,
terminate, or set aside, in whole or in part, the order of
the Director. Review of such proceedings shall be had as
provided in chapter 7 of title 5, United States Code. The
judgment and decree of the court shall be final, except that
the same shall be subject to review by the Supreme Court upon
certiorari, as provided in section 1254 of title 28, United
States Code.
``(3) Proceedings not treated as stay.--The commencement of
proceedings for judicial review under paragraph (2) shall
not, unless specifically ordered by the court, operate as a
stay of any order issued by the Director.''.
[[Page H9167]]
(b) Conforming Amendments.--
(1) 1992 act.--Section 1317(f) of the Housing and Community
Development Act of 1992 (12 U.S.C. 4517(f)) is amended by
striking ``section 1379B'' and inserting ``section 1379D''.
(2) Fannie mae charter act.--The second sentence of
subsection (b) of section 308 of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1723(b)) is
amended by striking ``The'' and inserting ``Except to the
extent that action under section 1377 of the Housing and
Community Development Act of 1992 temporarily results in a
lesser number, the''.
(3) Freddie mac act.--The second sentence of subparagraph
(A) of section 303(a)(2) of the Federal Home Loan Mortgage
Corporation Act (12 U.S.C. 1452(a)(2)(A)) is amended by
striking ``The'' and inserting ``Except to the extent that
action under section 1377 of the Housing and Community
Development Act of 1992 temporarily results in a lesser
number, the''.
SEC. 167. CRIMINAL PENALTY.
Subtitle C of title XIII of the Housing and Community
Development Act of 1992 (12 U.S.C. 4631 et seq.) is amended
by inserting after section 1377 (as added by the preceding
provisions of this Act) the following new section:
``SEC. 1378. CRIMINAL PENALTY.
``Whoever, being subject to an order in effect under
section 1377, without the prior written approval of the
Director, knowingly participates, directly or indirectly, in
any manner (including by engaging in an activity specifically
prohibited in such an order) in the conduct of the affairs of
any regulated entity shall, notwithstanding section 3571 of
title 18, be fined not more than $1,000,000, imprisoned for
not more than 5 years, or both.''.
SEC. 168. SUBPOENA AUTHORITY.
Section 1379D(c) of the Housing and Community Development
Act of 1992 (12 U.S.C. 4641(c)), as so redesignated by
section 165(a)(1) of this Act, is further amended--
(1) by striking ``request the Attorney General of the
United States to'' and inserting ``, in the discretion of the
Director,'';
(2) by inserting ``or request that the Attorney General of
the United States bring such an action,'' after ``District of
Columbia,''; and
(3) by striking ``or may, under the direction and control
of the Attorney General, bring such an action''.
SEC. 169. CONFORMING AMENDMENTS.
Subtitle C of title XIII of the Housing and Community
Development Act of 1992 is amended--
(1) in section 1372(c)(1) (12 U.S.C. 4632(c)), by striking
``that enterprise'' and inserting ``that regulated entity'';
(2) in section 1379 (12 U.S.C. 4637), as so redesignated by
section 165(a)(1) of this Act--
(A) by inserting ``, or of a regulated entity-affiliated
party,'' before ``shall not affect''; and
(B) by striking ``such director or executive officer'' each
place such term appears and inserting ``such director,
executive officer, or regulated entity-affiliated party'';
(3) in section 1379A (12 U.S.C. 4638), as so redesignated
by section 165(a)(1) of this Act, by inserting ``or against a
regulated entity-affiliated party,'' before ``or impair'';
(4) by striking ``An enterprise'' each place such term
appears in such subtitle and inserting ``A regulated
entity'';
(5) by striking ``an enterprise'' each place such term
appears in such subtitle and inserting ``a regulated
entity'';
(6) by striking ``the enterprise'' each place such term
appears in such subtitle and inserting ``the regulated
entity''; and
(7) by striking ``any enterprise'' each place such term
appears in such subtitle and inserting ``any regulated
entity''.
Subtitle E--General Provisions
SEC. 181. PRESIDENTIALLY APPOINTED DIRECTORS OF ENTERPRISES.
(a) Fannie Mae.--
(1) In general.--Subsection (b) of section 308 of the
Federal National Mortgage Association Charter Act (12 U.S.C.
1723(b)) is amended--
(A) in the first sentence, by striking ``eighteen persons,
five of whom shall be appointed annually by the President of
the United States, and the remainder of whom'' and inserting
``not less than 7 and not more than 15 persons, who'';
(B) in the second sentence, by striking ``appointed by the
President'';
(C) in the third sentence--
(i) by striking ``appointed or''; and
(ii) by striking ``, except that any such appointed member
may be removed from office by the President for good cause'';
(D) in the fourth sentence, by striking ``elective''; and
(E) by striking the fifth sentence.
(2) Transitional provision.--The amendments made by
paragraph (1) shall not apply to any appointed position of
the board of directors of the Federal National Mortgage
Association until the expiration of the annual term for such
position during which the effective date under section 185
occurs.
(b) Freddie Mac.--
(1) In general.--Paragraph (2) of section 303(a) of the
Federal Home Loan Mortgage Corporation Act (12 U.S.C.
1452(a)(2)) is amended--
(A) in subparagraph (A)--
(i) in the first sentence, by striking ``18 persons, 5 of
whom shall be appointed annually by the President of the
United States and the remainder of whom'' and inserting ``not
less than 7 and not more than 15 persons, who''; and
(ii) in the second sentence, by striking ``appointed by the
President of the United States'';
(B) in subparagraph (B)--
(i) by striking ``such or''; and
(ii) by striking ``, except that any appointed member may
be removed from office by the President for good cause''; and
(C) in subparagraph (C)--
(i) by striking the first sentence; and
(ii) by striking ``elective''.
(2) Transitional provision.--The amendments made by
paragraph (1) shall not apply to any appointed position of
the Board of Directors of the Federal Home Loan Mortgage
Corporation until the expiration of the annual term for such
position during which the effective date under section 185
occurs.
SEC. 182. REPORT ON PORTFOLIO OPERATIONS, SAFETY AND
SOUNDNESS, AND MISSION OF ENTERPRISES.
Not later than the expiration of the 12-month period
beginning on the effective date under section 185, the
Director of the Federal Housing Finance Agency shall submit a
report to the Congress which shall include--
(1) a description of the portfolio holdings of the
enterprises (as such term is defined in section 1303 of the
Housing and Community Development Act of 1992 (12 U.S.C.
4502) in mortgages (including whole loans and mortgage-backed
securities), non-mortgages, and other assets;
(2) a description of the risk implications for the
enterprises of such holdings and the consequent risk
management undertaken by the enterprises (including the use
of derivatives for hedging purposes), compared with off-
balance sheet liabilities of the enterprises (including
mortgage-backed securities guaranteed by the enterprises);
(3) an analysis of portfolio holdings for safety and
soundness purposes;
(4) an assessment of whether portfolio holdings fulfill the
mission purposes of the enterprises under the Federal
National Mortgage Association Charter Act and the Federal
Home Loan Mortgage Corporation Act; and
(5) an analysis of the potential systemic risk implications
for the enterprises, the housing and capital markets, and the
financial system of portfolio holdings, and whether such
holdings should be limited or reduced over time.
SEC. 183. CONFORMING AND TECHNICAL AMENDMENTS.
(a) 1992 Act.--Title XIII of the Housing and Community
Development Act of 1992 is amended by striking section 1383
(12 U.S.C. 1451 note).
(b) Title 18, United States Code.--Section 1905 of title
18, United States Code, is amended by striking ``Office of
Federal Housing Enterprise Oversight'' and inserting
``Federal Housing Finance Agency'' .
(c) Flood Disaster Protection Act of 1973.--Section
102(f)(3)(A) of the Flood Disaster Protection Act of 1973 (42
U.S.C. 4012a(f)(3)(A)) is amended by striking ``Director of
the Office of Federal Housing Enterprise Oversight of the
Department of Housing and Urban Development'' and inserting
``Director of the Federal Housing Finance Agency''.
(d) Department of Housing and Urban Development Act.--
Section 5 of the Department of Housing and Urban Development
Act (42 U.S.C. 3534) is amended by striking subsection (d).
(e) Title 5, United States Code.--
(1) Director's pay rate.--Section 5313 of title 5, United
States Code, is amended by striking the item relating to the
Director of the Office of Federal Housing Enterprise
Oversight, Department of Housing and Urban Development and
inserting the following new item:
`` Director of the Federal Housing Finance Agency.''.
(2) Deputy directors' pay rate.--Section 5314 of title 5,
United States Code, is amended by adding at the end the
following new item:
``Deputy Directors, Federal Housing Finance Agency (3).''.
(3) Pay rate for members of housing finance oversight
board.--Section 5315 of title 5, United States Code, is
amended by adding at the end the following new item:
``Members, Housing Finance Oversight Board.''.
(4) Exclusion from senior executive service.--Section
3132(a)(1)(D) of title 5, United States Code, is amended by
striking ``the Office of Federal Housing Enterprise Oversight
of the Department of Housing and Urban Development'' and
inserting ``the Federal Housing Finance Agency''.
(f) Inspector General Act of 1978.--Section 8G(a)(2) of the
Inspector General Act of 1978 (5 U.S.C. App.) is amended by
striking ``Federal Housing Finance Board'' and inserting
``Federal Housing Finance Agency''.
(g) Federal Deposit Insurance Act.--Section 11(t)(2)(A) of
the Federal Deposit Insurance Act (12 U.S.C.1821(t)(2)(A)) is
amended by adding at the end the following new clause:
``(vii) The Federal Housing Finance Agency.''.
(h) 1997 Emergency Supplemental Appropriations Act.--
Section 10001 of the 1997 Emergency Supplemental
Appropriations Act for Recovery From Natural Disasters, and
for Overseas Peacekeeping Efforts, Including Those In Bosnia
(42 U.S.C. 3548) is amended--
(1) by striking ``the Government National Mortgage
Association, and the Office of Federal Housing Enterprise
Oversight'' and inserting ``and the Government National
Mortgage Association''; and
(2) by striking ``, the Government National Mortgage
Association, or the Office of Federal Housing Enterprise
Oversight'' and inserting ``or the Government National
Mortgage Association''.
(i) National Homeownership Trust Act .--Section 302(b)(4)
of the Cranston-Gonzalez National Affordable Housing Act (42
U.S.C. 12851(b)(4)) is amended by striking ``the chairperson
of the Federal Housing Finance Board'' and inserting ``the
Director of the Federal Housing Finance Agency''.
SEC. 184. STUDY OF ALTERNATIVE SECONDARY MARKET SYSTEMS.
(a) In General.--The Director of the Federal Housing
Finance Agency, in consultation with the Board of Governors
of the Federal Reserve
[[Page H9168]]
System, the Secretary of the Treasury, and the Secretary of
Housing and Urban Development, shall conduct a comprehensive
study of the effects on financial and housing finance markets
of alternatives to the current secondary market system for
housing finance, taking into consideration changes in the
structure of financial and housing finance markets and
institutions since the creation of the Federal National
Mortgage Association and the Federal Home Loan Mortgage
Corporation.
(b) Contents.--The study under this section shall--
(1) include, among the alternatives to the current
secondary market system analyzed--
(A) repeal of the chartering Acts for the Federal National
Mortgage Association and the Federal Home Loan Mortgage
Corporation;
(B) establishing bank-like mechanisms for granting new
charters for limited purposed mortgage securitization
entities;
(C) permitting the Director of the Federal Housing Finance
Agency to grant new charters for limited purpose mortgage
securitization entities, which shall include analyzing the
terms on which such charters should be granted, including
whether such charters should be sold, or whether such
charters and the charters for the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation
should be taxed or otherwise assessed a monetary price; and
(D) such other alternatives as the Director considers
appropriate;
(2) examine all of the issues involved in making the
transition to a completely private secondary mortgage market
system;
(3) examine the technological advancements the private
sector has made in providing liquidity in the secondary
mortgage market and how such advancements have affected
liquidity in the secondary mortgage market; and
(4) examine how taxpayers would be impacted by each
alternative system, including the complete privatization of
the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation.
(c) Report.--The Director of the Federal Housing Finance
Agency shall submit a report to the Congress on the study not
later than the expiration of the 12-month period beginning on
the effective date under section 185.
SEC. 185. EFFECTIVE DATE.
Except as specifically provided otherwise in this title,
the amendments made by this title shall take effect on, and
shall apply beginning on, the expiration of the 1-year period
beginning on the date of the enactment of this Act.
TITLE II--FEDERAL HOME LOAN BANKS
SEC. 201. DEFINITIONS.
Section 2 of the Federal Home Loan Bank Act (12 U.S.C.
1422) is amended--
(1) by striking paragraphs (1), (10), and (11);
(2) by redesignating paragraphs (2) through (9) as
paragraphs (1) through (8), respectively;
(3) by redesignating paragraphs (12) and (13) as paragraphs
(9) and (10), respectively; and
(4) by adding at the end the following:
``(11) Director.--The term `Director' means the Director of
the Federal Housing Finance Agency.
``(12) Agency.--The term `Agency' means the Federal Housing
Finance Agency.''.
SEC. 202. DIRECTORS.
(a) Election.--Section 7 of the Federal Home Loan Bank Act
(12 U.S.C. 1427) is amended--
(1) by striking subsection (a) and inserting the following:
``(a) Number; Election; Qualifications; Conflicts of
Interest.--
``(1) In general.--The management of each Federal Home Loan
Bank shall be vested in a board of 13 directors, or such
other number as the Director determines appropriate, each of
whom shall be elected by the members and shall be a citizen
of the United States.
``(2) Member directors.--A majority of the directors of
each Bank shall be officers or directors of a member of such
Bank that is located in the district in which such Bank is
located.
``(3) Independent directors.--At least one-third of the
directors of each Bank shall be independent directors as
follows:
``(A) In general.--Each independent director shall be a
bona fide resident of the district in which such Bank is
located.
``(B) Public interest directors.--At least 2 of the
independent directors under this paragraph of each Bank shall
be representatives chosen from organizations with more than a
2-year history of representing consumer or community
interests on banking services, credit needs, housing, or
financial consumer protections.
``(C) Other directors.--Each independent director that is
not a public interest director under subparagraph (B) shall
have demonstrated knowledge of, or experience in, financial
management, auditing and accounting, risk management
practices, derivatives, project development, or
organizational management, or such other knowledge or
expertise as the Director may provide by regulation.
``(D) Conflicts of interest.--An independent director under
this paragraph of a Bank may not, during such director's term
of office, serve as an officer of any Federal Home Loan Bank
or as a director or officer of any member of a Bank.'';
(2) in subsection (b)--
(A) in the first sentence, by striking ``directorship'' and
inserting ``member directorship pursuant to subsection
(a)(2)''; and
(B) by inserting after the period at the end of the first
sentence the following new sentence: ``Each independent
directorship pursuant to subsection (a)(3) shall be filled by
election by a plurality of the votes of the members of the
Bank at large, in which election each member shall be
entitled to nominate candidates and to cast the same number
of votes as in an election to fill a directorship allocated
to the member's State.'';
(3) in subsection (c), by striking the second, third, and
fifth sentences;
(4) in subsection (d)--
(A) in the first sentence, by striking ``, whether elected
or appointed,'';
(B) in the second sentence, by striking ``or appointed'';
and
(C) in the third sentence, by striking ``an elective'' each
place such term appears and inserting ``a''; and
(5) by striking ``elective'' each place such term appears
(except in subsection (e)).
(b) Terms.--
(1) In general.--Section 7(d) of the Federal Home Loan Bank
Act (12 U.S.C. 1427(i)) is amended--
(A) in the first sentence, by striking ``3 years'' and
inserting ``4 years''; and
(B) in the second sentence--
(i) by striking ``Federal Home Loan Bank System
Modernization Act of 1999'' and inserting ``Federal Housing
Finance Reform Act of 2005''; and
(ii) by striking ``1/3'' and inserting ``1/4''.
(2) Savings provision.--The amendments made by paragraph
(1) shall not apply to the term of office of any director of
a Federal home loan bank who is serving as of the effective
date of this Act under section 211, including any director
elected to fill a vacancy in any such office.
(c) Vacancies.--Subsection (f) of section 7 of the Federal
Home Loan Bank Act (12 U.S.C. 1427(f)) is amended to read as
follows:
``(f) Vacancies.--A Bank director elected to fill a vacancy
shall be elected for the unexpired term of his or her
predecessor in office. In the event of a vacancy in any Bank
directorship, such vacancy shall be filled by an affirmative
vote of a majority of the remaining Bank directors,
regardless of whether such remaining Bank directors
constitute a quorum of the Bank's board of directors. A Bank
director so elected shall satisfy the requirements for
eligibility which were applicable to his predecessor. If any
Bank director shall cease to have any qualification set forth
in this section, the office held by such person shall
immediately become vacant. ''.
(d) Compensation.--Subsection (i) of section 7 of the
Federal Home Loan Bank Act (12 U.S.C. 1427(i)) is amended to
read as follows:
``(i) Directors' Compensation.--
``(1) In general.--Each Federal home loan bank may pay the
directors on the board of directors for the bank reasonable
and appropriate compensation for the time required of such
directors, and reasonable and appropriate expenses incurred
by such directors, in connection with service on the board of
directors, in accordance with resolutions adopted by the
board of directors and subject to the approval of the
Director.
``(2) Annual report by the board.--The Director shall
include, in the annual report submitted to the Congress
pursuant to section 1319B of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, information
regarding the compensation and expenses paid by the Federal
home loan banks to the directors on the boards of directors
of the banks.''.
(e) Transition Rule.--Any member of the board of directors
of a Federal Home Loan Bank serving as of the effective date
under section 211 may continue to serve as a member of such
board of directors for the remainder of the term of such
office as provided in section 7 of the Federal Home Loan Bank
Act, as in effect before such effective date.
SEC. 203. FEDERAL HOUSING FINANCE AGENCY OVERSIGHT OF FEDERAL
HOME LOAN BANKS.
The Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.),
other than in provisions of that Act added or amended
otherwise by this Act, is amended--
(1) by striking sections 2A and 2B (12 U.S.C. 1422a,
1422b);
(2) in section 6 (12 U.S.C. 1426(b)(1))--
(A) in subsection (b)(1), in the matter preceding
subparagraph (A), by striking ``Finance Board approval'' and
inserting ``approval by the Director''; and
(B) in each of subsections (c)(4)(B) and (d)(2), by
striking ``Finance Board regulations'' each place that term
appears and inserting ``regulations of the Director'';
(3) in section 8 (12 U.S.C. 1428), in the section heading,
by striking ``by the board'';
(4) in section 10(b) (12 U.S.C. 1430), by striking ``by
formal resolution'';
(5) in section 11 (12 U.S.C. 1431)--
(A) in subsection (b)--
(i) in the first sentence--
(I) by striking ``The Board'' and inserting ``The Office of
Finance, as agent for the Banks,''; and
(II) by striking ``the Board'' and inserting ``such
Office''; and
(ii) in the second and fourth sentences, by striking ``the
Board'' each place such term appears and inserting ``the
Office of Finance'';
(B) in subsection (c)--
(i) by striking ``the Board'' the first place such term
appears and inserting ``the Office of Finance, as agent for
the Banks,''; and
(ii) by striking ``the Board'' the second place such term
appears and inserting ``such Office''; and
(C) in subsection (f)--
(i) by striking the two commas after ``permit'' and
inserting ``or''; and
(ii) by striking the comma after ``require'';
(6) in section 15 (12 U.S.C. 1435), by inserting ``or the
Director'' after ``the Board'';
(7) in section 18 (12 U.S.C. 1438), by striking subsection
(b);
(8) in section 21 (12 U.S.C. 1441)--
(A) in subsection (b)--
(i) in paragraph (5), by striking ``Chairperson of the
Federal Housing Finance Board'' and inserting ``Director'';
and
[[Page H9169]]
(ii) in the heading for paragraph (8), by striking
``federal housing finance board'' and inserting ``director'';
and
(B) in subsection (i), in the heading for paragraph (2), by
striking ``Federal housing finance board'' and inserting
``Director'';
(9) in section 23 (12 U.S.C. 1443), by striking ``Board of
Directors of the Federal Housing Finance Board'' and
inserting ``Director'';
(10) by striking ``the Board'' each place such term appears
in such Act (except in section 15 (12 U.S.C. 1435), section
21(f)(2) (12 U.S.C. 1441(f)(2)), subsections (a),
(k)(2)(B)(i), and (n)(6)(C)(ii) of section 21A (12 U.S.C.
