HR 1859 | U.S. House Bill | Housing Finance Reform Act of 2011

HR 1859

112th CONGRESS
1st Session

H. R. 1859

To ensure the availability of reasonably priced conventional mortgages to borrowers in all economic cycles by encouraging private sector capital to support the secondary mortgage market, limiting the role of the Federal government and the exposure of taxpayers, and other purposes.

IN THE HOUSE OF REPRESENTATIVES

May 12, 2011

Mr. CAMPBELL (for himself and Mr. PETERS) introduced the following bill; which was referred to the Committee on Financial Services

A BILL

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Housing Finance Reform Act of 2011'.

SEC. 2. STATEMENT OF PURPOSES.

The purposes of this Act are to--

(1) ensure the availability of reasonably priced conventional residential mortgages to qualified borrowers in all economic cycles;

(2) provide incentives for private sector capital to support the secondary market for residential mortgages;

(3) limit the role of the Federal Government in the secondary market for residential mortgages and the exposure of taxpayers to the operations of the secondary markets for residential mortgages; and

(4) provide for the orderly wind down of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

SEC. 3. ESTABLISHMENT, OPERATION, SUPERVISION, AND REGULATION OF HOUSING FINANCE GUARANTY ASSOCIATIONS.

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.) is amended by inserting the following new subtitle D, and designating the existing subtitles D and E as subtitles E and F, respectively, and renumbering the sections of those subtitles accordingly:

`Subtitle D--Establishment, Operation, Supervision, and Regulation of Housing Finance Guarantee Associations

`SEC. 1381. DEFINITIONS.

`For purposes of this subtitle, the following definitions shall apply:

`(1) ASSOCIATION- The term `association' means a housing finance guarantee association chartered by the Director pursuant to section 1382.

`(2) ASSOCIATION-AFFILIATED PARTY- The term `association-affiliated party' means--

`(A) any director, officer, employee, or controlling stockholder of, or agent for, an association;

`(B) any shareholder, affiliate, consultant, or joint venture partner of an association, 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 an association;

`(C) any independent contractor for an association (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 association.

`(3) CONVENTIONAL MORTGAGE- The term `conventional mortgage' means a mortgage loan as defined in section 1390(e)(2).

`(4) FEDERAL HOUSING FINANCE AGENCY SECURITY- The term `Federal Housing Finance Agency security' means a security issued by an association through the Office of Securitization that conforms to the terms and conditions of section 1387.

`(5) LIMITED-LIFE ASSOCIATION- The term `limited-life association' means, with respect to an association in default or in danger of default, an entity organized by the Agency under section 1367(i) with respect to such association.

`(6) OFFICE OF SECURITIZATION- The term `Office of Securitization' means the Office established by section 1386.

`(7) ORGANIZER- The term `organizer' means the person or group of persons seeking to organize an association.

`(8) PERSON- The term `person' means any natural person or business entity.

`SEC. 1382. ESTABLISHMENT OF HOUSING FINANCE GUARANTY ASSOCIATIONS.

`(a) Director's Authority- The Director is authorized, under such regulations as the Director may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of housing finance guaranty associations, and to issue charters for such entities.

`(b) Formation of Associations; Articles of Association- Subject to the terms of this Act and regulations issued by the Director, an organizer may file an application with the Director to establish an association. The association may be chartered as a corporation, mutual association, partnership, limited liability corporation, cooperative, or any other organizational form that the organizer may deem appropriate. The Director may not require the organizer to adopt any particular organizational form.

`(c) Contents of the Application- An application for establishment of an association shall include--

`(1) the proposed articles of association;

`(2) a statement of the general object and purposes of the association;

`(3) the proposed capitalization and business plan for the association;

`(4) information on the financial resources of the organizers;

`(5) a statement of the relevant housing finance experience of the organizers;

`(6) identification of the proposed senior managers of the association and the relevant experience of such individuals; and

`(7) any other information the Director determines may be necessary to evaluate the background, experience, and integrity of the organizers and the proposed senior managers, or information otherwise necessary to determine the likely success of the proposed association.

`(d) Issuance of Charters and Chartering Criteria-

`(1) IN GENERAL- The Director may issue a charter for an association to commence business if the Director determines that the proposed association would be consistent with the purposes of this Act and the Housing Finance Reform Act of 2011, and that the association would have the managerial and financial resources to succeed.