1441a), subsections (e)(7), (f)(2)(C), and (k)(7)(B)(ii) of
section 21B (12 U.S.C. 1441b), and the first two places such
term appears in section 22 (12 U.S.C. 1442)) and inserting
``the Director'';
(11) by striking ``The Board'' each place such term appears
in such Act (except in sections 7(e) (12 U.S.C. 1427(e)), and
11(b) (12 U.S.C. 1431(b)) and inserting ``The Director'';
(12) by striking ``the Board's'' each place such term
appears in such Act and inserting ``the Director's'';
(13) by striking ``The Board's'' each place such term
appears in such Act and inserting ``The Director's'';
(14) by striking ``The Finance Board'' each place such term
appears in such Act and inserting ``The Director'';
(15) by striking ``the Finance Board'' each place such term
appears in such Act and inserting ``the Director'';
(16) by striking ``Federal Housing Finance Board'' each
place such term appears and inserting ``Director'';
(17) in section 11(i) (12 U.S.C. 1431(i), by striking ``the
Chairperson of''; and
(18) in section 21(e)(9) (12 U.S.C. 1441(e)(9)), by
striking ``Chairperson of the''.
SEC. 204. JOINT ACTIVITIES OF BANKS.
Section 11 of the Federal Home Loan Bank Act (12 U.S.C.
1431) is amended by adding at the end the following new
subsection:
``(l) Joint Activities.--Subject to the regulation of the
Director, any two or more Federal Home Loan Banks may
establish a joint office for the purpose of performing
functions for, or providing services to, the Banks on a
common or collective basis, or may require that the Office of
Finance perform such functions or services, but only if the
Banks are otherwise authorized to perform such functions or
services individually.''.
SEC. 205. SHARING OF INFORMATION BETWEEN FEDERAL HOME LOAN
BANKS.
(a) In General.-- The Federal Home Loan Bank Act is amended
by inserting after section 20 (12 U.S.C. 1440) the following
new section:
``SEC. 20A. SHARING OF INFORMATION BETWEEN FEDERAL HOME LOAN
BANKS.
``(a) Regulatory Authority.--The Director shall prescribe
such regulations as may be necessary to ensure that each
Federal Home Loan Bank has access to information that the
Bank needs to determine the nature and extent of its joint
and several liability.
``(b) No Waiver of Privilege.--The Director shall not be
deemed to have waived any privilege applicable to any
information concerning a Federal Home Loan Bank by
transferring, or permitting the transfer of, that information
to any other Federal Home Loan Bank for the purpose of
enabling the recipient to evaluate the nature and extent of
its joint and several liability.''.
(b) Regulations.--The regulations required under the
amendment made by subsection (a) shall be issued in final
form not later than 6 months after the effective date under
section 211 of this Act.
SEC. 206. REORGANIZATION OF BANKS AND VOLUNTARY MERGER.
Section 26 of the Federal Home Loan Bank Act (12 U.S.C.
1446) is amended--
(1) by inserting ``(a) Reorganization.--'' before
``Whenever''; and
(2) by striking ``liquidated or'' each place such phrase
appears;
(3) by striking ``liquidation or''; and
(4) by adding at the end the following new subsection:
``(b) Voluntary Mergers.--Any Bank may, with the approval
of the Director, and the approval of the boards of directors
of the Banks involved, merge with another Bank. The Director
shall promulgate regulations establishing the conditions and
procedures for the consideration and approval of any such
voluntary merger, including the procedures for Bank member
approval.''.
SEC. 207. SECURITIES AND EXCHANGE COMMISSION DISCLOSURE.
(a) In General.--The Federal Home Loan Banks shall be
exempt from compliance with--
(1) sections 13(e), 14(a), 14(c), and 17A of the Securities
Exchange Act of 1934 and related Commission regulations; and
(2) section 15 of that Act and related Securities and
Exchange Commission regulations with respect to transactions
in capital stock of the Banks.
(b) Member Exemption.--The members of the Federal Home Loan
Banks shall be exempt from compliance with sections 13(d),
13(f), 13(g), 14(d), and 16 of the Securities Exchange Act of
1934 and related Securities and Exchange Commission
regulations with respect to their ownership of, or
transactions in, capital stock of the Federal Home Loan
Banks.
(c) Exempted and Government Securities.--
(1) Capital stock.--The capital stock issued by each of the
Federal Home Loan Banks under section 6 of the Federal Home
Loan Bank Act are--
(A) exempted securities within the meaning of section
3(a)(2) of the Securities Act of 1933; and
(B) ``exempted securities'' within the meaning of section
3(a)(12)(A) of the Securities Exchange Act of 1934.
(2) Other obligations.--The debentures, bonds, and other
obligations issued under section 11 of the Federal Home Loan
Bank Act are--
(A) exempted securities within the meaning of section
3(a)(2) of the Securities Act of 1933;
(B) ``government securities'' within the meaning of section
3(a)(42) of the Securities Exchange Act of 1934;
(C) excluded from the definition of ``government securities
broker'' within section 3(a)(43) of the Securities Exchange
Act of 1934;
(D) excluded from the definition of ``government securities
dealer'' within section 3(a)(44) of the Securities Exchange
Act of 1934; and
(E) ``government securities'' within the meaning of section
2(a)(16) of the Investment Company Act of 1940.
(d) Exemption From Reporting Requirements.--The Federal
Home Loan Banks shall be exempt from periodic reporting
requirements pertaining to--
(1) the disclosure of related party transactions that occur
in the ordinary course of business of the Banks with their
members; and
(2) the disclosure of unregistered sales of equity
securities.
(e) Tender Offers.--The Securities and Exchange
Commission's rules relating to tender offers shall not apply
in connection with transactions in capital stock of the
Federal Home Loan Banks.
(f) Regulations.--In issuing final regulations to implement
provisions of this section, the Securities and Exchange
Commission shall consider the distinctive characteristics of
the Federal Home Loan Banks when evaluating the accounting
treatment with respect to the payment to Resolution Funding
Corporation, the role of the combined financial statements of
the twelve Banks, the accounting classification of redeemable
capital stock, and the accounting treatment related to the
joint and several nature of the obligations of the Banks.
SEC. 208. COMMUNITY FINANCIAL INSTITUTION MEMBERS.
(a) Total Asset Requirement.--Paragraph (10) of section 2
of the Federal Home Loan Bank Act (12 U.S.C. 1422(10)), as so
redesignated by section 201(3) of this Act, is amended by
striking ``$500,000,000'' each place such term appears and
inserting ``$1,000,000,000''.
(b) Use of Advances for Community Development Activities.--
Section 10(a) of the Federal Home Loan Bank Act (12 U.S.C.
1430(a)) is amended--
(1) in paragraph (2)(B)--
(A) by striking ``and''; and
(B) by inserting ``, and community development activities''
before the period at the end;
(2) in paragraph (3)(E), by inserting ``or community
development activities'' after ``agriculture,''; and
(3) in paragraph (6)--
(A) by striking ``and''; and
(B) by inserting ``, and `community development activities'
'' before ``shall''.
SEC. 209. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Right to Financial Privacy Act of 1978.--Section
1113(o) of the Right to Financial Privacy Act of 1978 (12
U.S.C. 3413(o)) is amended--
(1) by striking ``Federal Housing Finance Board'' and
inserting ``Federal Housing Finance Agency''; and
(2) by striking ``Federal Housing Finance Board's'' and
inserting ``Federal Housing Finance Agency's''.
(b) Riegle Community Development and Regulatory Improvement
Act of 1994.--Section 117(e) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (12 U.S.C.
4716(e)) is amended by striking ``Federal Housing Finance
Board'' and inserting ``Federal Housing Finance Agency''.
(c) Title 18, United States Code.--Title 18, United States
Code, is amended by striking ``Federal Housing Finance
Board'' each place such term appears in each of sections 212,
657, 1006, 1014, and inserting ``Federal Housing Finance
Agency''.
(d) MAHRA Act of 1997.--Section 517(b)(4) of the
Multifamily Assisted Housing Reform and Affordability Act of
1997 (42 U.S.C. 1437f note) is amended by striking ``Federal
Housing Finance Board'' and inserting ``Federal Housing
Finance Agency''.
(e) Title 44, United States Code.--Section 3502(5) of title
44, United States Code, is amended by striking ``Federal
Housing Finance Board'' and inserting ``Federal Housing
Finance Agency''.
(f) Access to Local TV Act of 2000.--Section
1004(d)(2)(D)(iii) of the Launching Our Communities' Access
to Local Television Act of 2000 (47 U.S.C.
1103(d)(2)(D)(iii)) is amended by striking ``Office of
Federal Housing Enterprise Oversight, the Federal Housing
Finance Board'' and inserting ``Federal Housing Finance
Agency''.
SEC. 210. STUDY OF AFFORDABLE HOUSING PROGRAM USE FOR LONG-
TERM CARE FACILITIES.
The Comptroller General shall conduct a study of the use of
affordable housing programs of the Federal home loan banks
under section 10(j) of the Federal Home Loan Bank Act to
determine how and the extent to which such programs are used
to assist long-term care facilities for low- and moderate-
income individuals, and the effectiveness and adequacy of
such assistance in meeting the needs of affected communities.
The study shall examine the applicability of such use to the
affordable housing programs required to be established by the
enterprises pursuant to the amendment made by section 128 of
this Act. The Comptroller General shall submit a report to
the Director of the Federal Housing Finance Agency and the
Congress regarding the results of the study not later than
the expiration of the 1-year period beginning on the date of
the enactment of this Act.
[[Page H9170]]
SEC. 211. EFFECTIVE DATE.
Except as specifically provided otherwise in this title,
the amendments made by this title shall take effect on, and
shall apply beginning on, the expiration of the 1-year period
beginning on the date of the enactment of this Act.
TITLE III--TRANSFER OF FUNCTIONS, PERSONNEL, AND PROPERTY OF OFFICE OF
FEDERAL HOUSING ENTERPRISE OVERSIGHT, FEDERAL HOUSING FINANCE BOARD,
AND DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Subtitle A--Office of Federal Housing Enterprise Oversight
SEC. 301. ABOLISHMENT OF OFHEO.
(a) In General.--Effective at the end of the 1-year period
beginning on the date of the enactment of this Act, the
Office of Federal Housing Enterprise Oversight of the
Department of Housing and Urban Development and the positions
of the Director and Deputy Director of such Office are
abolished.
(b) Disposition of Affairs.--During the 1-year period
beginning on the date of the enactment of this Act, the
Director of the Office of Federal Housing Enterprise
Oversight shall, solely for the purpose of winding up the
affairs of the Office of Federal Housing Enterprise
Oversight--
(1) manage the employees of such Office and provide for the
payment of the compensation and benefits of any such employee
which accrue before the effective date of the transfer of
such employee pursuant to section 303; and
(2) may take any other action necessary for the purpose of
winding up the affairs of the Office.
(c) Status of Employees Before Transfer.--The amendments
made by title I and the abolishment of the Office of Federal
Housing Enterprise Oversight under subsection (a) of this
section may not be construed to affect the status of any
employee of such Office as employees of an agency of the
United States for purposes of any other provision of law
before the effective date of the transfer of any such
employee pursuant to section 303.
(d) Use of Property and Services.--
(1) Property.--The Director of the Federal Housing Finance
Agency may use the property of the Office of Federal Housing
Enterprise Oversight to perform functions which have been
transferred to the Director of the Federal Housing Finance
Agency for such time as is reasonable to facilitate the
orderly transfer of functions transferred pursuant to any
other provision of this Act or any amendment made by this Act
to any other provision of law.
(2) Agency services.--Any agency, department, or other
instrumentality of the United States, and any successor to
any such agency, department, or instrumentality, which was
providing supporting services to the Office of Federal
Housing Enterprise Oversight before the expiration of the
period under subsection (a) in connection with functions that
are transferred to the Director of the Federal Housing
Finance Agency shall--
(A) continue to provide such services, on a reimbursable
basis, until the transfer of such functions is complete; and
(B) consult with any such agency to coordinate and
facilitate a prompt and reasonable transition.
(e) Savings Provisions.--
(1) Existing rights, duties, and obligations not
affected.--Subsection (a) shall not affect the validity of
any right, duty, or obligation of the United States, the
Director of the Office of Federal Housing Enterprise
Oversight, or any other person, which--
(A) arises under or pursuant to the title XIII of the
Housing and Community Development Act of 1992, the Federal
National Mortgage Association Charter Act, the Federal Home
Loan Mortgage Corporation Act, or any other provision of law
applicable with respect to such Office; and
(B) existed on the day before the abolishment under
subsection (a) of this section.
(2) Continuation of suits.--No action or other proceeding
commenced by or against the Director of the Office of Federal
Housing Enterprise Oversight in connection with functions
that are transferred to the Director of the Federal Housing
Finance Agency shall abate by reason of the enactment of this
Act, except that the Director of the Federal Housing Finance
Agency shall be substituted for the Director of the Office of
Federal Housing Enterprise Oversight as a party to any such
action or proceeding.
SEC. 302. CONTINUATION AND COORDINATION OF CERTAIN
REGULATIONS.
All regulations, orders, determinations, and resolutions
that--
(1) were issued, made, prescribed, or allowed to become
effective by--
(A) the Office of Federal Housing Enterprise Oversight; or
(B) a court of competent jurisdiction and that relate to
functions transferred by this subtitle; and
(2) are in effect on the date of the abolishment under
section 301(a) of this Act, shall remain in effect according
to the terms of such regulations, orders, determinations, and
resolutions, and shall be enforceable by or against the
Director of the Federal Housing Finance Agency until
modified, terminated, set aside, or superseded in accordance
with applicable law by such Director, as the case may be, any
court of competent jurisdiction, or operation of law.
SEC. 303. TRANSFER AND RIGHTS OF EMPLOYEES OF OFHEO.
(a) Transfer.--Each employee of the Office of Federal
Housing Enterprise Oversight shall be transferred to the
Federal Housing Finance Agency for employment no later than
the date of the abolishment under section 301(a) of this Act
and such transfer shall be deemed a transfer of function for
purposes of section 3503 of title 5, United States Code.
(b) Guaranteed Positions.--Each employee transferred under
subsection (a) shall be guaranteed a position with the same
status, tenure, grade, and pay as that held on the day
immediately preceding the transfer. Each such employee
holding a permanent position shall not be involuntarily
separated or reduced in grade or compensation for 12 months
after the date of transfer, except for cause or, if the
employee is a temporary employee, separated in accordance
with the terms of the appointment.
(c) Appointment Authority for Excepted Service Employees.--
(1) In general.--In the case of employees occupying
positions in the excepted service, any appointment authority
established pursuant to law or regulations of the Office of
Personnel Management for filling such positions shall be
transferred, subject to paragraph (2).
(2) Decline of transfer.--The Director of the Federal
Housing Finance Agency may decline a transfer of authority
under paragraph (1) (and the employees appointed pursuant
thereto) to the extent that such authority relates to
positions excepted from the competitive service because of
their confidential, policy-making, policy-determining, or
policy-advocating character.
(d) Reorganization.--If the Director of the Federal Housing
Finance Agency determines, after the end of the 1-year period
beginning on the date of the abolishment under section
201(a), that a reorganization of the combined work force is
required, that reorganization shall be deemed a major
reorganization for purposes of affording affected employees
retirement under section 8336(d)(2) or 8414(b)(1)(B) of title
5, United States Code.
(e) Employee Benefit Programs.--Any employee of the Office
of Federal Housing Enterprise Oversight accepting employment
with the Director of the Federal Housing Finance Agency as a
result of a transfer under subsection (a) may retain for 12
months after the date such transfer occurs membership in any
employee benefit program of the Federal Housing Finance
Agency or the Office of Federal Housing Enterprise Oversight,
as applicable, including insurance, to which such employee
belongs on the date of the abolishment under section 201(a)
if--
(1) the employee does not elect to give up the benefit or
membership in the program; and
(2) the benefit or program is continued by the Director of
the Federal Housing Finance Agency;
The difference in the costs between the benefits which would
have been provided by such agency and those provided by this
section shall be paid by the Director of the Federal Housing
Finance Agency. If any employee elects to give up membership
in a health insurance program or the health insurance program
is not continued by such Director, the employee shall be
permitted to select an alternate Federal health insurance
program within 30 days of such election or notice, without
regard to any other regularly scheduled open season.
SEC. 304. TRANSFER OF PROPERTY AND FACILITIES.
Upon the abolishment under section 301(a), all property of
the Office of Federal Housing Enterprise Oversight shall
transfer to the Director of the Federal Housing Finance
Agency.
Subtitle B--Federal Housing Finance Board
SEC. 321. ABOLISHMENT OF THE FEDERAL HOUSING FINANCE BOARD.
(a) In General.--Effective at the end of the 1-year period
beginning on the date of enactment of this Act, the Federal
Housing Finance Board (in this title referred to as the
``Board'') is abolished.
(b) Disposition of Affairs.--During the 1-year period
beginning on the date of enactment of this Act, the Board,
solely for the purpose of winding up the affairs of the
Board--
(1) shall manage the employees of such Board and provide
for the payment of the compensation and benefits of any such
employee which accrue before the effective date of the
transfer of such employee under section 323; and
(2) may take any other action necessary for the purpose of
winding up the affairs of the Board.
(c) Status of Employees Before Transfer.--The amendments
made by titles I and II and the abolishment of the Board
under subsection (a) may not be construed to affect the
status of any employee of such Board as employees of an
agency of the United States for purposes of any other
provision of law before the effective date of the transfer of
any such employee under section 323.
(d) Use of Property and Services.--
(1) Property.--The Director of the Federal Housing Finance
Agency may use the property of the Board to perform functions
which have been transferred to the Director of the Federal
Housing Finance Agency for such time as is reasonable to
facilitate the orderly transfer of functions transferred
under any other provision of this Act or any amendment made
by this Act to any other provision of law.
(2) Agency services.--Any agency, department, or other
instrumentality of the United States, and any successor to
any such agency, department, or instrumentality, which was
providing supporting services to the Board before the
expiration of the 1-year period under subsection (a) in
connection with functions that are transferred to the
Director of the Federal Housing Finance Agency shall--
(A) continue to provide such services, on a reimbursable
basis, until the transfer of such functions is complete; and
(B) consult with any such agency to coordinate and
facilitate a prompt and reasonable transition.
(e) Savings Provisions.--
(1) Existing rights, duties, and obligations not
affected.--Subsection (a) shall not affect
[[Page H9171]]
the validity of any right, duty, or obligation of the United
States, a member of the Board, or any other person, which--
(A) arises under the Federal Home Loan Bank Act or any
other provision of law applicable with respect to such Board;
and
(B) existed on the day before the effective date of the
abolishment under subsection (a).
(2) Continuation of suits.--No action or other proceeding
commenced by or against the Board in connection with
functions that are transferred to the Director of the Federal
Housing Finance Agency shall abate by reason of the enactment
of this Act, except that the Director of the Federal Housing
Finance Agency shall be substituted for the Board or any
member thereof as a party to any such action or proceeding.
SEC. 322. CONTINUATION AND COORDINATION OF CERTAIN
REGULATIONS.
(a) In General.--All regulations, orders, and
determinations described under subsection (b) shall remain in
effect according to the terms of such regulations, orders,
determinations, and resolutions, and shall be enforceable by
or against the Director of the Federal Housing Finance Agency
until modified, terminated, set aside, or superseded in
accordance with applicable law by such Director, any court of
competent jurisdiction, or operation of law.
(b) Applicability.--A regulation, order, or determination
is described under this subsection if it--
(1) was issued, made, prescribed, or allowed to become
effective by--
(A) the Board; or
(B) a court of competent jurisdiction and relates to
functions transferred by this subtitle; and
(2) is in effect on the effective date of the abolishment
under section 321(a).
SEC. 323. TRANSFER AND RIGHTS OF EMPLOYEES OF THE FEDERAL
HOUSING FINANCE BOARD.
(a) Transfer.--Each employee of the Board shall be
transferred to the Federal Housing Finance Agency for
employment not later than the effective date of the
abolishment under section 321(a), and such transfer shall be
deemed a transfer of function for purposes of section 3503 of
title 5, United States Code.
(b) Guaranteed Positions.--Each employee transferred under
subsection (a) shall be guaranteed a position with the same
status, tenure, grade, and pay as that held on the day
immediately preceding the transfer. Each such employee
holding a permanent position shall not be involuntarily
separated or reduced in grade or compensation for 12 months
after the date of transfer, except for cause or, if the
employee is a temporary employee, separated in accordance
with the terms of the appointment.
(c) Appointment Authority for Excepted and Senior Executive
Service Employees.--
(1) In general.--In the case of employees occupying
positions in the excepted service or the Senior Executive
Service, any appointment authority established under law or
by regulations of the Office of Personnel Management for
filling such positions shall be transferred, subject to
paragraph (2).
(2) Decline of transfer.--The Director of the Federal
Housing Finance Agency may decline a transfer of authority
under paragraph (1) to the extent that such authority relates
to positions excepted from the competitive service because of
their confidential, policymaking, policy-determining, or
policy-advocating character, and noncareer positions in the
Senior Executive Service (within the meaning of section
3132(a)(7) of title 5, United States Code).
(d) Reorganization.--If the Director of the Federal Housing
Finance Agency determines, after the end of the 1-year period
beginning on the effective date of the abolishment under
section 321(a), that a reorganization of the combined
workforce is required, that reorganization shall be deemed a
major reorganization for purposes of affording affected
employees retirement under section 8336(d)(2) or
8414(b)(1)(B) of title 5, United States Code.
(e) Employee Benefit Programs.--
(1) In general.--Any employee of the Board accepting
employment with the Federal Housing Finance Agency as a
result of a transfer under subsection (a) may retain for 12
months after the date on which such transfer occurs
membership in any employee benefit program of the Federal
Housing Finance Agency or the Board, as applicable, including
insurance, to which such employee belongs on the effective
date of the abolishment under section 321(a) if--
(A) the employee does not elect to give up the benefit or
membership in the program; and
(B) the benefit or program is continued by the Director of
the Federal Housing Finance Agency.
(2) Cost differential.--The difference in the costs between
the benefits which would have been provided by the Board and
those provided by this section shall be paid by the Director
of the Federal Housing Finance Agency. If any employee elects
to give up membership in a health insurance program or the
health insurance program is not continued by such Director,
the employee shall be permitted to select an alternate
Federal health insurance program within 30 days after such
election or notice, without regard to any other regularly
scheduled open season.
SEC. 324. TRANSFER OF PROPERTY AND FACILITIES.
Upon the effective date of the abolishment under section
321(a), all property of the Board shall transfer to the
Director of the Federal Housing Finance Agency.
Subtitle C--Department of Housing and Urban Development
SEC. 341. TERMINATION OF ENTERPRISE-RELATED FUNCTIONS.
(a) Termination Date.--For purposes of this subtitle, the
term ``termination date'' means the date that occurs one year
after the date of the enactment of this Act.
(b) Determination of Transferred Functions and Employees.--
(1) In general.--Not later than the expiration of the 6-
month period beginning on the date of the enactment of this
Act, the Secretary, in consultation with the Director of the
Office of Federal Housing Enterprise Oversight, shall
determine--
(A) the functions, duties, and activities of the Secretary
of Housing and Urban Development regarding oversight or
regulation of the enterprises under or pursuant to the
authorizing statutes, title XIII of the Housing and Community
Development Act of 1992, and any other provisions of law, as
in effect before the date of the enactment of this Act, but
not including any such functions, duties, and activities of
the Director of the Office of Federal Housing Enterprise
Oversight of the Department of Housing and Urban Development
and such Office; and
(B) the employees of the Department of Housing and Urban
Development necessary to perform such functions, duties, and
activities.
(2) Enterprise-related functions.--For purposes of this
subtitle, the term ``enterprise-related functions of the
Department'' means the functions, duties, and activities of
the Department of Housing and Urban Development determined
under paragraph (1)(A).
(3) Enterprise-related employees.--For purposes of this
subtitle, the term ``enterprise-related employees of the
Department'' means the employees of the Department of Housing
and Urban Development determined under paragraph (1)(B).
(c) Disposition of Affairs.--During the 1-year period
beginning on the date of enactment of this Act, the Secretary
of Housing and Urban Development (in this title referred to
as the ``Secretary''), solely for the purpose of winding up
the affairs of the Secretary regarding the enterprise-related
functions of the Department of Housing and Urban Development
(in this title referred to as the ``Department)'' --
(1) shall manage the enterprise-related employees of the
Department and provide for the payment of the compensation
and benefits of any such employee which accrue before the
effective date of the transfer of any such employee under
section 343; and
(2) may take any other action necessary for the purpose of
winding up the enterprise-related functions of the
Department.
(d) Status of Employees Before Transfer.--The amendments
made by titles I and II and the termination of the
enterprise-related functions of the Department under
subsection (b) may not be construed to affect the status of
any employee of the Department as employees of an agency of
the United States for purposes of any other provision of law
before the effective date of the transfer of any such
employee under section 343.
(e) Use of Property and Services.--
(1) Property.--The Director of the Federal Housing Finance
Agency may use the property of the Secretary to perform
functions which have been transferred to the Director of the
Federal Housing Finance Agency for such time as is reasonable
to facilitate the orderly transfer of functions transferred
under any other provision of this Act or any amendment made
by this Act to any other provision of law.
(2) Agency services.--Any agency, department, or other
instrumentality of the United States, and any successor to
any such agency, department, or instrumentality, which was
providing supporting services to the Secretary regarding
enterprise-related functions of the Department before the
termination date under subsection (a) in connection with such
functions that are transferred to the Director of the Federal
Housing Finance Agency shall--
(A) continue to provide such services, on a reimbursable
basis, until the transfer of such functions is complete; and
(B) consult with any such agency to coordinate and
facilitate a prompt and reasonable transition.
(f) Savings Provisions.--
(1) Existing rights, duties, and obligations not
affected.--Subsection (a) shall not affect the validity of
any right, duty, or obligation of the United States, the
Secretary, or any other person, which--
(A) arises under the authorizing statutes, title XIII of
the Housing and Community Development Act of 1992, or any
other provision of law applicable with respect to the
Secretary, in connection with the enterprise-related
functions of the Department; and
(B) existed on the day before the termination date under
subsection (a).
(2) Continuation of suits.--No action or other proceeding
commenced by or against the Secretary in connection with the
enterprise-related functions of the Department shall abate by
reason of the enactment of this Act, except that the Director
of the Federal Housing Finance Agency shall be substituted
for the Secretary or any member thereof as a party to any
such action or proceeding.
SEC. 342. CONTINUATION AND COORDINATION OF CERTAIN
REGULATIONS.
(a) In General.--All regulations, orders, and
determinations described in subsection (b) shall remain in
effect according to the terms of such regulations, orders,
determinations, and resolutions, and shall be enforceable by
or against the Director of the Federal Housing Finance Agency
until modified, terminated, set aside, or superseded in
accordance with applicable law by such Director, any court of
competent jurisdiction, or operation of law.
(b) Applicability.--A regulation, order, or determination
is described under this subsection if it--
(1) was issued, made, prescribed, or allowed to become
effective by--
(A) the Secretary; or
[[Page H9172]]
(B) a court of competent jurisdiction and that relate to
the enterprise-related functions of the Department; and
(2) is in effect on the termination date under section
341(a).
SEC. 343. TRANSFER AND RIGHTS OF EMPLOYEES.
(a) Transfer.--
(1) In general.--Except as provided in paragraph (2), each
enterprise-related employee of the Department shall be
transferred to the Federal Housing Finance Agency for
employment not later than the termination date under section
341(a) and such transfer shall be deemed a transfer of
function for purposes of section 3503 of title 5, United
States Code.
(2) Authority to decline.--An enterprise-related employee
of the Department may, in the discretion of the employee,
decline transfer under paragraph (1) to a position in the
Federal Housing Finance Agency and shall be guaranteed a
position in the Department with the same status, tenure,
grade, and pay as that held on the day immediately preceding
the date that such declination was made. Each such employee
holding a permanent position shall not be involuntarily
separated or reduced in grade or compensation for 12 months
after the date that the transfer would otherwise have
occurred, except for cause or, if the employee is a temporary
employee, separated in accordance with the terms of the
appointment.
(b) Guaranteed Positions.--Each enterprise-related employee
of the Department transferred under subsection (a) shall be
guaranteed a position with the same status, tenure, grade,
and pay as that held on the day immediately preceding the
transfer. Each such employee holding a permanent position
shall not be involuntarily separated or reduced in grade or
compensation for 12 months after the date of transfer, except
for cause or, if the employee is a temporary employee,
separated in accordance with the terms of the appointment.
(c) Appointment Authority for Excepted and Senior Executive
Service Employees.--
(1) In general.--In the case of employees occupying
positions in the excepted service or the Senior Executive
Service, any appointment authority established under law or
by regulations of the Office of Personnel Management for
filling such positions shall be transferred, subject to
paragraph (2).
(2) Decline of transfer.--The Director of the Federal
Housing Finance Agency may decline a transfer of authority
under paragraph (1) to the extent that such authority relates
to positions excepted from the competitive service because of
their confidential, policymaking, policy-determining, or
policy-advocating character, and noncareer positions in the
Senior Executive Service (within the meaning of section
3132(a)(7) of title 5, United States Code).
(d) Reorganization.--If the Director of the Federal Housing
Finance Agency determines, after the end of the 1-year period
beginning on the termination date under section 341(a), that
a reorganization of the combined workforce is required, that
reorganization shall be deemed a major reorganization for
purposes of affording affected employees retirement under
section 8336(d)(2) or 8414(b)(1)(B) of title 5, United States
Code.
(e) Employee Benefit Programs.--
(1) In general.--Any enterprise-related employee of the
Department accepting employment with the Federal Housing
Finance Agency as a result of a transfer under subsection (a)
may retain for 12 months after the date on which such
transfer occurs membership in any employee benefit program of
the Federal Housing Finance Agency or the Department, as
applicable, including insurance, to which such employee
belongs on the termination date under section 341(a) if--
(A) the employee does not elect to give up the benefit or
membership in the program; and
(B) the benefit or program is continued by the Director of
the Federal Housing Finance Agency.
(2) Cost differential.--The difference in the costs between
the benefits which would have been provided by the Department
and those provided by this section shall be paid by the
Director of the Federal Housing Finance Agency. If any
employee elects to give up membership in a health insurance
program or the health insurance program is not continued by
such Director, the employee shall be permitted to select an
alternate Federal health insurance program within 30 days
after such election or notice, without regard to any other
regularly scheduled open season.
SEC. 344. TRANSFER OF APPROPRIATIONS, PROPERTY, AND
FACILITIES.
Upon the termination date under section 341(a), all assets,
liabilities, contracts, property, records, and unexpended
balances of appropriations, authorizations, allocations, and
other funds employed, held, used, arising from, available to,
or to be made available to the Department in connection with
enterprise-related functions of the Department shall transfer
to the Director of the Federal Housing Finance Agency.
Unexpended funds transferred by this section shall be used
only for the purposes for which the funds were originally
authorized and appropriated.
The CHAIRMAN. No amendment to the committee amendment is in order
except those printed in House Report 109-254. Each amendment may be
offered only in the order printed in the report, by a Member designated
in the report, shall be considered read, shall be debatable for the
time specified in the report, equally divided and controlled by the
proponent and an opponent, shall not be subject to amendment, and shall
not be subject to a demand for division of the question.
It is now in order to consider amendment No. 1 printed in House
Report 109-254.
Amendment No. 1 Offered by Mr. Oxley
Mr. OXLEY. Mr. Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 1 offered by Mr. Oxley:
Page 6, strike lines 3 through 5 and insert the following
new subparagraph:
``(C) any independent contractor for a regulated entity
(including any attorney, appraiser, or accountant), if--
``(i) the independent contractor knowingly or recklessly
participates in--
``(I) any violation of any law or regulation;
``(II) any breach of fiduciary duty; or
``(III) any unsafe or unsound practice; and
``(ii) such violation, breach, or practice caused, or is
likely to cause, more than a minimal financial loss to, or a
significant adverse effect on, the regulated entity; and''.
Page 12, line 8, strike the quotations marks and the last
period.
Page 12, after line 8, insert the following new subsection:
``(g) Ombudsman.--The Director shall establish, by
regulation, an Office of the Ombudsman in the Agency. Such
regulations shall provide that the Ombudsman will consider
complaints and appeals from any regulated entity and any
person that has a business relationship with a regulated
entity and shall specify the duties and authority of the
Ombudsman.''.
Page 15, line 2, before the period insert ``, or request
that the Attorney General of the United States act on behalf
of the Director''.
Page 15, after line 2, insert the following new paragraph:
``(2) Consultation with attorney general.--The Director
shall provide notice to, and consult with, the Attorney
General of the United States before taking an action under
paragraph (1) of this subsection or under section 1344(a),
1345(d), 1348(c), 1372(e), 1375(a), 1376(d), or 1379D(c),
except that, if the Director determines that any delay caused
by such prior notice and consultation may adversely affect
the safety and soundness responsibilities of the Director
under this title, the Director shall notify the Attorney
General as soon as reasonably possible after taking such
action.''.
Page 15, line 3, strike ``(2)'' and insert ``(3)''.
Page 25, line 13, after the period insert quotation marks
and a period.
Page 25, strike lines 14 through 16.
Page 66, after line 12 add the following new subsection:
(e) Effective Date.--This section shall take effect on the
date of the enactment of this Act.
Page 102, after line 19, insert the following new
subparagraph:
``(A) Mortgages that finance dwelling units for low-income
families.''.
Page 102, line 20, strike ``(A)'' and insert ``(B)''.
Page 102, line 22, strike ``(B)'' and insert ``(C)''.
Strike line 17 on page 119 and all that follows through
line 9 on page 138 and insert the following:
SEC. 128. AFFORDABLE HOUSING FUND.
(a) In General.--The Housing and Community Development Act
of 1992 is amended by striking sections 1337 and 1338 (12
U.S.C. 4562 note) and inserting the following new section:
``SEC. 1337. AFFORDABLE HOUSING FUND.
``(a) Establishment and Purpose.--Each enterprise shall
establish and manage an affordable housing fund in accordance
with this section. The purpose of the affordable housing fund
shall be--
``(1) to increase homeownership for extremely low-and very
low-income families;
``(2) to increase investment in housing in low-income
areas, and areas designated as qualified census tracts or an
area of chronic economic distress pursuant to section 143(j)
of the Internal Revenue Code of 1986 (26 U.S.C. 143(j));
``(3) to increase and preserve the supply of rental and
owner-occupied housing for extremely low- and very low-income
families;
``(4) to increase investment in public infrastructure
development in connection with housing assisted under this
section; and
``(5) to leverage investments from other sources in
affordable housing and in public infrastructure development
in connection with housing assisted under this section
``(b) Allocation of Amounts by Enterprises.--
``(1) In general.--In accordance with regulations issued by
the Director under subsection (k) and subject to paragraphs
(2) and (3) of this subsection and subsection (f)(5), each
enterprise shall allocate to the affordable housing fund
established under subsection (a) by the enterprise--
``(A) in the year in which the effective date under section
185 of the Federal Housing Finance Reform Act of 2005 occurs,
3.5 percent of the after-tax income of the enterprise for the
preceding year;
``(B) in the year after the year referred to in
subparagraph (A), 3.5 percent of the after-tax income of the
enterprise for the preceding year; and
``(C) in each of the first three years after the year
referred to in subparagraph (B), 5 percent of the after-tax
income of the enterprise for the preceding year.
[[Page H9173]]
``(2) Limitation.--An enterprise shall not be required to
make an allocation for a year to the affordable housing fund
of the enterprise established under subsection (a) unless the
enterprise generated after-tax income for the preceding year.
``(3) Suspension of contributions.--The Director shall
temporarily suspend the allocation under paragraph (1) by an
enterprise to the affordable housing fund of the enterprise
upon a finding by the Director that such allocations--
``(A) are contributing, or would contribute, to the
financial instability of the enterprise;
``(B) are causing, or would cause, the enterprise to be
classified as undercapitalized; or
``(C) are preventing, or would prevent, the enterprise from
successfully completing a capital restoration plan under
section 1369C.
``(4) 5-year sunset and report.--
``(A) Sunset.--The enterprises shall not be required to
make allocations to the affordable housing funds in the 5th
year after the year in which the effective date under section
185 of the Federal Housing Finance Reform Act of 2005 occurs
or in any year thereafter.
``(B) Report on program continuance.--Not later 6 months
before the end of the last year in which the allocations are
required under paragraph (1), the Director shall submit to
the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate a report making recommendations
on whether the program under this section, including the
requirement for the enterprises to make allocations to the
affordable housing funds, should be extended and on any
modifications for the program.
``(5) Determination of after-tax income.--For purposes of
this section, the term `after-tax income' means, with respect
to an enterprise for a year, the amount reported by the
enterprise for such year in the enterprise's annual report
for such year that is filed with the Securities and Exchange
Commission, except that for any year in which no such filing
is made by an enterprise or such filing is not timely made,
such term means the amount determined by the Director based
on the income tax return filings of the enterprise.
``(c) Selection of Activities Funded Using Affordable
Housing Fund Amounts.--Amounts from the affordable housing
fund of the enterprise may be used, or committed for use,
only for activities that--
``(1) are eligible under subsection (d) for such use; and
``(2) are selected for funding by the enterprise in
accordance with the process and criteria for such selection
established pursuant to subsection (k)(2)(C).
``(d) Eligible Activities.--Amounts from the affordable
housing fund of an enterprise shall be eligible for use, or
for commitment for use, only for assistance for--
``(1) the production, preservation, and rehabilitation of
rental housing, including housing under the programs
identified in section 1335(a)(2)(B), except that amounts
provided from the Fund may be used for the benefit only of
extremely low- and very low-income families;
``(2) the production, preservation, and rehabilitation of
housing for homeownership, including such forms as
downpayment assistance, closing cost assistance, and
assistance for interest-rate buy-downs, that--
``(A) is available for purchase only for use as a principal
residence by families that qualify both as--
``(i) extremely low- and very-low income families at the
times described in subparagraphs (A) through (C) of section
215(b)(2) of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12745(b)(2)); and
``(ii) first-time homebuyers, as such term is defined in
section 104 of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12704), except that any reference in
such section to assistance under title II of such Act shall
for purposes of this section be considered to refer to
assistance from the affordable housing fund of the
enterprise;
``(B) has an initial purchase price that meets the
requirements of section 215(b)(1) of the Cranston-Gonzalez
National Affordable Housing Act; and
``(C) is subject to the same resale restrictions
established under section 215(b)(3) of the Cranston-Gonzalez
National Affordable Housing Act and applicable to the
participating jurisdiction that is the State in which such
housing is located; and
``(3) public infrastructure development activities in
connection with housing activities funded under paragraph (1)
or (2).
``(e) Eligible Recipients.--
``(1) In general.--Amounts from the affordable housing fund
of an enterprise may be provided only to a recipient that is
an organization, agency, or other entity (including a for-
profit entity, a nonprofit entity, a federally recognized
tribe, an Alaskan Native village, and a faith-based
organization) that--
``(A) has a demonstrated capacity for carrying out
activities of the type that are to be funded with such
affordable housing fund amounts; and
``(B) makes such assurances to the enterprise as the
Director shall, by regulation, require to ensure that the
recipient will comply with the requirements of this section
(including, in the case of any organization, agency, or
entity subject to paragraph (2), all of the requirements
specified under such paragraph) during the entire period that
begins upon selection of the recipient to receive amounts
from the affordable housing fund of the enterprise and ending
upon the conclusion of all activities under subsection (d)
that are engaged in by the recipient and funded with such
affordable housing fund amounts; and
``(C) in the case of any recipient who is not a for-profit
entity or a government agency or authority, complies with all
of the requirements under paragraph (2).
``(2) Additional requirements for recipients other than
for-profit entities.--The requirements under this paragraph
with respect to any organization, agency, or entity that is
not a for-profit entity or a government agency or authority
are that the organization, agency, or entity--
``(A) shall have as its primary purpose the provision of
affordable housing, as defined by the Director;
``(B) shall make such assurances to the enterprise as the
Director shall, by regulation, require to ensure that such
affordable housing fund amounts--
``(i) are used only to supplement, and to the extent
practical, to increase the level of funds that would, in the
absence of amounts made available from the affordable housing
fund, be made available from other sources for the recipient
to carry out activities of the type that are eligible under
subsection (d) for funding with affordable housing fund
amounts; and
``(ii) are not in any case used so as to supplant any funds
from other sources that are made available for such
activities of the recipient; and
``(C) does not, at the time during the period that begins
12 months before submission of an application for funding
from the affordable housing fund of the enterprise and ending
upon the expiration of the period referred to in paragraph
(1)(B)--
``(i) engage in any Federal election activity, as such term
is defined in paragraph (20) of section 301 of the Federal
Election Campaign Act of 1971 (2 U.S.C. 431(20)), except
that, notwithstanding the 120-day limitation in subparagraph
(A)(i) of such paragraph, such term shall include voter
registration activity during any period;
``(ii) make any expenditure for any electioneering
communication (as such term is defined in section 304(f)(3)
of the Federal Election Campaign Act of 1971 (2 U.S.C.
434(f)(3));
``(iii) make any lobbying expenditure, (as such term is
defined in such section 501(h)(2)), except that this clause
shall not apply to any such expenditure by an organization
described in section 501(c)(3) of the Internal Revenue Code
of 1986 that is exempt from taxation under subsection (a) of
such section 501, to the extent that such expenditure does
not exceed the amount under such Code for which such
exemption may be denied; or
``(iv) maintain any affiliation with any organization,
agency, or other entity that does not comply with clauses
(i), (ii), and (iii) of this subparagraph.
``(3) Affiliation.--
``(A) In general.--A recipient organization, agency, or
entity shall be considered to be affiliated with another
entity, for purposes of paragraph (2), if such recipient
entity controls, is controlled by, or is under common control
with such other entity.
``(B) Control.--The existence of any of the following
relationships between a recipient entity and another entity
shall indicate that control exists for purposes of
subparagraph (A):
``(i) Overlapping board membership.--Individuals serve in a
similar capacity as officers, executives, or staff of both
the recipient entity and the other entity.
``(ii) Shared resources.--The recipient entity and the
other entity share office space, staff members, supplies,
resources, or marketing materials, including Internet and
other forms of public communication.