`(2) CHARTERING CRITERIA- In making the determination under paragraph (1), the Director shall consider the competence, experience, and integrity of the organizer and proposed senior managers of the association, and the financial resources and future prospects of the proposed association. The Director may not issue a charter if the organizer fails to--

`(A) comply with all applicable formation requirements;

`(B) provide all information requested by the Director;

`(C) demonstrate the competence, experience, and integrity necessary to operate the association in a safe or sound manner;

`(D) demonstrate sufficient financial resources necessary to operate the association in a safe or sound manner; or

`(E) provide the Director with assurances that the association will make available to the Director, on an on-going basis, such information on the operations or activities of the association, or any affiliate of the association, that the Director deems necessary to ensure the safe and sound operation of the association and to enforce compliance with this Act.

`(3) EXPLANATION FOR DENIAL- Within 30 days of denying any application for the issuance of a charter under this section, the Director shall provide the organizer with a written explanation of the basis for the denial.

`(e) Special Purpose Associations-

`(1) IN GENERAL- The Director may issue a special purpose charter to the organizer of an association if the operations of the proposed association would be limited to serving a particular mortgage market, such as multifamily housing, or a particular category of mortgage lenders, such as community banks. All provisions of this Act that apply to associations shall apply to special purpose associations, including the criteria for obtaining a charter.

`(2) NONDISCRIMINATION- The operation of a special purpose association shall not be considered discriminatory for purposes of section 1385(a)(9).

`(f) Investments by Banking Organizations- A national bank, State bank, trust company, Federal or State credit union, or other banking organization, including a bank holding company and a savings and loan holding company, may acquire an interest in an association, and hold or dispose of such interest, subject to the provisions of this Act, and subject to the approval by the appropriate Federal banking agency for such institution.

`SEC. 1383. GENERAL POWERS OF ASSOCIATIONS.

`An association may--

`(1) adopt and use a corporate seal;

`(2) adopt, amend, and repeal by-laws;

`(3) sue or be sued;

`(4) make contracts and guarantees, incur liabilities, borrow money, issue notes, bonds, and other obligations;

`(5) purchase, receive, hold, and use real and personal property and other assets necessary for the conduct of its operations;

`(6) lend money;

`(7) invest, and reinvest funds, subject to the limitations of sections 1384 and 1385;

`(8) elect or appoint directors, officers, employees, and agents; and

`(9) issue securities, membership certificates, and other forms of ownership interests.

`SEC. 1384. HOUSING FINANCE RELATED POWERS OF ASSOCIATIONS.

`In addition to its general powers under section 1383, an association may--

`(1) purchase, hold, sell, and otherwise deal in conventional mortgages only for the purpose of--

`(A) creating a secondary market for such mortgages, including new conventional mortgage products;

`(B) facilitating the securitization of conventional mortgages; and

`(C) supporting multifamily housing;

`(2) issue, through the Office of Securitization, Federal Housing Finance Agency securities;

`(3) establish a trust or similar entity that shall not be subject to the claims made by creditors of the association in order to provide for the sale of beneficial interests in pools of mortgage loans or the right to receive interest and principal from such pools;

`(4) guarantee the timely payment of principal and interest on Federal Housing Finance Agency securities and charge a fee for such guarantee;

`(5) ensure that Federal Housing Finance Agency securities are properly serviced, which shall include the right to remove a mortgage servicer in the event the association determines that such servicer fails to perform contractual servicing obligations or other legal requirements imposed on mortgage servicers; and

`(6) hedge credit, interest rate and other risks associated with the purchase and sale of conventional mortgages.

`SEC. 1385. PROHIBITED ACTIVITIES.

`(a) In General- An association may not--

`(1) originate a mortgage;

`(2) service a mortgage;

`(3) guarantee timely payment of principal or interest on any mortgage-related security other than a Federal Housing Finance Agency security;

`(4) invest in securities other than Federal Housing Finance Agency securities, securities issued by the Federal Government or any agency of the Federal Government, and any other securities deemed appropriate by the Director;

`(5) speculate on credit, interest rate, and other risks;

`(6) underwrite, offer, sell, or solicit any form of insurance;

`(7) purchase any mortgage from an institution that holds a voting interest in the association;

`(8) purchase a conventional mortgage secured by a property comprised of one-to-four family dwelling units if the outstanding principal balance of the mortgage at the time of purchase exceeds 80 percent of the value of the property securing the mortgage, unless--

`(A) the seller retains a participation of not less than 10 percent in the mortgage;

`(B) for such period and under such circumstances as the Director may require, the seller agrees to repurchase or replace the mortgage upon demand of the association in the event that the mortgage is in default; or

`(C) that portion of the unpaid principal balance of the mortgage which is in excess of such 80 percent is guaranteed or insured by a qualified insurer, as determined by the Director.

`(9) discriminate against, or provide a preference to, any mortgage originator on the basis of the charter or license of such originator, the asset size of the originator, or the existence any ownership interest in the association by the originator; or

`(10) engage in any activity that is not authorized by this Act.