``(iii) Funding.--The recipient entity receives more than
20 percent of its total funding from such other entity or
provides more than 20 percent of the total funding of such
other entity.
``(iv) Other.--The recipient entity or such other entity
exhibits any other indicia of substantial overlap or common
control as may be set forth in regulation by the Director.
``(4) For profit.--For purposes of this subsection, the
term `for-profit entity' means any entity any part of the net
earnings of which inure to the benefit of any private
shareholder, member, founder, contributor, or individual.
``(f) Limitations on Use.--
``(1) Required amount for refcorp.--Of any amounts
allocated pursuant to subsection (b) in each year to the
affordable housing fund of an enterprise, 25 percent shall be
used as provided in section 21B(f)(2)(E) of the Federal Home
Loan Bank Act (12 U.S.C. 1441b(f)(2)(E)).
``(2) Required amount for homeownership activities.--Of any
amounts allocated pursuant to subsection (b) in each year to
the affordable housing fund of an enterprise, not less than
10 percent shall be used for activities under paragraph (2)
of subsection (d).
``(3) Maximum amount for public infrastructure development
activities in connection with affordable housing
activities.--Of any amounts allocated pursuant to subsection
(b) in each year to the affordable housing fund of an
enterprise, not more than 12.5 percent may be used for
activities under paragraph (3) of subsection (d).
[[Page H9174]]
``(4) Deadline for commitment or use.--Any amounts
allocated to the affordable housing fund of an enterprise
shall be used or committed for use within two years of the
date of such allocation.
``(5) Use of returns.--The Director shall, by regulation--
``(A) provide that any return on a loan or other investment
of any amounts allocated pursuant to subsection (b) to the
affordable housing fund of an enterprise shall count against
the allocation required under subsection (b) to be made by
the enterprise for the year following such return; and
``(B) establish such limitations as may be necessary to
ensure that the amount or likelihood of return is not the
primary consideration of awarding of allocated amounts to
recipients.
``(6) Prohibited uses.--The Director shall--
``(A) by regulation, set forth prohibited uses of amounts
from the affordable housing funds of the enterprises, which
shall include use for--
``(i) political activities;
``(ii) advocacy;
``(iii) lobbying, whether directly or through other
parties;
``(iv) counseling services;
``(v) travel expenses; and
``(vi) preparing or providing advice on tax returns;
``(B) by regulation, provide that, except as provided in
subparagraph (C), amounts allocated to the affordable housing
fund of an enterprise may not be used for administrative,
outreach, or other costs of--
``(i) the enterprise; or
``(ii) any recipient of amounts from the affordable housing
fund; and
``(C) by regulation, limit the amount of any such
contributions that may be used for administrative costs of
the enterprise of maintaining the affordable housing fund and
carrying out the program under this section.
``(7) Prohibition of consideration of use for meeting
housing goals.--In determining compliance with the housing
goals under this subpart, the Director may not consider
amounts used under this section for eligible activities under
subsection (d). The Director shall give credit toward the
achievement of such housing goals to purchases of mortgages
for housing that receives funding under this section, but
only to the extent that such purchases are funded other than
under this section.
``(8) Prohibition on certain redistribution of amounts.--
The Director shall, by regulation, ensure that amounts from
the affordable housing fund of an enterprise awarded under
this section to a national nonprofit housing intermediary are
not redistributed to other nonprofit entities.
``(g) Accountability of Recipients and Enterprises.--
``(1) Recipients.--
``(A) Tracking of funds.--The Director shall--
``(i) require each enterprise to develop and maintain a
system to ensure that each recipient of amounts from the
affordable housing fund of the enterprise uses such amounts
in accordance with this section, the regulations issued under
this section, and any requirements or conditions under which
such amounts were provided; and
``(ii) establish minimum requirements for agreements,
between the enterprises and recipients, regarding grants from
the affordable housing funds of the enterprises, which shall
include--
``(I) appropriate continuing financial and project
reporting, record retention, and audit requirements for the
duration of the grant to ensure compliance with the
limitations and requirements of this section and the
regulation under this section; and
``(II) any other requirements that the Director determines
are necessary to ensure appropriate grant administration and
compliance.
``(B) Misuse of funds.--If an enterprise determines that
any recipient of amounts from the affordable housing fund of
the enterprise has used any such amounts in a manner that is
materially in violation of this section, the regulations
issued under this section, or any requirements or conditions
under which such amounts were provided--
``(i) the enterprise shall notify the Director of such
misuse of amounts and the actions taken under this
subparagraph with respect to the recipient;
``(ii) such recipient shall be ineligible in perpetuity to
receive of any further amounts from the affordable housing
fund of such enterprise; and
``(iii) the enterprise shall require the recipient to
reimburse the enterprise for such misused amounts and return
to the enterprise any amounts from the affordable housing
fund of the enterprise that remain unused or uncommitted for
use.
The remedies under this subparagraph are in addition to any
other remedies that may be available under law.
``(2) Enterprises.--
``(A) Quarterly reports.--The Director shall require each
enterprise to submit a report, on a quarterly basis, to the
Director and the affordable housing board established under
subsection (j) describing the activities funded under this
section during such quarter with amounts from the affordable
housing fund of the enterprise established under this
section. The Director shall make such reports publicly
available. The affordable housing board shall review each
report by an enterprise to determine the consistency of such
activities funded with the criteria for selection of such
activities established pursuant to subsection (k)(2)(C).
``(B) Replenishment.--If the Director determines that an
activity funded by an enterprise with amounts from the
affordable housing fund of the enterprise is not consistent
with the criteria established pursuant to subsection
(k)(2)(C), the Director shall require the enterprise to
allocate to such affordable housing fund (in addition to
amounts allocated in compliance with subsection (b)) an
amount equal to the sum of the amounts from the affordable
housing fund used and further committed for use for such
activity.
``(h) Capital Requirements.--The utilization or commitment
of amounts from the affordable housing fund of an enterprise
shall not be subject to the risk-based capital requirements
established pursuant to section 1361(a).
``(i) Reporting Requirement.--Each enterprise shall
include, in the report required under section 309(m) of the
Federal National Mortgage Association Charter Act or section
307(f) of the Federal Home Loan Mortgage Corporation Act, as
applicable, a description of the actions taken by the
enterprise to utilize or commit amounts allocated under this
section to the affordable housing fund of the enterprise
established under this section.
``(j) Affordable Housing Board.--
``(1) Appointment.--The Director shall appoint an
affordable housing board of 7, 9, or 11 persons, who shall
include--
``(A) the Director, or the Director's designee;
``(B) the Secretary of Housing and Urban Development, or
the Secretary's designee;
``(C) the Secretary of Agriculture, or the Secretary's
designee;
``(D) 2 persons from for-profit organizations or businesses
actively involved in providing or promoting affordable
housing for extremely low- and very low-income households;
and
``(E) 2 persons from nonprofit organizations actively
involved in providing or promoting affordable housing for
extremely low- and very low-income households.
``(2) Terms.--
``(A) In general.--Except as provided in subparagraph (B),
the term of each member of the affordable housing board
appointed pursuant to paragraph (1) (but not including
members appointed pursuant to subparagraphs (A), (B), and
(C)) shall be 3 years.
``(B) Initial appointees.--The Director shall appoint the
initial members of the affordable housing board not later
than the expiration of the 60-day period beginning on the
effective date under section 185 of the Federal Housing
Finance Reform Act of 2005. As designated by the Director at
the time of appointment, of the members of the affordable
housing board first appointed pursuant to paragraph (1) (but
not including members appointed pursuant to subparagraphs
(A), (B), and (C))--
``(i) in the case of a board having 7 members--
``(I) one shall be appointed for a term of one year; and
``(II) one shall be appointed for a term of two years;
``(ii) in the case of a board having 9 members--
``(I) two shall be appointed for a term of one year; and
``(II) two shall be appointed for a term of two years; and
``(iii) in the case of a board having 11 members--
``(I) two shall be appointed for a term of one year; and
``(II) three shall be appointed for a term of two years;
``(3) Duties.--The duties of the affordable housing board
shall be--
``(A) to determine extremely low- and very low-income
housing needs;
``(B) to advise the Director with respect to--
``(i) establishment of the selection criteria under
subsection (k)(2)(C) that provide for appropriate use of
amounts from the affordable housing funds of the enterprises
to meet such needs; and
``(ii) operation of, and changes to, the program under this
section appropriate to meet such needs; and
``(C) to review the reports submitted by the enterprises
pursuant to subsection (g)(1) to determine whether the
activities funded using amounts from the affordable housing
funds of the enterprises comply with the regulations issued
pursuant to subsection (k)(2)(C) and inform the Director of
such determinations, for purposes of subsection (g)(2).
``(4) Meetings.--The board shall meet not less than
quarterly, except that during the 2-year period referred to
in paragraph (7), the board shall meet only as the Director
determines necessary.
``(5) Expenses and per diem.--Members of the board shall
receive travel expenses, including per diem in lieu of
subsistence, in accordance with sections 5702 and 5703 of
title 5, United States Code.
``(6) Advisory committee.--The board shall be considered an
advisory committee for purposes of the Federal Advisory
Committee Act (5 U.S.C. App.).
``(7) Termination.-- The board shall terminate upon the
expiration of the 2-year period that begins upon the
conclusion of the last year referred to in subsection
(b)(1)(C).
``(k) Regulations.--
``(1) In general.--The Director shall issue regulations to
carry out this section.
[[Page H9175]]
``(2) Required contents.--The regulations issued under this
subsection shall include--
``(A) authority for the Director to audit, provide for an
audit, or otherwise verify an enterprise's activities, to
ensure compliance with this section;
``(B) a requirement that the Director ensure that the
affordable housing fund of each enterprise is audited not
less than annually to ensure compliance with this section;
``(C) requirements for a process for application to, and
selection by, an enterprise for activities to be funded with
amounts from the affordable housing fund, which shall provide
that--
``(i) selection shall be based upon specific criteria,
which shall provide that--
``(I) in any selection of activities occurring during the
2-year period beginning on the effective date under section
185 of the Federal Housing Finance Reform Act of 2005,
additional weight shall be given to applications for eligible
activities under subsection (d) that--
``(aa) are to be carried out in any area that was declared
by the President as a major disaster area pursuant to the
Robert T. Stafford Disaster Relief and Emergency Assistance
Act as result of Hurricane Katrina or Hurricane Rita in 2005;
or
``(bb) the enterprise determines, in accordance with
regulations issued by the Director, serve persons
significantly affected by the occurrence of Hurricane Katrina
or Hurricane Rita in 2005 (including persons displaced as a
result of such hurricanes and persons whose affordable
housing opportunities are significantly affected by the
presence of persons displaced as a result of such
hurricanes); and
``(II) taking into consideration any additional weight
afforded applications pursuant to subclause (I), priority in
funding shall be based upon--
``(aa) whether activities are to be carried out in any area
that, not more than 2 years before such selection, was
declared by the President as a major disaster area pursuant
to the Robert T. Stafford Disaster Relief and Emergency
Assistance Act;
``(bb) greatest impact;
``(cc) geographic diversity;
``(dd) ability to obligate amounts and undertake activities
so funded in a timely manner;
``(ee) in the case of rental housing projects under
subsection (d)(1), the extent to which rents for units in the
project funded are affordable, especially for extremely low-
income families; and
``(ff) in the case of rental housing projects under
subsection (d)(1), the extent of the duration for which such
rents will remain affordable; and
``(ii) an enterprise may not require for such selection
that an activity involve financing or underwriting of any
kind by the enterprise (other than funding through the
affordable housing fund of the enterprise) and may not give
preference in such selection to activities that involve such
financing;
``(D) requirements to ensure that amounts from the
affordable housing funds of the enterprises used for rental
housing under subsection (d)(1) are used only for the benefit
of extremely low- and very-low income families; and
``(E) limitations on public infrastructure development
activities that are eligible pursuant to subsection (d)(3)
for funding with amounts from the affordable housing funds of
the enterprises and requirements for the connection between
such activities and housing activities funded under paragraph
(1) or (2) of subsection (d).
``(l) Enforcement.--Compliance by the enterprises with the
requirements under this section shall be enforceable under
subpart C. Any reference in such subpart to this part or to
an order, rule, or regulation under this part specifically
includes this section and any order, rule, or regulation
under this section.''.
(b) Contributions for Transition Period.--
(1) Reservation and contribution; prohibition of double
contributions.--If the date of the enactment of this Act does
not occur in the same calendar year as the effective date
under section 185 of this Act, each enterprise (as such term
is defined in section 1303 of the Housing and Community
Development Act of 1992) shall, in the year that such date of
enactment occurs, reserve for contribution to the affordable
housing fund to be established by the enterprise pursuant to
section 1337 of such Act (as amended by subsection (a) of
this section) an amount equal to 3.5 percent of the after-tax
income of the enterprise for the preceding year. Upon the
establishment of such affordable housing fund, each
enterprise shall allocate to such fund the amounts reserved
under this paragraph by the enterprise.
(2) Exception to deadline for commitment.--Section
1337(f)(4) of the Housing and Community Development Act of
1992 (as amended by subsection (a) of this section) shall not
apply to any amounts allocated to the affordable housing fund
of an enterprise pursuant to paragraph (1) of this
subsection.
(3) After-tax income.--For purposes of this subsection, the
term ``after-tax income'' has the meaning provided in
subsection (b)(5) of the new section 1337 to be inserted by
the amendment made by subsection (a) of this section.
(4) Effective date.--This subsection shall take effect on
the date of the enactment of this Act.
(c) REFCORP Payments.--Section 21B(f)(2) of the Federal
Home Loan Bank Act (12 U.S.C. 1441b(f)(2)) is amended--
(1) in subparagraph (E), by striking ``and (D)'' and
inserting ``(D), and (E)'';
(2) by redesignating subparagraph (E) as subparagraph (F);
and
(3) by inserting after subparagraph (D) the following new
subparagraph:
``(E) Payments by fannie mae and freddie mac.--To the
extent that the amounts available pursuant to subparagraphs
(A), (B), (C), and (D) are insufficient to cover the amount
of interest payments, each enterprise (as such term is
defined in section 1303 of the Housing and Community
Development Act of 1992 (42 U.S.C. 4502)) shall transfer to
the Funding Corporation in each calendar year the amounts
allocated for use under this subparagraph pursuant to section
1337(f)(1) of such Act.''.
Page 238, strike line 6 and insert the following:
(b) Conforming Amendments.--
(1) Housing and community development act of 1992.--
Subtitle B of title
Page 238, after line 10, insert the following new
paragraph:
(2) Federal home loan banks.--Section 25 of the Federal
Home Loan Bank Act (12 U.S.C. 1445) is amended by striking
``Board under this Act'' and inserting ``Director under
section 1367 of the Housing and Community Development Act of
1992''.
Page 248, line 4, after the semicolon insert ``or''.
Page 248, strike lines 5 through 11 and insert the
following:
``(D) violates any written agreement between the regulated
entity and the Director;
shall forfeit and pay a civil money penalty of not more than
$10,000 for each day during which such violation
continues.''.
Page 249, strike lines 4 through 10 and insert the
following:
``(iii) results in pecuniary gain or other benefit to such
party,
the regulated entity or regulated entity-affiliated party
shall forfeit and pay a civil penalty of not more than
$50,000 for each day during which such violation, practice,
or breach continues.''.
Strike line 22 on page 249 and all that follows through
line 5 on page 250, and insert the following:
``(B) knowingly or recklessly causes a substantial loss to
such regulated entity or a substantial pecuniary gain or
other benefit to such party by reason of such violation,
practice, or breach,
shall forfeit and pay a civil penalty in an amount not to
exceed the applicable maximum amount determined under
paragraph (4) for each day during which such violation,
practice, or breach continues.''.
Page 278, line 21, after the comma insert ``this title
shall take effect on and''.
Page 278, line 23, strike ``1-year'' and insert ``6-
month''.
Page 296, line 19, after the period insert the following:
``This section shall take effect on the date of the enactment
of this Act.''
Page 296, line 21, after the comma insert ``this title
shall take effect on and''.
Page 296, line 23, strike ``1-year'' and insert ``6-
month''.
Page 297, line 13, strike ``1-year'' and insert ``6-month''
Page 297, line 19, strike ``1-year'' and insert ``6-
month''.
Page 297, line 22, strike ``solely''.
Page 297, line 24, after ``sight'' insert ``and in addition
to carrying out its other responsibilities under law''.
Page 302, line 25, strike ``201(a)'' and insert ``301(a)''.
Page 303, line 14, strike ``201(a)'' and insert ``301(a)''.
Page 304, line 13, strike ``1-year'' and insert ``6-
month''.
Page 304, line 17, strike ``1-year'' and insert ``6-
month''.
Page 304, line 19, strike ``solely''.
Page 304, line 20, after ``Board'' insert ``and in addition
to carrying out its other responsibilities under law''.
Page 305, lines 23 and 24, strike ``1-year''.
Page 311, line 7, strike ``one year'' and insert ``6
months''.
Page 311, line 11, strike ``6-month'' and insert ``3-
month''.
Page 312, line 17, strike ``1-year'' and insert ``6-
month''.
Page 312, line 20, strike ``solely''.
Page 312, line 24, strike ``ment)' '' and insert ``ment')
and in addition to carrying out the Secretary's other
responsibilities under law regarding such functions''.
The CHAIRMAN. Pursuant to House Resolution 509, the gentleman from
Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank) each
will control 10 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
The manager's amendment that I offer makes a number of substantive
and technical changes to H.R. 1461, the Federal Housing Finance Reform
Act of 2005.
H.R. 1461, as reported by the Committee on Financial Services,
greatly expands the affordable housing role of Fannie and Freddie.
There are major sections on new single-family and multifamily housing
goals, duty to serve lower-income markets, and a new Affordable Housing
Fund with contributions from the enterprises.
The bill establishes a fund to finance construction of houses for
underserved
[[Page H9176]]
people. It is modeled after the successful Affordable Housing Program
of the Federal Home Loan Bank System. Fannie Mae and Freddie Mac will
manage programs funded by a percentage of their earnings.
The manager's amendment moves the effective date of the entire bill
up from 1 year to 6 months following enactment, including the
affordable housing funds. For the first 2 years, Fannie and Freddie
will contribute 3.5 percent of after-tax earnings and, subsequent to
that, 5 percent of such earnings. Twenty-five percent of the GSEs'
contributions will go annually to the Treasury Department to help pay
off REFCorp, that is, S and L bonds, with the remainder going to the
fund.
The fund will sunset in 5 years, when its extension will be
considered. During the first 2 years, priority consideration will be
given to areas impacted by Hurricanes Katrina and Rita. Thereafter
priority in funding will be based on greatest impact, geographic
diversity, timely action, as well as other disaster area needs.
Eligible recipients, for-profit builders, State housing agencies, and
nonprofit organizations must have a demonstrated capacity for
affordable housing activities and make assurances that they will comply
with limits on the use of those funds. Funds may not be used for
political activities, advocacy, lobbying, counseling services, travel
expenses, and tax return advice.
Nonprofit recipients must have affordable housing as their primary
purpose, and beginning 1 year before applying, nonprofits and their
affiliates cannot have engaged in Federal election activity,
electioneering communication, or lobbying.
Recipient use of funds will be closely tracked. Those misusing funds
will be permanently barred from participation and must make
reimbursement.
In addition, the manager's amendment includes a request from the
Committee on the Judiciary to require consultation with the Attorney
General by the GSE regulator when exercising new litigation authority,
and from the Committee on Government Reform to remove a Freedom of
Information Act exemption for the proceedings of the new agency's
oversight board.
The Federal Housing Finance Agency will establish an ombudsman to
hear complaints and appeals from the GSEs and those having business
relationships with the GSEs.
H.R. 1461 consolidates current GSE regulation by two agencies in HUD
into one agency. The manager's amendment clarifies that existing rules
and regulations will remain in force during the 6-month transition
period and until changed by the new Federal Housing Finance Agency.
I urge adoption of the manager's amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself such time as
I may consume.
Mr. Chairman, I claimed the time in opposition to the manager's
amendment because I am in opposition to a small part of the manager's
amendment, and, like many Members, I have a dilemma. Much of the
manager's amendment is what a manager's amendment ought to be, the
result of taking into account in some cases things that happened after
the bill came out of committee like the hurricanes, some refinements.
It is a very good amendment.
There are two small changes I would like to make. First, the
manager's amendment says, unlike the bill that passed committee, that a
nonprofit group may only ask for these funds and build housing with
these funds if building housing is its primary purpose. Understand that
that unequivocally says no faith-based institution may apply unless we
have a faith-based institution that worships housing. I am not aware of
any, but I do not want to be narrow-minded. There may be one. But any
other faith-based institution has as its primary purpose its faith, and
this excludes organizations that have been doing work.
The gentleman from Louisiana correctly pointed out, well, if they
have been already doing this, this does not stop them. It just means
they cannot get the new money.
But we want this money to be used well. There is a wealth of
experience in the Catholic Church, in the Episcopal Church, in the
Methodist Church, in the Jewish Community Housing For the Elderly. In
other groups, the Local Initiative Support Corporation, in other
groups, the Enterprise Fund, nonprofit groups, some of which have
housing as their primary purpose and some do not, why do we want to say
to groups that have a very successful record of building affordable
housing, including church groups, that they cannot participate in this
program? But that is what it does.
So one thing that I would change in the manager's amendment is to say
that they can do this if housing is one of their primary purposes, not
their only primary purpose. It lets the faith-based groups back in.
Secondly, we agree that we should prohibit the groups, and, remember,
we are not talking about using the money from the Affordable Housing
Fund for anything but housing. That is very clear.
{time} 1400
The Members have said, well, and I kind of slipped into this, well,
political activism, et cetera. Not a penny of the affordable housing
funds can be used for anything but housing; and there are strict
penalties if you get caught doing that. By the way, there may be some
who think that if you participate in affordable housing that it will be
so profitable that it will generate funds that you can use elsewhere.
When I mentioned that point yesterday, people from the Catholic
Conference and the Episcopal group and all the other groups started to
laugh. Anyone who has done subsidized housing knows the organizations
usually wind up further subsidizing with their own funds rather than
end up making money.
But we are talking about now only what you can do with your own money
if you use affordable housing funds for affordable housing. We have
agreed to a lot of restrictions. We have agreed that with your own
money, if you agree to participate in this fund, you cannot engage in
any Federal election activity as it is defined in the Federal Election
Campaign Act. You cannot make expenditure for any electioneering
communication as defined in the Federal Campaign Act. You cannot make
any lobbying expenditure except under the limits of 501(c)3. All of
those we have accepted. They are in the manager's amendment as further
restrictions, and we accept them.
All we are saying is that nonpartisan voter registration and get-out-
the-vote should be permitted uses, in other words, what the gentleman
from Ohio talked about. We had the gentleman from Florida read the
ACORN Plan. That plan by ACORN would have made them ineligible to
participate in this fund. It was partisan. People have every right to
be partisan. We have made a concession here, that, yes, we will say
that if you are engaged in partisan political activity you cannot do
this.
Here is what will be the parliamentary situation. If this manager's
amendment is defeated, I will offer as the recommittal motion 99.5
percent, textually, of the manager's amendment. It is over there at the
majority's side. We will not touch it from what it now is. The only
changes we will make is we will, instead of saying this has to be your
primary purpose, which excludes faith-based groups, we will say it has
to be one of your primary purposes.
We will continue the restriction on electioneering and lobbying, et
cetera, but we will say that electioneering and communications or
partisanship are banned, but nonpartisan voter registration and
nonpartisan get-out-the-vote are not banned. That is the question.
Should we say that if you do affordable housing, you cannot also do
voter registration, nonpartisan voter registration. If you are caught
doing it in a partisan way, then you would lose the funds under here.
You cannot do get out the vote.
Again, voting and residence are very closely linked in America. You
vote from your home. In some cases you might vote in your home, if you
are in an elderly development. What about the people, and the gentleman
from Ohio raised this. The gentleman from Ohio said, well, we are going
to work on it. Yes, it has to be worked on, because right now, thanks
to the demands of the Republican Study Committee, it is not there, the
right to do that.
[[Page H9177]]
If you have a housing development, you cannot, under this manager's
amendment, help the old people in the development vote. You cannot
invite somebody in to do voter registration. They can come in on their
own, but you cannot cooperate. Again, I want to emphasize and I would
say to my Republican friends, this is a bill that has a lot of
bipartisan support. We have some partisan differences in other areas
than housing, but this one got pretty bipartisan.
What happened is this: there are people who do not like affordable
housing. I have to say the gentleman from Texas (Mr. Hensarling) is not
here, but he said why do you not just do vouchers instead of this. He
was being honest. He is not really for the affordable housing program
at all.
I did look up, on June 29th this year, the House by a majority
adopted an amendment to increase section 8 vouchers. The gentleman from
Texas (Mr. Hensarling) voted against that. Thirty Republicans voted for
it. He was not one of them.
I think there are people who do not want the housing to go forward,
and there are others who do not want to see an increased voter
participation by people they do not think will be serious enough
voters. If that is what the House wants to vote on, okay.
But procedurally what you have is a bill comes out of committee; it
is held up for months because a part of the Republican Party does not
want to put this to a fair vote. Well, I regret that. We should have
had a fair vote. I am just offering you the next best thing. It is not
the same thing. It is not a clean vote, but here is the functional
equivalent.
Members can have two choices: they can vote against the manager's
amendment and know that I will offer a recommittal motion, which will
be everything in the manager's amendment except the one provision that
prevents faith-based groups from participating; and the one that says
no nonpartisan voter registration or the voter turnout.
Alternatively, if people vote for the manager's amendment, maybe some
people will be afraid: well, I do not want to look like I am not
helping the people in the hurricane area, then I will offer a recommit.
The recommit will make those three small specific changes in the
manager's amendment.
In other words, Members will have a chance to vote on everything in
the manager's amendment, all the restrictions on what these groups can
do with their own money, all the restrictions of what they can do with
affordable housing money, put our faith-based groups in and have the
voter registration be allowed. That is what will be before us.
Mr. Chairman, I reserve the balance of my time.
Mr. OXLEY. Mr. Chairman, I am pleased to yield 4 minutes to the
gentleman from Louisiana (Mr. Baker), chairman of the GSE subcommittee.
Mr. BAKER. Mr. Chairman, I thank the gentleman for his continuing
courtesy and leadership on this issue. I am going to try one more time
on this thing. The bill as it is now constructed allocates 3.5 percent
of net profit for the first 2 years from the various enterprises into a
fund which gives as a priority Katrina victims, Rita victims and
natural disaster victims, in that order.
I can tell you if I were to go to the city of Baker, in my district
today, walk down Groom Road to the FEMA trailer park and say to them, I
am going to buy you a bus to haul you to go vote 2 years from now, or I
am going to put money into building you a home, guess which one they
would pick. People want out of the FEMA trailers, they want out of
their circumstance; and almost every cent of this money, we will
guarantee, I promise, to be utilized almost exclusively for Katrina and
Rita.
It is estimated as a result of the Katrina disaster, 100,000 homes
are impaired or destroyed: 100,000. The guesstimate of what it might
take to pay off mortgages, to clean the mess up, and to build homes
back is easily $30 billion. That is Katrina. Then we talk about Rita
and then welcome back and plug Wilma in as a natural disaster, $500
million in the scope of this debate, concerning ourselves with creating
a resource for additional political activism does not make sense.
Now, let us talk about the administration of the program: who is
going to run it, what is the program. I know how you check on a house.
You go see if it is there. Then you can figure out if somebody is in it
and who are they. You can look at their income tax return; and, yes,
they are entitled to be here pursuant to the provisions of the program.
How do you regulate a bus acquisition program used for hauling people
to the polls? Who is going to do that? What are the rules? How about
this? How about you leave Katrina/Rita victims alone, come back with
regulations that create a system, something that makes sense. Here is
how you do it. Here is how you comply. Then you get the money. No, we
want to take the money first and figure it out later. That is what gets
this place in trouble.
Now, if we really want to work together and reclaim our bipartisan
territory, let us take it one step at a time. Let us figure out what
the problem is, figure out a remedy, let us promulgate it, make it
subject to hearings, pass it through the Congress, and plug some money
in later. Now, I know that may be too logical, but I really want to
leave that as a thought before you vote against the manager's
amendment.
This is a well-crafted proposal with extremely limited resources
aimed at an enormous problem that otherwise will not get resolved in a
very cost-effective manner, and we will outstrip the resources of this
proposal for 5 years, much less the 2 years for which the money has
been officially dedicated for this purpose.
Keep in mind, if you are building houses and hauling voters and
registering and engaged in political advocacy as of the date of passage
of this bill, you can still do it. You just do not get to back your
truck up to the U.S. Treasury and download a bunch of this money. That
is all. It is an easy choice, and I suggest to the House that it is a
reasonable position for us to take and a responsible position. It is
not an attack on the basic civil rights of this country.
Mr. FRANK of Massachusetts. Mr. Chairman, I first yield myself 1
minute to say I do not think it is a fair characterization of the low-
income housing activities of the Catholic Church or other organizations
that they are trying to back up the truck to the Treasury. In the first
place, there is no debate that every penny in the affordable housing
fund goes for affordable housing.
The question is, what do you have to give up as a choice of doing the
affordable housing. Every faith organization in America, every
Protestant denomination, every branch of Judaism, and the Roman
Catholic Church says we do housing, and the gentleman is right. They
could simply refuse to take any money from this and go forward, because
they are not eligible for money from this.
Why do that? Why say to the faith-based organization, whatever
happened to your belief in the importance of helping faith-based
organizations? Is it over already, that romance? Because that is what
we just want to change. All we want is to allow our religious
organizations in part to be able to participate without stopping their
voter registration and other activity.
Mr. Chairman, I yield the balance of my time to the gentleman from
Pennsylvania (Mr. Kanjorski).
Mr. KANJORSKI. Mr. Chairman, I think we have debated a tough issue. I
am sure there are people on the other side that understand why we feel
so strongly on this faith-based issue. We have maybe a chance to
resolve this and come out of this House with a resounding victory.
If we vote down the manager's amendment, we will include the entire
manager's amendment in the motion to recommit with three exceptions. We
will take out that the prime purpose has to be housing, so faith-based
organizations can still consider God as a primary challenge and
obligation.
Secondly, we will add in the terms that will allow for voter
registration and get-out-the vote on a nonpartisan basis. So this will
only affect getting out the vote and voter registration in a
nonpartisan way. Finally, what I urge my colleagues on the other side
to do is vote down the manager's amendment, accept the motion to
recommit, have a perfect bill that we can walk out of here today with
almost a unanimous approval.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield for the purpose of
[[Page H9178]]
making a unanimous consent request to the gentlewoman from Texas (Ms.
Jackson-Lee).
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Chairman, I rise in opposition to the
manager's amendment because it is a deal breaker with those provisions
and certainly because the conference of Catholic bishops has indicated
that they want to build houses and participate in democracy too.
Mr. Chairman, I rise in opposition to the instant legislation, H.R.
1461--especially insofar as it fails to remove the unfair and
unreasonable language that provides that nonprofits will be prohibited
from using their own funds to engage in nonpartisan voter registration
and requires that housing be their primary purpose in order to receive
funds.
The Motion to Recommit made by Mr. Franks seeks to protect our faith-
based entities that need these valuable dollars to provide affordable
housing.
Not only would the Gentleman's amendment have redeemed this
legislation, but his Motion to Recommit would have removed language
contained in the current Manager's Amendment that bars organizations
with proven experience in mobilizing community support and resources--a
nonpartisan initiative. In addition, the Manager's Amendment would
constrain the ability of experienced faith-based and community-based
organizations to successfully compete for the affordable housing funds
that are proposed in the underlying bill.
My District of Houston, Texas, has a plethora of faith-based
organizations that have plans that would provide much-needed affordable
housing for the surrounding community. Our affordable housing stock has
suffered for a long time, and I have been working steadfastly with the
Secretary of Housing and Urban Development to facilitate the obtainment
of opportunities by these groups. The nugatory provisions in the
Manager's Amendment will contravene the hard work that I and many other
Members have done to this end.
While I applaud the effort made by the administration to remove
barriers to full participation in Federal programs and funding faith-
based entities, proposals such as the Manager's Amendment will bar
these groups from access to this funding while for-profit agencies
remain free to engage in the same voter registration activities. This
double-standard must be removed--it contravenes the spirit of the U.S.
Constitution.
Existing limits in H.R. 1461 on activities that qualify for
affordable housing funds prevent abuse of this funding. Groups, many of
which operate in my District of Houston sign certifications to receive
Federal, State, and local government funds that prohibit diversion of
program funds for political and lobbying purposes. There are multiple
vehicles available to ensure that the new Affordable Housing Funds are
protected from inappropriate use by grantees.
Our faith-based groups need the proposed Affordable Housing Fund
under H.R. 1461, especially in the devastated Gulf Coast region where
hundreds of thousands of families have not been able to return to their
homes. In such challenging times, it would be unfortunate if
experienced faith-based organizations and nonprofits that have
performed laudably in meeting the needs of these survivors would be
barred from participation in funding that would help meet critical
housing needs.
Mr. Chairman, I support the legislation on the above limited basis.
Mr. OXLEY. Mr. Chairman, I would simply say in summary to ask the
Members to support the manager's amendment. We need to support the
folks down in the gulf region that were affected by the hurricane. The
purpose of the manager's amendment was twofold, to insure that money
was available as quickly as possible to those victims who are 100,000
homeless, just in Louisiana alone, to make certain that they can get
access to that as quickly as possible; secondly, to make certain that
the groups that are building those homes are not political front groups
for a right or left agenda, but ones who are sincerely interested in
building with bricks and mortar to provide that opportunity to those
folks.
If you want to help those folks in the gulf region, and you want to
make certain that money is used effectively and not in a political way,
support the Oxley manager's amendment.
Mr. Chairman, I yield back the balance of my time.
The Acting CHAIRMAN (Mr. Putnam). The question is on the amendment
offered by the gentleman from Ohio (Mr. Oxley).
The question was taken; and the Acting Chairman announced that the
noes appeared to have it.
Mr. BAKER. Mr. Chairman, I demand a recorded vote.
The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Ohio (Mr.
Oxley) will be postponed.
It is now in order to consider amendment No. 2 printed in House
Report 109-254.
Amendment No. 2 Offered by Ms. Carson
Ms. CARSON. Mr. Chairman, I offer an amendment.
The Acting CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 2 offered by Ms. Carson:
Page 114, line 6, strike the quotation marks and the last
period.
Page 114, after line 6, insert the following new paragraph:
``(3) Manufactured housing market.--In determining whether
an enterprise has complied with the duty under subparagraph
(A) of subsection (a)(2), the Director may consider loans
secured by both real and personal property.''.
The Acting CHAIRMAN. Pursuant to House Resolution 509, the
gentlewoman from Indiana (Ms. Carson) and a Member opposed each will
control 5 minutes.
The Chair recognizes the gentlewoman from Indiana (Ms. Carson).
Ms. CARSON. Mr. Chairman, I yield myself such time as I may consume.
This amendment I am offering today will help low- and moderate-income
families fulfill the American dream of homeownership.
This amendment will not mandate, but encourage, the GSEs to purchase
personal property loans secured by manufactured housing and will count
towards the GSE underserved market goals.
{time} 1415
This practice is consistent with the charters of Fannie Mae and
Freddie Mac.
In 2004, the average income of those who purchased manufactured homes
was $28,000. These homes cost 30 percent less than a site-built house
and are equal in quality, amenities, and efficiency. Currently only
real property loans are considered for manufactured housing purchases,
but the vast majority of manufactured home buyers rent the land on
which it rests. Personal property loans are issued for the purchase of
a manufactured home, but not tied to any piece of land. While these
loans are typically financed as personal property, my amendment would
allow for the GSEs to only purchase personal property loans that
finance manufactured housing.
In 1992, Congress set a goal for the GSEs to promote mortgage credit
in areas where traditional credit opportunities were unavailable,
inaccessible, or too costly. My amendment will help the GSEs achieve
this goal by encouraging them to purchase personal property loans for
manufactured housing.
Mr. Chairman, this amendment will assist GSEs in continuing to serve
home buyers in underserved areas and will encourage lenders to offer
more and better loans to finance the purchase of new homes. It has the
broad support of manufactured housing organizations as well as
consumers. It has bipartisan support. I encourage my colleagues to
adopt this amendment.
Mr. Chairman, I yield back the balance of my time.
Mr. OXLEY. Mr. Chairman, I rise to claim the time in opposition to
the amendment but am not opposed and would indicate that we are pleased
to accept the amendment offered by the gentlewoman from Indiana and
applaud her for her foresight and leadership in the area of
manufactured housing.
The Acting CHAIRMAN (Mr. Putnam). The question is on the amendment
offered by the gentlewoman from Indiana (Ms. Carson).
The amendment was agreed to.
The Acting CHAIRMAN. It is now in order to consider amendment No. 3
printed in House Report 109-254.
Amendment No. 3 Offered by Mr. Davis of Alabama
Mr. DAVIS of Alabama. Mr. Chairman, I offer an amendment.
The Acting CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 3 offered by Mr. Davis of Alabama:
Page 107, strike lines 20 through 24 and insert the
following new paragraph:
``(26) Rural area.--The term `rural area' has the meaning
given such term in section
[[Page H9179]]
520 of the Housing Act of 1949 (42 U.S.C. 1490), except that
such term includes micropolitan areas and tribal trust
lands.''.
The Acting CHAIRMAN. Pursuant to House Resolution 509, the gentleman
from Alabama (Mr. Davis) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Alabama (Mr. Davis).
Mr. DAVIS of Alabama. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, one of the goals of this bill is to stimulate
affordable housing activity on the part of the GSEs in certain
categories and areas that traditionally have been underserved, and one
of those happens to be the rural portions of America. There have been
various goals that have been added that will require the GSEs to be
more proactive in their lending in rural America.
The concern that I have with the underlying bill is that the
definition of ``rural'' that has been adopted is one that is, number
one, very different from the definition that has historically been used
by the Congress beginning with the Housing Act of 1949; and, second of
all, I think it is one that is unduly restrictive. The new definition
would define ``rural'' as being, among other things, nonmetro areas.
As many of us in this Chamber know, ``metro area'' is very broadly
defined in this country, and a number of areas that we would all think
of as being rural, that we would all view as being within the ambit of
this bill, would certainly fall inside metro areas and thus be excluded
from the purview of this bill, and would be excluded from the
definition of ``rural.''
So what our amendment, which I believe to be noncontroversial, would
do would be to return to the traditional definition of ``rural'' that
is contained in the Housing Act of 1949. That definition again is one
that has long been accepted and long employed by this body.
I should also note, Mr. Chairman, that we would retain some of the
changes made in the substantive bill which would talk about
micropolitan and tribal trust lands. Those would be included in the new
definition, but we would return to the traditional definition that has
been employed since 1949.
Mr. Chairman, I reserve the balance of my time.
Mr. OXLEY. Mr. Chairman, I rise to claim the time in opposition, but
I also want to say I do not oppose this amendment. As a matter of fact,
I want to congratulate the gentleman from Alabama for an excellent
amendment and well thought-out. He is a valuable member of the
committee. This side has no objections to the amendment.
Mr. DAVIS of Alabama. Mr. Chairman, I thank the chairman for his
compliments.
Mr. DAVIS of Alabama. Mr. Chairman, I yield back the balance of my
time.
The Acting CHAIRMAN. The question is on the amendment offered by the
gentleman from Alabama (Mr. Davis).
The amendment was agreed to.
The Acting CHAIRMAN. It is now in order to consider amendment No. 4
printed in House Report 109-254.
Amendment No. 4 Offered by Mr. Leach
Mr. LEACH. Mr. Chairman, I offer an amendment.
The Acting CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
(Amendment No. 4 offered by Mr. Leach:
Strike line 21 on page 49 and all that follows through line
4 on page 51 and insert the following new subsections:
``(c) Establishment of Revised Minimum Capital Levels.--
Notwithstanding subsections (a) and (b) and notwithstanding
the capital classifications of the regulated entities, the
Director may, by regulations issued under section 1319G(b) or
by order--
``(1) establish a minimum capital level, for any particular
enterprise, that is higher than the level specified in
subsection (a) or, for any particular Federal home loan bank,
that is higher than the level specified in subsection (b), as
the Director deems necessary or appropriate taking into
consideration the particular circumstances of the particular
regulated entity, which may include any prudential standards
necessary to ensure long-term insitutional viability and
competitive equity in the market; or
``(2) establish a minimum capital level for the
enterprises, for the Federal home loans banks, or for both
the enterprises and the banks, that is higher than the level
specified in subsection (a) for the enterprises or the level
specified in subsection (b) for the Federal home loan banks,
to the extent needed to ensure that the regulated entities
operate in a safe and sound manner.
``(d) Effect on Other Authority.--Nothing in this section
may be construed to limit the authority of the Director to
require a regulated entity to raise or maintain capital under
other provisions of law, or pursuant to prompt corrective
action or administrative enforcement actions, or in
connection with conservatorship or receivership powers.''.
The Acting CHAIRMAN. Pursuant to House Resolution 509, the gentleman
from Iowa (Mr. Leach) and the gentleman from Massachusetts (Mr. Frank)
each will control 5 minutes.
The Chair recognizes the gentleman from Iowa (Mr. Leach).
Mr. LEACH. Mr. Chairman, I yield myself such time as I may consume.
My amendment is to strengthen the capital requirements of the bill.
But first, let me acknowledge that between passage in the committee and
the bringing of the bill to the floor, the capital standard provision
has been strengthened, and I congratulate the committee for doing that.
But secondly, let me stress that still at this point in time, even
though the bill itself got a strong bipartisan committee vote, it lacks
the support of the administration. The principal reason does not relate
to some of the debate that has occurred earlier on a very important
issue, it relates to the fact that the Department of the Treasury, that
is the administration, does not want to have accountability for
regulation if it is not given adequate authority. And, lacking adequate
authority, it feels that this approach is not one that produces greater
safety and soundness for the American financial system.