`(b) Rule of Construction- Subsection (a)(8) shall not be construed to prevent an association from setting standards related to the financial condition of originators from which it may acquire a conventional mortgage or prevent an association from setting guarantee fees based upon the volume of mortgages an originator sells to the association.

`SEC. 1386. OFFICE OF SECURITIZATION.

`(a) In General- The Director shall establish an Office of Securitization within the Agency to facilitate the securitization of conventional mortgages.

`(b) Functions of Office- The Office of Securitization shall--

`(1) subject to section 1387, create and label Federal Housing Finance Agency securities;

`(2) take such actions as may be necessary to issue the catastrophic federal guarantee described in section 1388 with respect to Federal Housing Finance Agency securities;

`(3) impose and collect the fee for the catastrophic federal guarantee;

`(4) administer and service Federal Housing Finance Agency securities, including acting as trustee for any trust established by an association for purposes of facilitating the securitization of conventional mortgages; and

`(5) engage in such other activities the Director determines to be incidental to the securitization of conventional mortgages.

`(c) Management of the Office- The Office of Securitization shall be managed by the Deputy Director of the Agency for Housing Finance Guarantee Association, who shall be designated by the Director in accordance with section 1391 and shall be subject to the direction and control of the Director.

`(d) No Economic Interest- In the performance of its functions, the Office of Securitization shall not assume any economic interest in the securities issued by an association.

`(e) Contracting Authority- The Director may contract with the Government National Mortgage Association to perform any or all of the functions of the Office of Securitization specified in subsection (b).

`SEC. 1387. FEDERAL HOUSING FINANCE AGENCY SECURITIES.

`(a) In General- The Director shall establish, by regulation, one or more standard forms for Federal Housing Finance Agency securities issued by associations.

`(b) Common Label; Standard Terms and Conditions- The forms required by subsection (a) shall--

`(1) identify the securities as Federal Housing Finance Agency securities;

`(2) set forth the terms and conditions for the payment of interest and principal on such securities;

`(3) state that such securities are guaranteed by the full faith and credit of the United States, subject to the limitations of section 1388(b);

`(4) address the servicing of Federal Housing Finance Agency securities; and

`(5) include such other standardized terms and conditions that the Director deems appropriate to enhance the liquidity of the securities, and shall include a representation and warranty certifying that a policy of a title insurance be in place to transfer title-related risks to State licensed title insurance companies for all conventional mortgages collateralizing a Federal Housing Finance Agency security.

`(c) Limitation- The forms established by the Director pursuant to subsection (a) shall not prevent Federal Housing Finance Agency securities to vary based upon--

`(1) the maturity of the securities;

`(2) the yield of the securities;

`(3) the type of conventional mortgages that serve as collateral for the securities; or

`(4) such other terms and conditions that the Director deems appropriate.

`(d) Temporary Regulation of Guarantee Fees-

`(1) GAO STUDY- Not later than the expiration of the 12-month period beginning upon the date of the enactment of the Housing Finance Reform Act of 2011, the Comptroller General of the United States shall conduct a study to determine the market value of the catastrophic guarantee under section 1388 and submit to the Director a report setting forth the findings of such study.

`(2) AMOUNT- Taking into consideration the findings of the study pursuant to paragraph (1), the Director shall establish a pricing structure for guarantee fees by associations that provides for a reasonable rate of return to associations.

`(3) QUARTERLY ADJUSTMENT- After initially establishing the pricing structure pursuant to paragraph (2), the Director shall, on a calendar quarterly basis, review such prices and adjust the pricing structure as appropriate.

`(4) EMERGENCY ADJUSTMENT- The Director may, at any time, adjust the prices and pricing structure under this subsection if the Director determines that market conditions or other factors require such adjustment.

`(5) TERMINATION OF PRICING STRUCTURE- The Director shall monitor competition between associations to determine the first time at which both are the following conditions exist:

`(A) There is sufficient competition between the associations.

`(B) The associations, individually and collectively, are stable and sufficient to serve the market.

Upon such a determination, the Director shall provide for the termination of the applicability and adjustment of pricing structure under this subsection upon a date certain and shall terminate the pricing structure on such date. On and after such date, each association shall establish guarantee fees to be charged by the association.

`(e) Disclosure Requirement-

`(1) IN GENERAL- Federal Housing Finance Agency securities shall not be registered securities under the terms of the Securities Act of 1933 (15 U.S.C. 77a et seq.) and shall be exempt securities for purposes of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).

`(2) DISCLOSURE REGULATION- Notwithstanding paragraph (1), the Director shall, by regulation, ensure transparency of Federal Housing Finance Agency securities by requiring each association to publicly disclose information about the composition of each pool of mortgages backing the security, including the average loan-to-value ratio, the average debt-to-income ratio, the average payment history of the mortgagors, the number and value of mortgages from each State, the distribution of mortgage coupon rates, and whether the mortgages were originated in broker or non-broker channels.

`SEC. 1388. CATASTROPHIC FEDERAL GUARANTEE.

`(a) Authorization- Subject to the limitations in subsection (b), and such other terms and conditions that the Director deems appropriate, the Director shall guarantee the timely payment of the principal and interest of Federal Housing Finance Agency securities, and the full faith and credit of the United States is hereby pledged to the payment of all amounts which may be required to be paid as a result of such guarantee.

`(b) Limitations- A guarantee under this section shall apply only if--

`(1) the association that issued the securities has been placed into conservatorship or receivership by the Director; and

`(2) the Reserve Fund established by section 1389 lacks sufficient funds to make the required principal and interest payments.

`(c) Fee-

`(1) ESTABLISHMENT- The Director shall establish, on an annual basis, a fee to be paid by associations for a guarantee issued under this section in connection with Federal Housing Finance Agency securities issued by such associations.

`(2) ADMINISTRATION- The Director shall impose and collect such fee through the Office of Securitization.

`(3) AMOUNT- The Director shall establish the fee at a level to ensure that amounts in the Reserve Fund are sufficient to cover potential claims on such Fund, taking into consideration--

`(A) general economic conditions;

`(B) trends in housing prices; and

`(C) such other factors that the Director deems appropriate.

`(d) Special Assessment To Repay Cost of Federal Guarantee-

`(1) IN GENERAL- If the Director is required to make payments pursuant to the catastrophic Federal guarantee authorized under subsection (a) in excess of the amounts in the Reserve Fund, the Director shall impose a special assessment on associations to recoup all costs associated with the guarantee.

`(2) CRITERIA- The Director, by regulation, shall establish criteria for the imposition of a special assessment. Such criteria shall--

`(A) apportion the assessment equally among all associations; and

`(B) to the extent feasible and prudent, permit associations to pay the assessment over a period of time so that the assessment does not cause an association to be undercapitalized or otherwise materially impair the operations of an association.

`(e) No Federal Support for Other Securities or Obligations of Associations- This Act may not be construed to authorize or provide any guarantee of any security or obligation of an association by the United States or any agency or instrumentality of the United States, other than Federal Housing Finance Agency securities issued by an association.

`SEC. 1389. RESERVE FUND.

`(a) Establishment; Credits- The Director shall establish a Reserve Fund, which shall be credited with all fees imposed and collected pursuant to section 1388(c).

`(b) Organization- The Reserve Fund shall be maintained with a Federal Reserve Bank or with a depository institution designated as a depository or fiscal agent of the United States.

`(c) Use- Amounts in the Reserve Fund shall be used by the Director, through the Office of Securitization, to make principal and interest payments to the owners of Federal Housing Finance Agency securities issued by an association that has been placed into conservatorship or receivership--

`(1) for payment under guarantees issued under subsection (a) of section 1388 only under the terms provided in subsection (b) of such section; and

`(2) to the extent such amounts are not otherwise needed, for investment in obligations of the United States or in obligations guaranteed as to principal and interest by the United States.

`(d) Treasury Advance-

`(1) IN GENERAL- If amounts in the Reserve Fund are insufficient to satisfy the liabilities of the Fund, the Secretary of the Treasury shall advance to the Fund such amounts as may be necessary to meet the obligations of the Fund, as determined by the Director and the Secretary, and the Director shall agree to repay such advance on such terms and conditions as required by the Secretary.

`(2) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to the Secretary, without fiscal year limitation, such sums as may be necessary to carry out this subsection.

`SEC. 1390. SUPERVISION OF ASSOCIATIONS.

`(a) General Supervisory Authority of Director-

`(1) IN GENERAL- The Director shall have supervisory authority over associations, and may issue such regulations, orders, and interpretations as the Director determines necessary to ensure that an association operates in a safe and sound manner.

`(2) USE OF EXISTING AUTHORITY- Except as provided in this section, an association, an association-affiliated party, and a limited-life association shall be subject to the same supervisory and enforcement powers of the Director to the same extent as if an association was a regulated entity, the association-affiliated party was an entity-affiliated party, and the limited-life association was a limited-life entity, including--

`(A) the enforcement powers under sections 1371 through 1379 (12 U.S.C. 4631-9);

`(B) authority to reclassify a capital classification (as established pursuant to subsection (h)(2) of this section) as provided in section 1364(c) (12 U.S.C. 4614(c));

`(C) authority to restrict capital distributions in accordance with section 1364(e) (12 U.S.C. 4614(e));

`(D) authority to take prompt corrective supervisory actions in response to capital classifications as provided for in sections 1365 and 1366 (12 U.S.C. 4615, 4616); and

`(E) authority to appoint the Agency as the conservator or a receiver in accordance with section 1367 (12 U.S.C. 4617).