So what this amendment does is strengthens the capital standard
provision. Minimum capital is the amount of capital needed to protect
financial institutions against broad categories of business risk, so
when a crisis strikes, there is a reserve to fall back upon. Capital is
especially important for GSEs because their short-term obligations are
large, and they are single-industry-intensive. Fannie Mae and Freddie
Mac, for instance, have debt obligations due within a year of about 45
percent of their debt liabilities. Any problem with capital markets
affecting these firms could become very large, very quickly.
What might ``very quickly'' mean? Because of the scale of short-term
obligations of the GSEs, the GSEs are rolling over many billions of
dollars of obligations each week. For this reason, a market crisis
could become acute in a matter of days, and this is something the
country has to think through.
Today's House vote comes nearly a year after Federal regulators
ordered Fannie Mae to restate $10.8 billion in previously reported
earnings because of accounting problems several years ago, and this is
not long after Freddie Mac restated about $5 billion in earnings. The
stakes are significant, given that these two GSEs carry together about
$1.5 trillion in debt. The failure of either institution could
potentially make the savings and loan crisis of a generation ago look
somewhat minor.
I would stress here that Fannie and Freddie are very unique
institutions. They are, on the one hand, secondary market institutions
serving as intermediaries primary markets as well as a tertiary market.
On the other hand, when they hold mortgages in their portfolios, they
are, in effect, simply another S&L. Hence, while financial risk
management tools are much greater than they were a generation ago when
we had the S&L crisis, in one sense, for these two institutions, their
use is a little bit more problematic, because in the housing industry
risk is transferred to Fannie and Freddie disproportionately. They
become receivers of risk and as risk becomes concentrated within these
institutions, they disproportionately become on the hook if very
extraordinary things happen in the economy, something that is not
beyond thinking.
In the 1980s, without sufficient capital, S&Ls grew larger and
entered new lines of business as their capital basis shrunk, and, when
things got bad, the taxpayer was on the hook for $250 billion. Fannie
and Freddie today operate on a capital base much less than S&Ls did
just before their collapse in the 1980s.
It has been suggested by some--actually, a ``Dear Colleague'' letter
has
[[Page H9180]]
been circulated--that opponents believe that my amendment would limit
the discretion of the new regulator. I would only suggest that that is
not my intent, and it is clearly not the intent of the language.
Let me just describe what the Federal Reserve says about this. In a
letter dated October 5, 2005, Chairman Greenspan wrote, ``This
amendment would improve the proposed legislation. . . The regulators
for the GSEs should have a free hand in determining . . . minimum risk-
based capital standards for these enterprises. Your amendment would
give the regulator greater discretion in this critical area.''
It is one thing to have institutions established to have an advantage
in cost of money provided by the United States Government, and another
thing to also have advantage in leverage ratio provided by the United
States Congress. So because the growing presence of GSEs in our markets
and the possible risk they pose to our financial system are
significant, it is clear we need a strong regulator, and I would urge
that this regulator be given this additional authority.
The Acting CHAIRMAN. The time of the gentleman from Iowa has expired.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 3 minutes.
Mr. Chairman, the gentleman from Iowa is a thoughtful Member and the
former chairman of the committee, who has been very critical of the
role of GSEs, and I think this is, frankly, not so much a specific
amendment as an expression of a sense that, a view that they have
gotten too large. One particular aspect to the amendment seems to me to
sum this up when it calls for higher minimum capital requirements as
the director deems necessary or appropriate to ensure long-term
institutional viability and competitive equity in the market.
Now, we are all for long-term institutional viability, but
competitive equity means, look, there are banks who complain that
because Fannie and Freddie are perceived to have some back-up from the
Congress, and let me say right now, if you are listening, if you are
buying Fannie or Freddie's paper because you think I am going to vote
to bail you out, sell it, and cash it in, I am not going to do that. I
do not think there is a Federal guarantee. I certainly, as a great
supporter of their housing role, do not plan to do that. But banks
complain that they cannot meet Fannie and Freddie's price because
Fannie and Freddie can borrow money more cheaply. That is part of what
we are dealing with here when you talk about competitive equity.
I agree that Fannie and Freddie get certain advantages in this. That
is why we have virtual unanimity here. There are debates about
restrictions on what happens when you go into the Affordable Housing
Fund, but there is virtual unanimity about having an Affordable Housing
Fund.
What we are saying is there are two ways we can do this. We can
reduce what we think is Freddie and Fannie's competitive advantage, or
you can make sure that more of that competitive advantage is shared
with the housing market, and that is the position that the majority,
bipartisan majority of the committee has taken.
When the gentleman from Iowa talks about competitive equity, it seems
to me you are inviting the banks to say, wait a minute, that is not
fair, and we do not want Fannie and Freddie to be able to do this as
cheaply as possible because it is not fair to us.
With regard to the powers of the regulator, the gentleman from
Louisiana played a major role in this, and the gentleman from
Pennsylvania was with him, and the chair and ranking member of the
subcommittee. The regulator is fully empowered. The regulator within
the bill is fully empowered to do whatever is necessary for safety and
soundness. The regulator can raise capital in general; the regulator
can decide that a particular activity is risky, and capital should be
raised to compensate for that. But to go beyond and to get into
competitive equity, it seems to me to be not so much a concern for
safety and soundness as the philosophical question.
I would also say that with all of the misdeeds of Fannie and Freddie,
their safety and soundness has not been called into question. Yes,
there were accounting misdeeds, and people got money who should not
have gotten it, and some are being penalized as they should be, but
safety and soundness has not been called into question, and this
legislation further enhances what the regulator does.
Mr. LEACH. Mr. Chairman, will the gentleman yield?
Mr. FRANK of Massachusetts. I yield to the gentleman from Iowa.
Mr. LEACH. Mr. Chairman, first I would like to make clear that what
the amendment does is say, ``which may include'' consideration for what
the gentleman has just indicated.
Mr. FRANK of Massachusetts. Competitive equity.
Mr. LEACH. That is correct. But secondly, if you do not have concern
for competitive equity, you put the taxpayer at greater risk because
you will have weaker standards. You also drive a system that we will be
putting all assets of a given kind of industry within a governmentally
privileged institution. That is what the trends are. So this is both a
taxpayer protection and free market protection.
{time} 1430
Mr. FRANK of Massachusetts. Well, I would say to the gentleman, we
agree on this. Competitive equity has got nothing to do with protecting
the taxpayers, except the taxpayers who happen to own banks. That is
where competitive equity comes in.
The fact is that safety and soundness is what protects the taxpayers.
Competitive equity has to do with fairness to competitors. That does
not implicate the Treasury.
Mr. Chairman, I yield such time as he may consume to the gentleman
from Texas (Mr. Neugebauer).
Mr. NEUGEBAUER. Mr. Chairman, I rise in opposition to the Leach
amendment. H.R. 1461 clearly stipulates that the new regulator for
Fannie, Freddie, and the Home Loan Banks has the authority to increase
the minimum capital levels ``to the extent needed to ensure that the
regulated entities operate in a safe and sound manner.''
This is a broad grant of authority to this new regulator. The Leach
amendment, however, begins to limit the discretion of the regulator by
adding several competitive issues in the determination of the minimum
capital.
The Leach amendment would effectively establish minimum capital at an
arbitrary decision, by equating that to banks. Let us be very clear
that these entities are not banks. One of the things that we need to
make sure of is that if we are going to form a world-class regulator
for these entities and that we are going to put in place people to
manage that process and to regulate these entities, we need to give
them the discretion that they need to make sure that as they set those
capital levels that they are considering the economy, the state of the
markets at that particular time, and have the ability to regulate to
those entities and not try to make those entities something that they
are not, and these entities are not banks.
The gentleman's amendment does not do anything to increase the
safeness and the soundness of these institutions. By the very fact that
the regulators will have the ability to do that, set those minimum
capital levels at a level that they need to be, gives them the
flexibility to do that.
And so I would urge Members to vote against the Leach amendment.
The Acting CHAIRMAN (Mr. Putnam). The question is on the amendment
offered by the gentleman from Iowa (Mr. Leach).
The question was taken; and the Acting Chairman announced that the
noes appeared to have it.
Mr. LEACH. Mr. Chairman, I demand a recorded vote.
The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Iowa (Mr.
Leach) will be postponed.
Sequential Votes Postponed in Committee of the Whole
The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, proceedings
will now resume on those amendments on which further proceedings were
postponed, in the following order:
Amendment No. 1 by Mr. Oxley of Ohio.
Amendment No. 4 by Mr. Leach of Iowa.
The Chair will reduce to 5 minutes the time for any electronic vote
after the first vote in this series.
Amendment No. 1 Offered by Mr. Oxley
The Acting CHAIRMAN. The pending business is the demand for a
recorded
[[Page H9181]]
vote on the amendment offered by the gentleman from Ohio (Mr. Oxley) on
which further proceedings were postponed and on which the noes
prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.
Recorded Vote
The Acting CHAIRMAN. A recorded vote has been demanded.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 210,
noes 205, not voting 19, as follows:
[Roll No. 541]
AYES--210
Aderholt
Akin
Alexander
Bachus
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boustany
Brady (TX)
Brown (SC)
Burgess
Burton (IN)
Buyer
Calvert
Camp
Cantor
Capito
Carter
Castle
Chabot
Chocola
Coble
Cole (OK)
Conaway
Crenshaw
Cubin
Culberson
Cunningham
Davis (KY)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
Dent
Doolittle
Drake
Dreier
Duncan
Emerson
English (PA)
Everett
Farr
Feeney
Ferguson
Fitzpatrick (PA)
Flake
Forbes
Fortenberry
Fossella
Foxx
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gillmor
Gingrey
Gohmert
Goode
Goodlatte
Granger
Graves
Green (WI)
Gutknecht
Hall
Harris
Hart
Hastert
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Hulshof
Hunter
Hyde
Inglis (SC)
Issa
Istook
Jenkins
Jindal
Johnson (CT)
Johnson, Sam
Jones (NC)
Keller
Kelly
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
Kuhl (NY)
LaHood
Latham
LaTourette
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas
Lungren, Daniel E.
Mack
Manzullo
Marchant
McCaul (TX)
McCotter
McCrery
McHenry
McKeon
McMorris
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Oxley
Paul
Pearce
Pence
Peterson (PA)
Pickering
Pitts
Poe
Pombo
Porter
Price (GA)
Pryce (OH)
Putnam
Radanovich
Regula
Rehberg
Reichert
Renzi
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Royce
Ryan (WI)
Ryun (KS)
Saxton
Schmidt
Schwarz (MI)
Sensenbrenner
Sessions
Shadegg
Shays
Sherwood
Shimkus
Shuster
Simpson
Smith (TX)
Sodrel
Souder
Stearns
Sullivan
Tancredo
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Turner
Upton
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
Young (FL)
NOES--205
Abercrombie
Ackerman
Allen
Andrews
Baca
Baird
Baldwin
Barrow
Bean
Becerra
Berkley
Berman
Berry
Bishop (NY)
Blumenauer
Boren
Boucher
Boyd
Bradley (NH)
Brady (PA)
Brown (OH)
Brown, Corrine
Butterfield
Capps
Capuano
Cardin
Cardoza
Carnahan
Carson
Case
Chandler
Clay
Cleaver
Clyburn
Conyers
Cooper
Costa
Costello
Cramer
Crowley
Cuellar
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeFazio
DeGette
Delahunt
DeLauro
Dicks
Dingell
Doggett
Doyle
Edwards
Ehlers
Engel
Eshoo
Etheridge
Evans
Fattah
Filner
Ford
Frank (MA)
Gilchrest
Gonzalez
Gordon
Green, Al
Green, Gene
Grijalva
Gutierrez
Harman
Hastings (FL)
Herseth
Higgins
Hinchey
Hinojosa
Holden
Holt
Honda
Hooley
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson (IL)
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick (MI)
Kind
Kucinich
Langevin
Lantos
Larsen (WA)
Larson (CT)
Leach
Lee
Levin
Lewis (GA)
Lipinski
Lofgren, Zoe
Lowey
Lynch
Maloney
Markey
Marshall
Matheson
Matsui
McCarthy
McCollum (MN)
McDermott
McGovern
McHugh
McIntyre
McKinney
McNulty
Meehan
Meeks (NY)
Melancon
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore (KS)
Moore (WI)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Otter
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Petri
Pomeroy
Price (NC)
Rahall
Ramstad
Rangel
Ross
Rothman
Ruppersberger
Rush
Ryan (OH)
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Schwartz (PA)
Scott (GA)
Scott (VA)
Serrano
Sherman
Simmons
Skelton
Slaughter
Smith (NJ)
Smith (WA)
Snyder
Solis
Spratt
Stark
Strickland
Stupak
Sweeney
Tanner
Tauscher
Thompson (CA)
Thompson (MS)
Tierney
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Wasserman Schultz
Waters
Watson
Watt
Waxman
Weiner
Woolsey
Wu
Wynn
NOT VOTING--19
Bishop (GA)
Boswell
Brown-Waite, Ginny
Cannon
Diaz-Balart, L.
Diaz-Balart, M.
Emanuel
Foley
Meek (FL)
Moran (VA)
Platts
Reyes
Reynolds
Ros-Lehtinen
Roybal-Allard
Shaw
Towns
Wexler
Whitfield
{time} 1457
Mr. WEINER, Ms. MILLENDER-McDONALD, and Mr. GILCHREST changed their
vote from ``aye'' to ``no''.
Mr. SIMPSON changed his vote from ``no'' to ``aye''.
So the amendment was agreed to.
The result of the vote was announced as above recorded.
Personal Explanation
Mr. FARR. Mr. Chairman, on rollcall No. 541, I inadvertently voted
``aye.'' I wish the Record to show that had I voted correctly, I would
have voted ``no.''
Amendment No. 4 Offered by Mr. Leach
The Acting CHAIRMAN (Mr. Putnam). The pending business is the demand
for a recorded vote on the amendment offered by the gentleman from Iowa
(Mr. Leach) on which further proceedings were postponed and on which
the noes prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.
Recorded Vote
The Acting CHAIRMAN. A recorded vote has been demanded.
A recorded vote was ordered.
The Acting CHAIRMAN. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 36,
noes 378, not voting 19, as follows:
[Roll No. 542]
AYES--36
Beauprez
Blackburn
Chocola
Cooper
Dicks
Dingell
Duncan
Ehlers
Flake
Franks (AZ)
Garrett (NJ)
Gilchrest
Gillmor
Gutknecht
Hensarling
Hostettler
Johnson (CT)
King (IA)
Kingston
Latham
Leach
Lungren, Daniel E.
Musgrave
Nussle
Paul
Pence
Petri
Rohrabacher
Royce
Ryan (WI)
Shadegg
Shays
Taylor (MS)
Taylor (NC)
Wamp
Wynn
NOES--378
Abercrombie
Ackerman
Aderholt
Akin
Alexander
Allen
Andrews
Baca
Bachus
Baird
Baker
Baldwin
Barrett (SC)
Barrow
Bartlett (MD)
Barton (TX)
Bass
Bean
Becerra
Berkley
Berry
Biggert
Bilirakis
Bishop (NY)
Bishop (UT)
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boren
Boucher
Boustany
Boyd
Bradley (NH)
Brady (PA)
Brady (TX)
Brown (OH)
Brown (SC)
Brown, Corrine
Burgess
Burton (IN)
Butterfield
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Cardoza
Carnahan
Carson
Carter
Case
Castle
Chabot
Chandler
Clay
Cleaver
Clyburn
Coble
Cole (OK)
Conaway
Conyers
Costa
Costello
Cramer
Crenshaw
Crowley
Cubin
Cuellar
Culberson
Cummings
Cunningham
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (KY)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeFazio
DeGette
Delahunt
DeLauro
DeLay
Dent
Doggett
Doolittle
Doyle
Drake
Dreier
Edwards
Emerson
Engel
English (PA)
Eshoo
Etheridge
Evans
Everett
Farr
Fattah
Feeney
Ferguson
Filner
Fitzpatrick (PA)
Forbes
Ford
Fortenberry
Fossella
Foxx
Frank (MA)
Frelinghuysen
Gallegly
Gerlach
Gibbons
Gingrey
Gohmert
Gonzalez
Goode
Goodlatte
Gordon
Granger
Graves
Green (WI)
Green, Al
Green, Gene
Grijalva
Gutierrez
Hall
Harman
Harris
Hart
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Herseth
Higgins
Hinchey
Hinojosa
Hobson
Hoekstra
Holden
Holt
Honda
[[Page H9182]]
Hooley
Hoyer
Hulshof
Hunter
Hyde
Inglis (SC)
Inslee
Israel
Issa
Istook
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Jenkins
Jindal
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kildee
Kilpatrick (MI)
Kind
King (NY)
Kirk
Kline
Knollenberg
Kolbe
Kucinich
Kuhl (NY)
LaHood
Langevin
Lantos
Larsen (WA)
Larson (CT)
LaTourette
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren, Zoe
Lowey
Lucas
Lynch
Mack
Maloney
Manzullo
Marchant
Marshall
Matheson
Matsui
McCarthy
McCaul (TX)
McCollum (MN)
McCotter
McCrery
McDermott
McGovern
McHenry
McHugh
McIntyre
McKeon
McKinney
McMorris
McNulty
Meehan
Meeks (NY)
Melancon
Menendez
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Mollohan
Moore (KS)
Moore (WI)
Moran (KS)
Murphy
Murtha
Myrick
Nadler
Napolitano
Neal (MA)
Neugebauer
Ney
Northup
Norwood
Nunes
Oberstar
Obey
Olver
Ortiz
Osborne
Otter
Owens
Oxley
Pallone
Pascrell
Pastor
Payne
Pearce
Pelosi
Peterson (MN)
Peterson (PA)
Pickering
Pitts
Poe
Pombo
Pomeroy
Porter
Price (GA)
Price (NC)
Pryce (OH)
Putnam
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Reichert
Renzi
Rogers (AL)
Rogers (KY)
Rogers (MI)
Ross
Rothman
Ruppersberger
Rush
Ryan (OH)
Ryun (KS)
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Saxton
Schakowsky
Schiff
Schmidt
Schwartz (PA)
Schwarz (MI)
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Sessions
Sherman
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Slaughter
Smith (NJ)
Smith (TX)
Smith (WA)
Snyder
Sodrel
Solis
Souder
Spratt
Stark
Stearns
Strickland
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Upton
Van Hollen
Velazquez
Visclosky
Walden (OR)
Walsh
Wasserman Schultz
Waters
Watson
Watt
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Young (AK)
Young (FL)
NOT VOTING--19
Berman
Bishop (GA)
Boswell
Brown-Waite, Ginny
Diaz-Balart, L.
Diaz-Balart, M.
Emanuel
Foley
Markey
Meek (FL)
Moran (VA)
Platts
Reyes
Reynolds
Ros-Lehtinen
Roybal-Allard
Shaw
Wexler
Whitfield
{time} 1506
Mr. ADERHOLT changed his vote from ``aye'' to ``no.''
Mr. ROHRABACHER changed his vote from ``no'' to ``aye.''
So the amendment was rejected.
The result of the vote was announced as above recorded.
The Acting CHAIRMAN (Mr. Bishop of Utah). It is now in order to
consider amendment No. 5 printed in House Report 109-254.
Amendment No. 5 Offered by Mr. Royce
Mr. ROYCE. Mr. Chairman, I offer an amendment.
The Acting CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 5 offered by Mr. Royce:
Page 53, line 20, after ``enterprise'' insert the
following: ``, with mitigating systemic risk to the housing
or capital markets or the financial system,''.
The Acting CHAIRMAN. Pursuant to House Resolution 509, the gentleman
from California (Mr. Royce) and the gentleman from Pennsylvania (Mr.
Kanjorski) each will control 5 minutes.
The Chair recognizes the gentleman from California (Mr. Royce).
Mr. ROYCE. Mr. Chairman, I yield 1 minute to the gentleman from New
Jersey (Mr. Garrett).
Mr. GARRETT of New Jersey. Mr. Chairman, I rise in support of this
legislation, which strengthens the language with regard to portfolios
and GSEs.
The GSEs claim that they are shock absorbers in the system. One of
the main reasons that Fannie and Freddie claim they should not have
their portfolios limited is that they provide a stable means of support
for the residential finance markets at times of crisis.
Fannie's CEO, Dan Mudd, testified that ``our mortgage portfolio
allows us to play a shock-absorbing function for the finance system
during times of potential difficulty.''
This week, Freddie's president, Eugene McQuade, was quoted as saying
that the enterprises provided a source of stability to the mortgage
finance market after the September 11 terrorist attacks.
This is a nice thought, Mr. Chairman. However, their statements are
not true.
If you look at Fannie's purchases for its portfolio during every
month of 2001, you will notice that its purchases in September of 2001,
of that year, were the lowest level of anytime during that year.