`(b) Examinations- The Director shall conduct a full-scope examination of an association not less frequently than once every 12 months, and shall have real-time access to all data and information related to the activities and operations of an association.

`(c) Capital Standards-

`(1) ESTABLISHMENT- The Director shall establish, by regulation, risk-based and leverage capital standards for associations.

`(2) CRITERIA- In setting the capital standards required by paragraph (1), the Director shall take into consideration--

`(A) the risk associated with conventional mortgages;

`(B) underwriting standards that apply to conventional mortgages; and

`(C) such other factors as the Director deems appropriate.

`(d) Management and Operational Standards- The Director shall establish, by regulation, standards for the management and operations of associations, including standards related to--

`(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 interest rate risk exposure;

`(4) 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;

`(5) adequacy and maintenance of liquidity and reserves;

`(6) management of asset growth;

`(7) investments and acquisitions of assets consistent with this Act;

`(8) 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;

`(9) management of credit and counterparty risk, including systems to identify concentrations of credit risk and prudential limits to restrict exposure of the association to a single counterparty or groups of related counterparties;

`(10) maintenance of adequate records, in accordance with consistent accounting policies and practices that enable the Director to evaluate the financial condition of the association; and

`(11) such other operational and management standards as the Director determines to be appropriate.

`(e) Underwriting Standards for Conventional Mortgages-

`(1) REGULATION REQUIRED- The Director shall establish, by regulation, underwriting standards for conventional mortgage purchased by an association. Such standards shall be the same as the standards established by the Bureau for Consumer Financial Protection of the Federal Reserve System for qualified mortgages pursuant to section 129C(b) of the Truth in Lending Act (15 U.S.C. 1639c(b); as added by section 1412 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (124 Stat. 2145)).

`(2) DEFINITION- For purposes of this subsection, the term `conventional mortgage' means a loan that--

`(A) is secured by a mortgage, lien, or other security interest on a--

`(i) a one-to-four family residence that is the principal residence of the mortgagor,

`(ii) a property comprising five or more family dwelling units;

`(iii) a manufactured home that is the principal residence of the mortgagor; or

`(iv) the stock or membership interest or certificate issued to a tenant-stockholder or resident-member of a cooperative housing corporation, as defined in section 216 of the Internal Revenue Code of 1986, and in the proprietary lease, occupancy agreement, or right of tenancy in the dwelling union of the tenant-stockholder or resident-member in such cooperative housing corporation;

`(B) is a subordinate mortgage or lien on--

`(i) a one-to-four family residence that is the principal residence of the mortgage; or

`(ii) a property that comprises five or more family dwelling units:

`(C) is not insured or guaranteed under--

`(i) the National Housing Act (12 U.S.C. 1701 et seq.);

`(ii) title V of the Housing Act of 1949 (42 U.S.C. 1471 et seq.);

`(iii) chapter 37 of title 38, United States Code; or

`(D) meets the underwriting standards set by the Director pursuant to paragraph (1).

`(f) Limitation on Maximum Original Principal Amount- The Director shall prohibit any association from purchasing any conventional mortgage for which the maximum original principal obligation exceeds the greater of--

`(1) 150 percent of the average home price in the United States for a residence having the same number of dwelling units as the residence subject to the mortgage; or

`(2) 150 percent of the median price, for the area in which the residence subject the mortgage is located for a residence having the same number of dwelling units as the residence subject to the mortgage.

`(g) Reporting Requirements-

`(1) IN GENERAL- An association shall submit to the Director such reports, containing such information and in such form and at such times, as the Director deems necessary to assess the condition, operations and activities of the association.

`(2) INFORMATION REGARDING AREAS AND MARKETS SERVED-

`(A) SUBMISSION OF INFORMATION- The Director shall require each association to submit data annually to the Director that the Director determines is sufficient to indicate the geographic areas and market segments being served by the association.

`(B) PUBLIC AVAILABILITY- Upon receipt of information submitted pursuant to subparagraph (A), the Director shall make such information available to the public in a form and manner determined appropriate by the Director.

`(h) Prompt Corrective Actions-

`(1) ESTABLISHMENT AND CRITERIA- The Director, by regulation, shall--

`(A) establish the capital classifications specified under paragraph (2) for associations;

`(B) establish criteria for each such capital classification based upon the amount and types of capital held by an association; and

`(C) classify each association according to such capital classifications.

`(2) CAPITAL CLASSIFICATIONS- The capital classifications specified under this paragraph are--

`(A) adequately capitalized;

`(B) undercapitalized;

`(C) significantly undercapitalized; and

`(D) critically undercapitalized.

`(i) Conservatorship and Receivership-

`(1) ADDITIONAL GROUNDS FOR APPOINTMENT- In addition to the grounds for the appointment of conservator or receiver under section 1367(a)(3) (12 U.S.C. 4617(a)(3)), the Director shall appoint the Agency as the conservator or receiver of an association if the association fails to make a timely payment of principal or interest on a Federal Housing Finance Agency security issued by the association.

`(2) LIMITED-LIFE ASSOCIATION- If the Agency is appointed as receiver for an association, the Agency, as receiver, may organize a limited life association to assume the assets and purchase the liabilities of the association subject to the same provisions applicable under section 1367(i) to a limited-life regulated entity appointed for a regulated entity, and such limited-life association shall, by operation of law and immediately upon its organization, succeed to the charter of the association and operate in accordance with such charter, this Act, and any other provision of law to which the association is subject.

`SEC. 1391. AGENCY OPERATIONS.

`(a) Applications Processing Division- The Director shall establish a division within the Agency to accept and process applications for the formation of associations, and shall employ accountants, financial analysts, lawyers, and such other personnel as the Director determines necessary to evaluate the qualifications of the organizer or organizers and the financial prospects of a proposed association.

`(b) Auditing Division- The Director shall establish a division within the Agency to conduct regular audits of the processes and systems used by associations. Such audits shall include a review of loan files and systems for tracking loan documents.

`(c) Deputy Director for Housing Finance Guarantee Associations-

`(1) IN GENERAL- The Agency shall have a Deputy Director for Housing Finance Guarantee Associations, who shall be designated by the Director from among individuals with demonstrated understanding of housing markets and housing finance.

`(2) FUNCTIONS- The Deputy Director for Housing Finance Guarantee Associations shall have such functions, powers, and duties with respect to the formation, regulation, and supervision of associations and the operations of the Office of Securitization as the Director shall prescribe.

`(3) LIMITATIONS- The Deputy Director for Housing Finance Guarantee Associations may not--

`(A) have any direct or indirect financial interest in any association or regulated entity;

`(B) hold any office, position, or employment in any association or regulated entity; or

`(C) have served as an executive officer or director of any association or regulated entity at any time during the 3-year period preceding the date of the designation of such individual by the Director.

`(d) Annual Assessment of Agency Operations- In addition to the general authority of the Federal Housing Finance Oversight Board provided under section 1313A (12 U.S.C. 4513a), the Board, annually, shall--

`(1) conduct an assessment of the operations and resources of the Agency to determine whether the Director and the Agency have the powers, systems, personnel, and other resources necessary to charter, supervise, and regulate associations;

`(2) make recommendations to the Director based upon the assessment required in paragraph (1); and

`(3) report the results of the assessment under this subsection and any recommendations pursuant to such assessment to the Congress.

`(e) Assessments and Other Fees- The Director shall establish, by regulation, such assessments and fees the Director deems necessary to cover the Agency's direct and indirect costs for chartering, supervising, and regulating associations under this subtitle, including all costs associated with the establishment and operation of the Office of Securitization.

`SEC. 1392. APPLICABLE LAW.

`(a) In General- All authorized activities of an association shall be governed by Federal law and subject to exclusive regulation and supervision by the Agency. No State may prevent or restrict an association from engaging directly or indirectly in any activity authorized under or pursuant to this subtitle.

`(b) Limitation- Subsection (a) may not be construed to prevent the application of nondiscriminatory State laws that apply to all businesses operating in a State, including criminal, tax, and zoning laws.

`SEC. 1393. JUDICIAL REVIEW.

`(a) In General- An association affected by an action of the Director may seek review of such action in an appropriate Federal court.

`(b) Private Rights of Action- Nothing in this Act may be construed to create a private right of action on behalf of any person against an association, or any officer or director of an association.

`SEC. 1394. BUDGET NEUTRALITY.

`The Director shall exercise the authority provided in this subtitle over the formation, regulation, and supervision of associations and the operations of the Office of Securitization so as to ensure that associations and the Office of Securitization operate in a manner that does not increase the budget deficit, or debt, of the Federal Government.'.

SEC. 4. TRANSITION.

(a) Transition Plan- Not later than six months after the date of the enactment of this Act, the Director of the Federal Housing Finance Agency shall submit to the Congress a plan that provides for--

(1) the winding down of the enterprises; and

(2) the formation, supervision, and regulation of associations as provided in subtitle D of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as added by the amendment made by section 3 of this Act.