Fannie might argue that they acted as a shock absorber not by buying
mortgages and MBS, but by committing to buy in succeeding months.
Mr. Chairman, I will conclude by saying that we should support these
significant portfolio limitations in order to make sure that GSEs are
able to be reined in and not become what they have said they are and go
out of their range of portfolio.
Mr. KANJORSKI. Mr. Chairman, I yield 2 minutes to the gentleman from
California (Mr. Gary G. Miller).
(Mr. Gary G. Miller of California asked and was given permission to
revise and extend his remarks.)
Mr. GARY G. MILLER of California. Mr. Chairman, this amendment
basically is unnecessary. It interferes with the GSEs' ability to
provide stability and liquidity to the residential mortgage market,
including during times of crisis, which is mostly important.
The bill already allows the regulator to address safety and soundness
concerns through risk-based capital, minimum capital, and portfolio
powers. Adding this systemic risk language would likely add uncertainty
and instability into the secondary-mortgage market, ultimately
resulting in a negative impact on the housing markets.
H.R. 1461 gives the new regulator the same powers and authority that
bank regulators have, and more, including the authority to limit the
growth of the housing GSEs for safety and soundness reasons.
Bank regulators do not have the authority to limit growth of banks
for undefined systemic risk reasons. The Royce amendment goes beyond
the bank-like regulation.
Similar to bank regulatory authority, H.R. 1461 gives the GSE
regulator the discretion to increase a GSE's capital requirement,
particularly the minimum capital requirement, which effectively
empowers the regulator to limit the growth of a GSE's portfolio.
H.R. 1461 also gives the regulator the authority to adjust risk-based
capital, which provides a risk-related measure by which the regulator
evaluates all aspects of a GSE's business.
H.R. 1461 already provides an unprecedented level of authority over
the enterprises' portfolios.
The bill gives the regulator broad authority over the size and
competition of the GSEs' portfolios.
The regulator could force an enterprise to dispose of any asset or
liability if the regulator determines that doing so would be consistent
with safety and soundness.
Let me quote from the bill itself. H.R. 1461, page 53:
``Notwithstanding the capital classifications of the GSE, the director
may by order require an enterprise, under such terms and conditions as
the director determines to be appropriate, to dispose of or acquire any
asset or liability, if the director determines that such action is
consistent with the safe and sound operation of the GSE.''
By harming the GSEs' ability to support our Nation's mortgage market,
the Royce amendment would endanger housing.
Reducing the size of the GSE portfolios for reasons other than those
affecting the safety and soundness of the company could negatively
impact home buyers and the mortgage market in the following ways: one,
increasing mortgage rates for customers; two, limiting the liquidity
available to small lenders to sell their mortgages, and many more.
I strongly encourage a ``no'' vote for this amendment.
Limiting the GSEs' ability to sustain the market in time of crises
and keep mortgage rates stable.
Reducing new mortgage product innovation--limiting the GSEs' ability
to reach underserved populations and achieve their housing goals.
[[Page H9183]]
Conclusions
GSEs are essential to housing market. The GSEs' mortgage investment
activities are crucial to fulfilling their mission to provide
liquidity, stability and affordability in the residential mortgage
market.
Banks are not obligated to provide liquidity, stability or
affordability to the mortgage market. They are free to enter or leave
the market at any time. When market conditions become less favorable,
they will shift into other, more profitable investments.
Royce will reduce liquidity. Arbitrarily forcing the GSEs to reduce
their mortgage investments would reduce liquidity in the mortgage
market, hinder the GSEs' ability to stabilize the market, and make
mortgage credit more expensive.
Mr. ROYCE. Mr. Chairman, I yield 1 minute to the gentleman from Texas
(Mr. Hensarling).
Mr. HENSARLING. Mr. Chairman, I thank the gentleman for yielding me
time, and I thank him for his amendment.
First, I want to thank the gentleman from Ohio (Mr. Oxley) and the
gentleman from Louisiana (Mr. Baker) for bringing us to this position
in the first place.
Clearly, there have been huge accounting irregularities at our GSEs.
Clearly, something needs to be done; and with these accounting
irregularities, we also know that we have very significant systemic
risks to our economy that are involved with the GSEs' portfolio
holdings.
Chairman Greenspan has testified before our committee on numerous
occasions about this. It is time that we do something.
This is as straightforward an amendment as it can be. It simply adds
a sentence to this legislation allowing the new regulator the authority
to step in, where necessary, to reduce the size of Fannie and Freddie's
portfolios, something that we know has nothing to do with their mission
of creating liquidity in the secondary-mortgage market.
Again, as Chairman Greenspan said before, ``Without the needed
restrictions on the size of the GSE balance sheets, we put at risk our
abilities to preserve safe and sound financial markets in the United
States, a key ingredient of support for housing.''
I urge a ``yes'' vote on the amendment.
{time} 1515
Mr. KANJORSKI. Mr. Chairman, I yield 1 minute to the gentleman from
Virginia (Mr. Tom Davis).
Mr. TOM DAVIS of Virginia. Mr. Chairman, I rise in opposition to the
amendment.
Briefly, I want to note that the existing committee print already
gives the regulator power to force Freddie Mac and Fannie Mae to sell
assets for any possible safety and soundness problems. I am not sure
that adding an additional test, one that is ill-defined, will
accomplish any additional good.
And it could do some harm. Here is why: under this amendment, a
regulator could decide to force a healthy, over-capitalized Freddie or
Fannie to sell assets at a time when the housing market could ill
afford it. The ripple effects on local homeowners, communities, and
economies could suffer, all in the name of this theoretical term of
``systemic risk.''
I should add this approach is not consistent with the banking world.
This power to punish a healthy institution in advance of any real
safety and soundness problem does not exist in the banking world. And
many banks are now the same size as Freddie and Fannie. I urge Members
to support the well-balanced committee print language.
Mr. ROYCE. Mr. Chairman, I reserve the balance of my time.
Mr. KANJORSKI. Mr. Chairman, I yield myself the balance of my time.
I have a great deal of respect for the proponent of this amendment. I
know he is a very serious and thoughtful Member; but I think this
amendment goes overboard from the standpoint of during the 6 years of
consideration of this bill, we balanced out very well the structure to
create a regulator that would be similar to the bank regulators. The
powers involved in this bill allow for the regulator to control safety
and soundness and to have direction of the portfolio when systemic risk
would occur in these particular organizations.
This amendment goes far beyond that and allows the latitude to the
regulator to get involved whenever there are capital-markets
instability, not only housing instability, but capital markets or the
financial system instability. What it means is we will always be
subject to the whim and fancy of a regulator to require these GSEs to
sell assets or sell liabilities at the whim of the regulator's thought
that there may be some need to regulate systemic risk, when in fact
these organizations suffer no systemic risk.
I join with the gentleman from Virginia (Mr. Tom Davis) when he
analyzes out that what we would be doing is arming a regulator who may
not always be the most thoughtful individual in the world to take
actions against our housing industry and our housing GSEs at the most
inappropriate time and moment, causing destabilization to the housing
market and, in effect, causing further destabilization and systemic
risk to the financial markets. I urge my colleagues on both sides of
the aisle to vote ``no'' on this amendment.
Mr. Chairman, I yield back the balance of my time.
Mr. ROYCE. Mr. Chairman, I yield myself the balance of my time.
Mr. Chairman, I rise today in support of this amendment dealing with
systemic risk to H.R. 1461, the legislation to reform oversight of the
Nation's three housing GSEs.
I think most people would assume that Congress would and should
create a regulator with the authority to protect the broader financial
system with respect to systemic risk, especially in light of the
warnings of systemic risk from the Federal Reserve and the Treasury,
the $1.5 trillion of mortgage assets concentrated in just two
companies, the special ties the GSEs have with the Federal Government,
and the over-$2 trillion in GSE debt.
Unfortunately, the fact of the matter is that H.R. 1461 fails to give
the regulator the authority to protect the financial system against a
potential shock that would seriously undermine the U.S. housing market
and the global financial system.
I have just spoken with Alan Greenspan's office this afternoon, and
they totally reject the argument that the regulator has this ability to
take into account the systemic risk and take the necessary actions in
the bill; and also the Bush administration disagrees with that
assertion. They think it is not in there.
Furthermore, if the authority is already in the bill, what is wrong
with my additional 14 words stating it explicitly. Let me also make the
point that my amendment would allow the regulator to review the
investment holdings of Fannie Mae and Freddie Mac, and this authority
is necessary because the huge concentration of on-balance sheet assets
of Fannie Mae and Freddie Mac create too much interest rate risk, in
other words, too much exposure to swings in interest rates in the hands
of only a few risk managers.
The traditional mortgage guarantee business model at Fannie Mae and
Freddie Mac provides liquidity in the mortgage market and helps
homeownership without increasing risk to the taxpayer. However, the
enterprises' on-balance sheet mortgage assets only benefit Fannie and
Freddie shareholders at the expense of the taxpayer.
Taking into account the unequaled levels of debt outstanding and the
unprecedented use of derivatives to manage interest rate risk at the
enterprises, the Federal Reserve and the Treasury Department believe
that the on-balance sheet mortgage assets of the two enterprises create
systemic risk to the global financial markets.
Mr. Chairman, Congress failed to rein in the savings and loan
industry in the early 1980s. That failure led to hundreds of billions
of dollars in taxpayer losses. Today, however, Congress has been
forewarned by the Fed, the Treasury, the OECD, and the IMF. I would
like to end debate on this amendment with the words of our
distinguished chairman of the Federal Reserve, Alan Greenspan, who has
publicly urged the House of Representatives to defeat H.R. 1461 unless
the threat of systemic risk is addressed. He said: ``To fend off
possible future systemic difficulties, which we at the Federal Reserve
Board assess as likely if GSE expansion continues unabated,
preventative actions are required sooner rather than later.'' I urge my
colleagues to support this amendment.
[[Page H9184]]
The Acting CHAIRMAN (Mr. Bishop of Utah). The question is on the
amendment offered by the gentleman from California (Mr. Royce).
The question was taken; and the Acting Chairman announced that the
noes appeared to have it.
Mr. ROYCE. Mr. Chairman, I demand a recorded vote.
The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from California
(Mr. Royce) will be postponed.
It is now in order to consider amendment No. 6 printed in House
Report 109-254.
Amendment No. 6 Offered by Mr. Paul
Mr. PAUL. Mr. Chairman, I offer an amendment.
The Acting CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 6 offered by Mr. Paul:
Page 64, after line 12, insert the following new section:
SECTION 117. ELIMINATION OF AUTHORITY TO BORROW FROM TREASURY
OF THE UNITED STATES.
(a) Fannie Mae.--Section 304 of the Federal National
Mortgage Association Charter Act (12 U.S.C. 1719) is amended
by striking subsection (c).
(b) Freddie Mac.--Section 306 of the Federal Home Loan
Mortgage Corporation Act (12 U.S.C. 1455) is amended by
striking subsection (c).
(c) Federal Home Loan Banks.--Section 11 of the Federal
Home Loan Bank Act (12 U.S.C. 1431) is amended by striking
subsection (i).
The Acting CHAIRMAN. Pursuant to House Resolution 509, the gentleman
from Texas (Mr. Paul) and the gentleman from Massachusetts (Mr. Frank)
each will control 5 minutes.
The Chair recognizes the gentleman from Texas (Mr. Paul).
Mr. PAUL. Mr. Chairman, I yield myself 3 minutes.
(Mr. PAUL asked and was given permission to revise and extend his
remarks.)
Mr. PAUL. Mr. Chairman, my amendment is straightforward. It cuts off
a line of credit to the Treasury. The GSEs have a line of credit of $2
billion. It is said that it is not important because they never use it.
The answer really to that is if they never use it, why leave it on the
books. But we do know they indirectly use it. It has been described as
a subsidy, because the GSEs can go into the market and get a discount
on their loan costs; therefore, they can out-compete the private
sector. My amendment merely eliminates that line of credit, puts a
greater burden on the marketplace to regulate the GSEs rather than
depending on regulation.
I think Members can see there is a problem with our GSEs. The debt is
horrendous. Today, the administration sent a letter around and said
that the debt of the GSEs totals $2.5 trillion, and they also guarantee
in addition $2.4 trillion. That adds up to more money than the Federal
Government has borrowed. So it is a tremendous amount of money and
credit that is in the system; and people have become frightened about
this, including chairman of the Federal Reserve Board, Alan Greenspan.
But what we are doing here today is not addressing the real problem:
Why is it out of control? Why is there a financial housing bubble that
everybody is afraid is going to undergo a severe correction?
One of the major reasons is the fact that it has this special line of
credit. So if we want to address the real cause of the problem, we have
to eliminate the line of credit. So it rather amazes me that we do this
much legislating without addressing the real cause of our problem.
Of course, there are other things that contribute to the housing
bubble, something that we cannot deal with today, but the fact that
there is easy credit and low interest rates, interest rates below the
market level, that is then directed into the housing market. This also
contributes to the size and the scope of the borrowing capacity of the
GSEs.
Also in this bill, of course, we are adding into this a brand new
housing program which is said to probably involve another billion
dollars in the next 2 years. I guess it is not surprising when The Wall
Street Journal editorializes against this. Unfortunately, they are not
very kind. They say this bill is another ``Republican policy
embarrassment''.
This housing bubble, a housing program that we are starting up, how
do we finance it? Well, we tax the GSEs. Instead of arguing the case
for the marketplace and letting people earn money legitimately without
subsidies, what we do, we keep allowing the system to continue. They do
make profits, and then we tax them. We are talking about an additional
tax, and this might very well be the reason the administration has come
out against this bill, because of this new tax.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 2 minutes.
Mr. Chairman, first, the administration has been somewhat
inconsistent on this. A year ago, Secretary of HUD Jackson boasted
about the fact that he was insisting Freddie and Fannie increase the
extent to which they do low-income housing because we have always had
affordable housing goals enforced by law. So the administration last
year was insisting that Fannie and Freddie use more of their money to
help low-income people.
Let me say, I am not surprised. The gentleman from Texas (Mr. Paul)
has been straightforward. He is one of the most intellectually honest
Members of the House. Sometimes, like on casino gambling and medical
marijuana, I am glad to be with him. This time we disagree. He is very
clear in saying we should not be doing subsidized housing. He is quite
clear.
If his amendment were to pass, we would not be able to have an
affordable housing program because the level of profits Fannie and
Freddie generate, which we are tapping in part, 5 percent, to do
affordable housing, would substantially diminish.
Yes, I think people ought to be able to work to build housing; but
low-income people, people working at the minimum wage, a minimum wage
the gentleman does not want to raise, are not going to be able to build
their own housing.
People in the hurricane area who get priority, if the affordable
housing bill goes through, that part of the bill goes through, hundreds
of millions of dollars will be available to replace housing literally
washed away in Mississippi, Alabama, Texas, and in Florida. There is no
way people down there will be able to do it on their own. The gentleman
has been quite explicit, and I appreciate his being honest about it.
If this amendment passes, the effect will be to substantially
increase the capital cost to Fannie and Freddie. They will have to pay
more for capital. Once they pay more for capital, not only would the
affordable housing fund disappear, but so will the ability of the Bush
administration, through Secretary Jackson, to demand that they meet
certain housing goals. And leave aside the affordable housing program,
the Bush administration, under Secretary Jackson, is proud of what it
did to order Fannie and Freddie to do more to meet affordable housing
goals, to buy up mortgages for people at 80 percent of median income. I
hope that the gentleman's amendment in this particular case is
defeated.
Mr. Chairman, I reserve the balance of my time.
Mr. PAUL. Mr. Chairman, I yield myself such time as I may consume.
If we had a bill that was a little cleaner, we probably would be
dealing with the problems we face with the GSEs and we would be dealing
with a housing program, a new housing program, probably with a
different bill.
I see one attempt is to deal with this problem that we face. Another
attempt is we are deciding that we need more money directed into the
housing industry, and of course your building friends like this, too.
And those are Republican allies as well. The builders love this because
we will pump more money into the market so they can make more profits.
So it is another government housing project. From a market viewpoint,
this is not good because we want the money in the market to be
allocated purely by the market and not by government direction.
It is the government direction first from the inflation, the
artificial interest rates, and then from the allocation of funds that
cause distortion. That is what we are dealing with here, the distortion
that people are literally frightened about because nobody can even
measure the amount of derivatives that are involved with Fannie Mae and
[[Page H9185]]
Freddie Mac. People are holding their breath for an accident to happen.
I see this as an opportunity to talk about the marketplace, why we
should move Fannie Mae and Freddie Mac into the market.
A lot of people complained about the problems we had with Enron, and
we needed that as an excuse to pass a lot more regulation. The truth is
the market dealt with Enron. Enron was dealt with rather cruelly by the
marketplace before the regulators got there. What we need to do is not,
and especially as Republicans and conservatives, talk about a world-
class regulator and that it is going to solve all of these problems.
My argument is if we do not solve the problem of basic underlying
inflation distortion of interest rates, allocation of funds through
housing programs, as well as this line of credit, believe me, we are
not going to solve this problem. Please vote to strike this line of
credit to the Treasury.
{time} 1530
As it was stated earlier on this floor, we may have some regulations
built into this that may even precipitate the puncturing of the housing
bubble. That nobody can predict. But without addressing the basic flaw
in the system that has created this $5 trillion worth of debt, believe
me, we will not have an answer. I urge a ``yes'' vote on this
amendment.
The Acting CHAIRMAN (Mr. Bishop of Utah). The time of the gentleman
from Texas has expired.
Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 30 seconds.
The gentleman's amendment actually does not go quite far enough, but
he has a germaneness problem. What he really wants to do is abolish
HUD, given his philosophy. He does not think there should be a Federal
housing program. Since he cannot get at HUD, he goes after Fannie and
Freddie in ways that would reduce substantially what we do in housing.
And, by the way, the administration's objection to this bill is not,
as says the gentleman, that it is too much regulation. It is that we do
not give the regulator enough powers. So the administration's position
is somewhat opposite to the gentleman from Texas', not for the first
time, to his credit.
Mr. Chairman, I yield 1\1/2\ minutes to the gentlewoman from Florida
(Ms. Wasserman Schultz).
Ms. WASSERMAN SCHULTZ. Mr. Chairman, I rise today to strongly oppose
the Paul amendment and the civic engagement restrictions in the
manager's amendment we previously debated. These will have a
disproportionate and disparate impact on the State of Florida.
I just came back from my district, where the damage caused by
Hurricane Wilma has been extensive. Its effects will be felt for
months, if not years. Thousands of Floridians are living in shelters,
as thousands of homes in the State were severely or completely
destroyed.
People in Florida, Texas, the Gulf States, and across the country
have been affected by these storms and have real life issues to deal
with: food, shelter, clothing, fuel, lines for 2 and 3 hours to get
fuel. I had to drive 150 miles today before I could find one gas
station that only had about a half-hour line.
These people need shelter. They are going to need affordable housing.
They could care less about partisan politics. These restrictions are
misplaced and unnecessary. They preclude legitimate nonprofits from
accessing affordable housing funds at a time when hundreds of thousands
of Americans desperately need this assistance. We should not be
clouding the need for affordable housing with partisan politics.
I urge my colleagues to stay focussed on the issues that are at the
center of people's lives and vote ``no'' on this amendment and
ultimately support the gentleman from Massachusetts' motion to
recommit.
Mr. FRANK of Massachusetts. Mr. Chairman, we have had very limited
time here, so I am going to stray to another topic relative to the
bill.
Mr. Chairman, I yield 1 minute to the gentleman from California (Mr.
Sherman).
Mr. SHERMAN. Mr. Chairman, I thank the gentleman for yielding me this
time and for inviting me to address the Garrett amendment, which comes
up next, and to urge that we oppose that amendment.
I want to thank the chairman and the ranking member for including in
the bill when it left our committee language proposed by the gentleman
from California (Mr. Gary G. Miller) and myself to raise the conforming
loan limit in certain areas.
The reason we have these GSEs is to help middle-class families
achieve the dream of homeownership. Since the beginning, we recognized
that a middle-class family cannot find a home in Alaska and Hawaii at
the same amounts with the same level of mortgage as in the other 48
States. So we have always had a higher limit for those States. We now
must recognize that in Los Angeles, New York, and certain other areas,
housing prices are every bit as high as in some parts of Alaska and
Hawaii. And that is why the bill that we need to defend from the
Garrett amendment provides for a conforming loan limit, that is either
as high as it is in Alaska and Hawaii or such lower amount as equals
the average home price in that area.
We have middle-class families in my district, a police officer
married to a teacher, trying to get a home. Do not deprive them of the
benefits of these GSEs on the theory that they are wealthy. They are
not.
The Acting CHAIRMAN (Mrs. Capito). The question is on the amendment
offered by the gentleman from Texas (Mr. Paul).
The question was taken; and the Acting Chairman announced that the
noes appeared to have it.
Mr. PAUL. Mr. Chairman, I demand a recorded vote.
The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Texas (Mr.
Paul) will be postponed.
It is now in order to consider amendment No. 7 printed in House
Report 109-254.
Amendment No. 7 Offered by Mr. Garrett of New Jersey
Mr. GARRETT of New Jersey. Madam Chairman, I offer an amendment.
The Acting CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 7 offered by Mr. Garrett of New Jersey:
Strike line 21 on page 81 and all that follows through line
4 on page 91.
The Acting CHAIRMAN. Pursuant to House Resolution 509, the gentleman
from New Jersey (Mr. Garrett) and the gentleman from California (Mr.
Gary G. Miller) each will control 5 minutes.
The Chair recognizes the gentleman from New Jersey (Mr. Garrett).
Mr. GARRETT of New Jersey. Madam Chairman, I yield myself 2 minutes.
My amendment would strike the language in the bill that raises the
conforming loan limits for certain parts of the United States. H.R.
1461 would raise by 50 percent the maximum size mortgage Fannie Mae and
Freddie Mac could buy.
This language hurts the very basic functions of GSEs to provide
liquidity and help lower-income home buyers.
While the GSEs are chartered to operate in every district across the
country, their effectiveness in serving low-income borrowers has been
seriously hindered because they focus instead on bigger and bigger
loans to higher and higher-income borrowers. Presently, Fannie and
Freddie can buy first mortgages on single-family houses up to $359,000.
That limit is the so-called ``conforming loan limit,'' and it rises
every year. Next year it will go up to $400,000. But with the bill now,
it will go up to $600,000 in 2006. A home buyer would need an income of
almost $200,000 to buy that home. Is that what Fannie Mae was intended
to help?
According to a study by the Federal Reserve published last January,
the interest rate difference between a conforming loan and a jumbo loan
fluctuates between .15 percent and .18 percent, most of which is pure
profit for Fannie Mae. Based on the current interest rate environment,
this means at best Fannie is going to lower monthly costs by simply $60
for someone buying that $200,000 loan who is now paying $3,300 or so a
month in mortgage payments.
The problem for Fannie is this extension into jumbo loans for higher-
income families and forgetting about
[[Page H9186]]
their mission to help lower-income families comes with a an added
price, a risk to their balance sheets.
Chairman Greenspan and Secretary Snow have consistently raised their
concerns about the systemic risks that the size of Fannie and Freddie's
portfolios pose to our Nation's housing market. And if we allow them
now to participate in the jumbo loan market as well, they will only
continue to further exacerbate this dire situation.
We should ask, why was it even proposed that Fannie get this added
power to help high-income home buyers? Was there a problem that needed
to be fixed? No such evidence was ever presented at any of the
committee hearings.
The private sector has adequate sources of funding for loans that are
above the conforming limits. An active private secondary market for
larger mortgage loans that did not exist when the enterprises were set
up is now active to supplement these sources of funding, and allowing
Fannie to take on higher costs in jumbo loans only takes valuable time
and resources away from their enterprises.
Madam Chairman, I reserve the balance of my time.
Mr. GARY G. MILLER of California. Madam Chairman, I yield myself such
time as I may consume.
GSEs have been at the forefront of creating affordable housing
opportunities for American families.
While nationally the homeownership rate is at a record high of 69.2
percent, many high-cost metropolitan areas across the Nation lag behind
this national rate. In the second quarter of 2004, the national average
was 69.2 percent. Yet in New York, New York it was 36.6; Los Angeles,
California, 51.6; Orange County, California 61.4; and Boston,
Massachusetts, 59.4.
The high-cost area designation takes median home prices into account,
but would be capped at 150 percent of the statutory loan limit, the
same limit that now applies to Alaska, Hawaii, Guam, and the Virgin
Islands. If it is good enough for Alaska, Guam, Hawaii, and the Virgin
Islands, it should also be good enough for California; Michigan; New
York; Connecticut; New Jersey; Nevada; Virginia; Washington, D.C.;
Pennsylvania; Florida; New Hampshire; and many more. For example, in
the North New Jersey Metropolitan Statistical Area, the median home
price is $435,200. It this amendment passes, it would drop to $359,650
under the loan limits.
The conforming loan limit provision in this bill will make a
meaningful cost difference for home buyers. Based on the current
interest rate environment, the current monthly payment difference
between a conforming loan and a jumbo loan can save a homeowner up to
$171 per month. In high-cost areas a significant majority of entry-
level homes exceed the national conforming loan limit. The conforming
loan limits language in H.R. 1461 will help nearly 245,000 first-time
home buyers. In fact, in the gentleman from New Jersey's (Mr. Garrett)
district alone, it helps 42,987 first-time buyers.
There is broad-based opposition to this amendment. National
Association of Realtors oppose it; National Association of Home
Builders, National Association of Mortgage Brokers, Independent
Community Bankers of America, National Alliance of Independent Bankers.
I just received a call from HUD Secretary Jackson, who also opposes
this amendment.
There are three parts in section 123. The Garrett amendment deletes
all three in this section. I think that is an error on his part.
This section sets conforming loan limits and requires the agency to
make annual adjustments to the limits based on increases or decreases
in a housing price index maintained by the agency.
Two, the accuracy of the housing price index is required to be
audited by the GAO.
And, three, for high-cost metropolitan statistical areas, the
conforming loan limit is raised to the lesser of 150 percent of the
statutory limit or the median home price in the area.
The Garrett amendment does not just strike the high-cost area
provision, it completely strikes the entire conforming loan limits
section of the bill: One, how the loan limit is calculated. Two, it
creates uncertainty on who is supposed to set the new loan limit every
year. Three, it eliminates flexibility in loan limits to reflect market
fluctuations, and the GAO study to develop loan limit is deleted by
this amendment entirely.
This basically is to make sure that high-cost areas are provided the
same flexibility that Guam, Alaska, Hawaii, and Virgin Islands are
currently benefiting from. The housing costs are going up across this
Nation. This bill was worked in a fashion to allow for that, to allow
systematic review yearly of these high-cost areas so GSEs can go out
and compete in the jumbo marketplace, decreasing the cost of loans to
individuals, decreasing their payments, allowing more individuals in
the first-time marketplace to own a home and get the best possible home
they can buy, especially during bad times.
When the economy starts to fail, banks sometimes pull out of
marketplaces. GSEs at that time pull into them in a heavier fashion to
make sure there is liquidity.
There is ample overview within this bill to make sure safety and
soundness are taken into consideration. These loans are securitized.
These loans just are just not sitting out there floating in the
marketplace. These are good, sound loans based on people who need that.
Madam Chairman, I reserve the balance of my time.
Mr. GARRETT of New Jersey. Madam Chairman, I yield myself 1 minute.
We must remember what the original focus of the GSEs was when they
were initially chartered by this Congress, they were to do two things,
and that is to provide liquidity to the marketplace and also to help
provide for facilitating low-income buyers coming into the marketplace.
It is already set up in the law that the amount that GSEs can lend
can go up every year. As it is right now, it stands at $359,000. It is
set to go up to $400,000 for next year, in 2006. As the bill was
amended in committee, it comes out now that that will go up by 50
percent.
I ask the question, how would we define somebody who is about to buy
a $600,000 home? That individual would have to be making an income of
around $200,000. Even if they are firemen, policemen, teachers, who
have you, they would still need an income of $200,000 in order to buy a
home at $600,000.
That was not the intent of GSEs. The intent was to help the low-
income market to get their homes. By allowing the GSEs to get into this
market, what we are doing is distracting them from their purpose and
hurting those very people that they were intended to help: low-income
people, whether they are in New Jersey or California or other high-
interest-rate States, to be able to buy their first time.
Madam Chairman, I reserve the balance of my time.
Mr. GARY G. MILLER of California. Madam Chairman, the gentleman
should have been consistent and deleted Alaska, Guam, Hawaii, and the
Virgin Islands.
Madam Chairman, I yield 1 minute to the gentleman from New Jersey
(Mr. Menendez).
Mr. MENENDEZ. Madam Chairman, I rise in strong opposition to the
Garrett amendment, which would be devastating for middle-class families
across New Jersey and in high-cost areas throughout the country.
While my colleague might argue that this amendment would have no
effect on the ability of families to purchase a home, he is gravely
mistaken.
The Garrett amendment prohibits Fannie and Freddie from purchasing
mortgages at a higher cost than the current limit. This means that in
the high-cost areas such as those in New Jersey where the median home
price exceeds the national price by at least $200,000 in counties like
Bergen and Passaic, families would not have access to an affordable
loan. Under this amendment families will be priced out of their own
neighborhood.
{time} 1545
Those who live in higher-cost areas do not deserve to be punished and
should not have to move somewhere else to obtain an affordable home
loan; yet that is exactly what this amendment does. This amendment is a
step backwards for efforts to open the doors to affordable
homeownership. We should be trying to expand opportunities for families
who dream of owning a home in the area they want to live in,
[[Page H9187]]
not shutting them out of achieving the American Dream.
I urge a ``no'' vote on the amendment.
Mr. GARRETT of New Jersey. Madam Chairman, I yield myself 20 seconds.
Madam Chairman, the assertion that this would be devastating to the
market runs contrary to the facts before the committee. There was no
evidence whatsoever presented to the committee to say that the system
in place in States such as New Jersey or California or elsewhere are in
need of GSEs to come in to increase their conforming limits by 50
percent. There is already an additional market out there that allows
for people to buy jumbo loans; and there are a number of different
variations, adjustable rate loans, that allow people who are in the
upper brackets and making $200,000 to be able to afford and to buy
these mortgages.
Mr. GARY G. MILLER of California. Madam Chairman, I yield 30 seconds
to the gentleman from New York (Mr. Israel).
Mr. ISRAEL. Madam Chairman, what we are debating here is what is
affordable, how much is enough. Middle-class families know the answer.
If you are in the middle class, you are too rich to be eligible for
Federal programs, but too poor to be able to keep up with the cost of
living.
The language that the gentleman from California (Mr. Gary G. Miller),
the gentleman from California (Mr. Sherman), and I worked into this
bill is a commonsense, bipartisan compromise that keeps up with that
middle-class squeeze that makes the American Dream of homeownership
possible. With all due respect to the gentleman, this amendment makes
the American Dream of homeownership even harder. We should defeat this
amendment.
Mr. GARRETT of New Jersey. Madam Chairman, I yield myself the balance
of my time.
Madam Chairman, as stated, the purpose of Fannie Mae and Freddie Mac,
the GSEs, was to provide liquidity difficult to the market and allow
first-time homeowners to get into the market in the first place.
However, we want to define who those people are, and I think some
things we can agree on: those people who are making $200,000 and who
want to expand and go up to larger houses should not be the ones that
we define as lower-income individuals.
The statistics also show that came before our committee that even if
we put this into place, the differential on mortgage rates would
account for around $60 to $70 per mortgage. So if you are buying that
$600,000 house and paying $3,000 or $3,300 a month, even if this bill
were to pass, you would only see your savings of around $60 or $70.
I think the focus of Congress should be what it was when Fannie and
Freddie were first set up, and that is to help those people get into
their very first home. We can do that best by limiting their function
to what it was prior to this amendment in the committee, and that is to
focus on first-time home buyers in every State of the Union to be able
to buy that first home, people of low and modest means who need the
assistance of a government-backed program such as Fannie and Freddie to
be able to know that there is a program there that allows them to get
into that loan.
We can allow the other market, which is already in place, which has
been functioning properly, where there is no evidence whatsoever to
come before our committee that says there was a need to expand in this
area, to continue to provide the financing for people who are at the
upper-income levels of $200,000 and the like to be able to buy those
homes.
Madam Chairman, I believe the best thing in mind is to make sure we
remain in place the system that allows first-time home buyers the
ability to get into their homes. By voting ``yes'' on this amendment,
we be will be able to do that.
Mr. FARR. Madam Chairman, I rise in strong opposition to the Garrett
amendment that would prevent an increase in the Conforming Loan Limit.
If the Conforming Loan Limit is not increased, middle income families
on the Central Coast of California will not be able to own a piece of
the American dream--their own home.
Right now, Fannie Mae and Freddie Mac can purchase single family
mortgages up to a nationwide limit of $359,650.
Increasing the Conforming Loan Limit will allow these GSEs greater
access to high cost housing markets, which will increase the
availability of mortgage capital which will increase homeownership.
I understand a mortgage of $359,650 sounds like a lot in some
congressional districts, but in my district, middle class families will
be priced out of the housing market if the Conforming Loan Limit is not
increased.
Let me give you some examples of housing prices for my district--
Monterey County, the median home sales price in September 2005 was
$712,797.
Santa Cruz County, the medium home sales price in September 2005 was
$750,000.
For the City of Salinas, in Monterey County, the median home sales
price in September was $610,000, while the medium household income was
$43,720, according to Census figures compiled for 1999.
For the City of Watsonville, in Santa Cruz County, the median home
sales price in September was $654,750, while the median household
income was $37,617, according to Census figures compiled in 1999.
There is a huge affordable housing-income gap in my district that
will only get worse without an increase in the Conforming Loan Limit.
The American dream--homeownership--should be an opportunity for all
Americans.
I urge a ``no'' vote on the Garrett amendment.
Mr. MENENDEZ. Madam Chairman, I rise in strong opposition to the
Garrett amendment, which would be devastating for middle-class families
across New Jersey and in high cost areas throughout the country.
One of the sensible actions this bill takes is allowing Fannie Mae
and Freddie Mac to purchase mortgages that reflect the actual median
home price instead of a set national limit.
We all know that the price of purchasing a home is increasing. But
Madam Chairman, it is blatantly wrong to pretend that the same loan
limits should apply to areas where the average home cost is $75,000 as
areas where the median cost is well over $350,000. The reality is, home
prices in high-cost areas are skyrocketing at higher rates and to costs
that are far above the national average.
While my colleague from New Jersey argues that this amendment would
have no affect on the ability of families to purchase a home, he is
gravely mistaken.
Because his amendment would prohibit Fannie and Freddie from
purchasing mortgages at a cost higher than the current limit, families
in high cost areas--such as those in New Jersey where the median home
price exceeds the national median home price by at least $200,000--
would not have access to any affordable loan. Under this amendment,
family will be priced out of their own neighborhood.
These affordable loans help ensure families who seek the dream of
homeownership have the same chance to own their own home as those with
more means. Families that live in higher cost areas do not serve to be
punished and should not have to move somewhere else to obtain an
affordable home loan. Yet that is what this amendment would do.
A family living in Bergen or Passaic County, for instance, where the
median home price is $390,000, would not be able to get an affordable
loan from Fannie or Freddie simply because they live in an area where
the cost excess the current limit. So where are they supposed to go?
This amendment is a step backwards for efforts to open the doors to
affordable homeownership. We should be trying to expand opportunities
for families who dream of owning a home in the area they want to live,
not shutting them out from achieving the American dream.
Ms. MALONEY. Madam Chairman, I rise in opposition to the Garrett
amendment. This amendment would take out of the bill a provision that I
strongly support which raises the permissible loan limits for Fannie
Mae and Freddie Mac up to the median home price in high cost areas such
as New York City.
This is a simple and common-sense amendment which recognizes that
home prices in some parts of the country are higher than in most of the
nation.
In these areas middle class families cannot use lower rate GSE loans
to buy a median price home, because the price will exceed the
nationwide GSE limit. Simple fairness requires that we solve this
problem and give middle class families in these areas the same
opportunity to use a lower-cost GSE loan as those in other areas enjoy.
This is about whether New York's policemen, firefighters, school
teachers, government workers and other middle-class workers can aspire
to home ownership.
[[Page H9188]]
I strongly supported raising the loan limit in high cost areas and I
strongly oppose taking this provision out.
This amendment is critical to New York and other high cost areas. But
it does not come at a cost to other areas. This is not a zero sum
situation.
So I urge my colleagues from these areas that are not affected by
this amendment to join me in voting against it so that middle class
workers across this nation will have a chance at the American Dream of
owning your own home.
Ms. WOOLSEY. Madam Chairman, my district, the 6th District of
California, just north of the Golden Gate Bridge is a ``donor''
district. We pay a lot more in taxes than we get back, in fact, the
median home price is approaching $1 million. This is almost three times
the national median home price, and my constituents want their taxes to
work for them.
They want middle-class families in their area to be able to secure a
GSE loan.
They want teachers, firefighters, and policemen who serve and live in
areas of the country where the housing market is soaring, to be
eligible for an GSE loan.
Madam Chairman, we can do that. We must preserve the section of the
underlying bill that allows for raising conforming loan limits in high
cost areas. I urge my colleagues to oppose the Garrett amendment and
allow fair home mortgage lending.
The Acting CHAIRMAN (Mrs. Capito). The question is on the amendment
offered by the gentleman from New Jersey (Mr. Garrett).
The question was taken; and the Acting Chairman announced that the
noes appeared to have it.
Mr. GARRETT of New Jersey. Madam Chairman, I demand a recorded vote.
The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from New Jersey
(Mr. Garrett) will be postponed.
It is now in order to consider amendment No. 8 printed in House
Report 109-254.
Amendment No. 8 Offered by Ms. Loretta Sanchez of California
Ms. LORETTA SANCHEZ of California. Madam Chairman, I offer an
amendment.
The Acting CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 8 offered by Ms. Loretta Sanchez of
California:
Page 93, line 17, before the semicolon insert ``, including
the use of alternative credit scoring''.
The Acting CHAIRMAN. Pursuant to House Resolution 509, the
gentlewoman from California (Ms. Loretta Sanchez) and a Member opposed
each will control 5 minutes.
The Chair recognizes the gentlewoman from California (Ms. Loretta
Sanchez).
Ms. LORETTA SANCHEZ of California. Madam Chairman, I yield myself
such time as I may consume.
Madam Chairman, my amendment is very simple and straightforward. It
merely adds alternative credit scoring as an element of the Annual
Housing Report, as outlined in section 1324 of the bill.
Before I continue, however, I would first like to thank the Committee
on Rules for making the amendment in order and the Committee on
Financial Services for its consideration. In particular I would like to
thank the gentleman from Delaware (Mr. Castle), who has been a leader
on exploring the challenges and the opportunities of alternative credit
scoring. I look forward to working with the gentleman on this issue in
the future.
My amendment is a modest one, but I think its implications have far-
reaching potential. It is currently estimated that there are about 50
million people in the United States who have little or no credit
history. Many of these individuals make a solid income, they pay their
bills, they have substantial savings and investments. However, these
people face tough, if not insurmountable, conditions when they go to
secure a loan. Those who do qualify often have to pay excessive fees or
elevated interest rates. The irony is that you are more likely to
secure credit if you have debt than if you have none.
So the question is, how can these people who are outside the
traditional banking system gain access to credit and home loans if they
have no traditional credit history? One of the answers may be to use
alternative credit scoring and alternative sources of information, such
as utility bills and other types of payment systems so that they have a
history. If we use that, then we could see that they would most likely
pay their mortgage every month.
Much work is being done to develop and automate the use of
alternative credit information. Companies such as Fair Isaac, the
originator of the FICO score, has an algorithm which it uses to help
lenders gain the credit worthiness of unbanked or underbanked
applicants. Nevertheless, while the private sector is taking the
initiative, I think it needs the support of the Federal Government. Let
me tell you why.
Recently, we had Hispanic Heritage Month here in Washington, D.C.
where the Congressional Hispanic Caucus Institute does a summit. I did
a particular forum on alternative credit scoring. Many of the actors,
many of the first originators of loans for homes, for example, said
that it would be much easier for them to approve people on alternative
credit scoring if in fact the Fannie Maes, for example, of the world
actually would buy these in the secondary market. Right now they do
not.
So I think it is important for us as the Federal Government to step
up and to have Fannie Mae and Freddie Mac and others begin to look at
using alternative credit scoring on a more regular basis. It would
encourage primary lenders to follow suit; and more people, who should
really be eligible for these loans, would be eligible.
My amendment does not mandate nor does it direct GSEs to use
alternative credit scoring. It only asks that they report on their use
of these methods in the effort to promote greater homeownership,
particularly in underserved communities. By raising awareness of
alternative credit scoring, we could potentially be helping thousands
of qualified home buyers who have always aspired to own their own home.
Madam Chairman, I ask my colleagues for their support on this
amendment.
Madam Chairman, I yield back the balance of my time.
Mr. OXLEY. Madam Chairman, I claim the time in opposition, although I
am not opposed to the amendment. As a matter of fact, I am very much in
favor of the amendment, and I congratulate the gentlewoman from
California for her amendment. I know the gentleman from Delaware (Mr.
Castle) and the gentleman from Michigan (Mr. Ehlers) and others on our
side of the aisle have been very interested in this entire issue. I
think it is a worthy amendment, and we have no objection on this side.
The Acting CHAIRMAN. The question is on the amendment offered by the
gentlewoman from California (Ms. Loretta Sanchez).
The amendment was agreed to.
Mr. OXLEY. Madam Chairman, I move that the Committee do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Baker) having assumed the chair, Mrs. Capito, Acting Chairman of the
Committee of the Whole House on the State of the Union, reported that
that Committee, having had under consideration the bill (H.R. 1461) to
reform the regulation of certain housing-related Government-sponsored
enterprises, and for other purposes, had come to no resolution thereon.
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