(b) Contents of Plan- The plan required by subsection (a) shall provide for--

(1) measures to ensure the continued operation of the enterprises during the transition period, including the retention of qualified personnel;

(2) the transfer of qualified personnel and systems from the enterprises to associations;

(3) the implementation of the transitional actions required by subsections (b) through (m) of this section; and

(4) such other matters as the Director deems appropriate.

(1) REPEAL- The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended by striking sections 1331 through 1336 (12 U.S.C. 4561-6).

(2) CONFORMING AMENDMENTS- Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended--

(A) in section 1303(28) (12 U.S.C. 4502(28)), by striking `and, for the purposes' and all that follows through `designated disaster areas';

(B) in section 1324(b)(1)(A) (12 U.S.C. 4544(b)(1)(A))--

(i) by striking clauses (i), (ii), and (iv);

(ii) in clause (iii), by inserting `and' after the semicolon at the end; and

(iii) by redesignating clauses (iii) and (v) as clauses (i) and (ii), respectively;

(D) in section 1339(h) (12 U.S.C. 4569), by striking paragraph (7);

(E) in section 1341 (12 U.S.C. 4581)--

(i) in subsection (a)--

(I) in paragraph (1), by inserting `or' after the semicolon at the end;

(II) in paragraph (2), by striking the semicolon at the end and inserting a period; and

(III) by striking paragraphs (3) and (4); and

(ii) in subsection (b)(2)--

(I) in subparagraph (A), by inserting `or' after the semicolon at the end;

(II) by striking subparagraphs (B) and (C); and

(III) by redesignating subparagraph (D) as subparagraph (B);

(F) in section 1345(a) (12 U.S.C. 4585(a))--

(i) in paragraph (1), by inserting `or' after the semicolon at the end;

(ii) in paragraph (2), by striking the semicolon at the end and inserting a period; and

(iii) by striking paragraphs (3) and (4); and

(G) in section 1371(a)(2) (12 U.S.C. 4631(a)(2))--

(i) by striking `with any housing goal established under subpart B of part 2 of subtitle A of this title,'; and

(ii) by striking `section 1336 or'.

(d) Requirement for Enterprises To Pay State and Local Taxes-

(1) FANNIE MAE- Effective on the date of the enactment of this Act, paragraph (2) of section 309(c) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1723a(c)(2)) is amended--

(A) by striking `shall be exempt from' and inserting `shall be subject to'; and

(B) by striking `except that any' and inserting `and any'.

(2) FREDDIE MAC- Effective on the date of the enactment of this Act, section 303(e) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1452(e)) is amended--

(A) by striking `shall be exempt from' and inserting `shall be subject to'; and

(B) by striking `except that any' and inserting `and any'.

(e) Designation of Deputy Director for Housing Finance Guarantee Associations- Not later than six months after the date of the enactment of this Act, the Director shall designate the Deputy Director for Housing Finance Guarantee Associations authorized by section 1391(c) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as added by the amendment made by section 3 of this Act.

(f) Establishment of Office of Securitization and Creation of Standardized Mortgage Security- Not later than 12 months after the date of the enactment of this Act, the Director shall--

(1) provide for the establishment of the Office of Securitization, as authorized by section 1386 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as added by the amendment made by section 3 of this Act;

(2) create the standardized mortgage security forms required by section 1387 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as added by the amendment made by section 3 of this Act; and

(3) require, in a manner that does not disrupt or impair trading in existing mortgage securities issued by the enterprises, that the enterprises use the standardized mortgage security forms when issuing new mortgage securities.

(g) Reduction in Mortgage Asset Portfolios of Enterprises-

(1) IN GENERAL- Not later than 12 months after the date of enactment of this Act, the Director shall publish, in final form, a regulation that requires each enterprise to reduce its total mortgage assets to not more than $250,000,000,000, within 5 years of the date of the enactment of this Act.

(2) DEFINITION- For purposes of this paragraph, the term `total mortgage assets' means, with respect to an enterprise, mortgages, mortgage loans, mortgage-related securities, participation certificates, mortgage-backed commercial paper, obligations of real estate investment conduits and similar assets, in each case to the extent that such assets would appear on the balance sheet of the enterprise in accordance with generally accepted accounting principles in effect in the United States as of September 7, 2008.

(h) Increase in Guarantee Fees Charged by Enterprises-

(1) IN GENERAL- Not later than 12 months after the date of the enactment of this Act, the Director shall, taking into consideration the study under section 1387(d)(1) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as added by the amendment made by section 3 of this Act, issue in final form a regulation that directs the enterprises to increase, over a three-year period, guarantee fees to more accurately reflect the risk assumed by the guarantee.

(2) DEFINITION- For purposes of this subsection, the term `guarantee fee' means a fee charged by an enterprise in connection with any guarantee, issued by the enterprise, of the timely payment of principal and interest on securities, notes, and other obligations based on or backed by mortgages on residential real property. Such term includes--

(A) the guarantee fee charged by the Federal National Mortgage Association with respect to mortgage-backed securities; and

(B) the management and guarantee fee charged by the Federal Home Loan Mortgage Corporation with respect to participation certificates.

(i) Conforming Loan Limits- Effective upon the date of the enactment of this Act, section 146 of the Continuing Appropriations Act, 2011 (Public Law 111-242; 124 Stat. 2615) is amended by adding at the end the following new subsection:

`(c) Extension Until End of Conservatorships- Notwithstanding any provision of subsection (a) or (b), such subsections shall apply with respect to mortgages originated during the period that begins at the conclusion of fiscal year 2011 and ends upon the termination of the conservatorship of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, as applicable, pursuant to section 4(l) of the Housing Finance Reform Act of 2011.'.

(j) Finalization of Regulations Governing Associations, Formation the Applications and Auditing Divisions- Not later than 12 months after the date of the enactment of this Act, the Director shall--

(1) issue, in final form regulations governing the chartering, operations, and supervision of associations, including required capital and other prudential standards; and

(2) establish the applications and auditing divisions required by section 1391 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as added by the amendment made by section 3 of this Act.

(k) Notification to Congress and Acceptance of Charter Applications- Following the completion of the actions required under subsection (j), the Director shall--

(1) notify the Congress that the Agency has taken all appropriate actions to begin the process of chartering, supervising and regulating associations, and

(2) may commence accepting, and acting upon, applications for the chartering of associations.

(l) Mandatory Receivership- The Director shall place the enterprises into receivership no later than one year after five or more associations, two of which are not special purpose associations, have been chartered.

(m) Federal Support for Existing Obligations of Fannie Mae and Freddie Mac- The full faith and credit of the United States is hereby pledged to the payment of all debt obligations of the enterprises and all mortgage-backed securities issued by the enterprises, until such obligations and securities mature or are redeemed.

(n) Definitions- For purposes of this section, the following definitions shall apply:

(1) AGENCY- The term `Agency' means the Federal Housing Finance Agency.

(2) ASSOCIATION; CONVENTIONAL MORTGAGE; OFFICE OF SECURITIZATION; REGULATED ENTITY- The terms `association', `conventional mortgage', `Office of Securitization', and `regulated entity' have the meanings given such terms in section 1381 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992.

(3) DIRECTOR- The term `Director' means the Director of the Agency.

(4) ENTERPRISE- The term `enterprise' has the meaning given such term in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4502).

(5) TRANSITION PERIOD- The term `transition period' means the period that begins upon the date of the enactment of this Act and ends upon appointment of receivers for both enterprises pursuant to subsection (m).

SEC. 5. TECHNICAL AND CONFORMING AMENDMENTS.

Federal Housing Enterprises Financial Safety and Soundness Act of 1992 is amended--

(1) in section 1303(28) (12 U.S.C. 4502(28)), by striking `and, for the purposes' and all that follows through `designated disaster areas';

(2) in section 1324(b)(1)(A) (12 U.S.C. 4544(b)(1)(A))--

(A) by striking clauses (i), (ii), and (iv);

(B) in clause (iii), by inserting `and' after the semicolon at the end; and

(3) in section 1338(c)(10) (12 U.S.C. 4568(c)(10)), by striking subparagraph (E);

(4) in section 1339(h) (12 U.S.C. 4569), by striking paragraph (7);

(5) in section 1341 (12 U.S.C. 4581)--

(A) in subsection (a)--

(i) in paragraph (1), by inserting `or' after the semicolon at the end;

(ii) in paragraph (2), by striking the semicolon at the end and inserting a period; and

(iii) by striking paragraphs (3) and (4); and

(B) in subsection (b)(2)--

(i) in subparagraph (A), by inserting `or' after the semicolon at the end;

(ii) by striking subparagraphs (B) and (C); and

(iii) by redesignating subparagraph (D) as subparagraph (B);

(6) in section 1345(a) (12 U.S.C. 4585(a))--

(A) in paragraph (1), by inserting `or' after the semicolon at the end;

(B) in paragraph (2), by striking the semicolon at the end and inserting a period; and

(7) in section 1371(a)(2) (12 U.S.C. 4631(a)(2))--

(A) by striking `with any housing goal established under subpart B of part 2 of subtitle A of this title,'; and

(B) by striking `section 1336 or'.

END