Order Code RL32795
CRS Report for Congress
Received through the CRS Web
Government-Sponsored Enterprises (GSEs):
Regulatory Reform Legislation
Updated October 27, 2005
Mark Jickling
Specialist in Public Finance
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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Government-Sponsored Enterprises:
Regulatory Reform Legislation
Summary
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs),
chartered by Congress to establish a secondary mortgage market to improve the
availability of capital for home mortgage financing. To help these privately-owned
institutions accomplish this mission, Congress granted them several statutory benefits
not available to other private companies. The advantages of GSE status have helped
the enterprises to grow very large and dominate the secondary mortgage market.
In 1992, Congress established the Office of Federal Housing Enterprise
Oversight (OFHEO), an agency within the Department of Housing and Urban
Development (HUD), to oversee the financial safety and soundness of the enterprises.
OFHEO is authorized to set capital requirements, conduct annual risk-based
examinations, and generally enforce compliance with safety and soundness standards.
With the rapid growth of the GSEs, and major accounting scandals at Fannie
Mae and Freddie Mac, the effectiveness of the current regulatory regime has been
widely questioned. Several legislative proposals considered in the 108th and earlier
Congresses addressed GSE regulatory reform, but none was enacted. However,
adequacy of GSE regulation remains a prominent legislative issue.
While improving supervision of Fannie Mae and Freddie Mac is the major
focus, regulatory reform also involves the 12 Federal Home Loan Banks, which
comprise one collective GSE. The Federal Home Loan Banks lend to lenders —
their member banks — primarily for housing, but also for many other purposes.
Under the proposed GSE reform, they would be brought under a single regulatory
umbrella with Fannie and Freddie.
In the 109th Congress, H.R. 1461 and S. 190 propose to restructure the GSE
supervisor and enhance its regulatory powers. H.R. 1461 was marked up and
reported by the Financial Services Committee on May 25, 2005, and passed the full
House, with amendments, on October 26, 2005. Chairman Shelby put forward an
amendment in the nature of a substitute for S. 190, which was marked up and
approved by the Banking Committee on July 28, 2005.
Common provisions of S. 190 and H.R. 1461 would abolish OFHEO and
establish an independent agency to oversee the housing GSEs and the Federal Home
Loan Banks; enhance the safety and soundness, disclosure, and enforcement tools
available to the new regulator; and increase the budget autonomy of the new agency
by exempting its assessments from the annual appropriations process. S. 190 as
reported takes the further step of limiting the type of assets that Fannie and Freddie
could hold in their investment portfolios.
This report summarizes legislative proposals in the 109th Congress that aim to
strengthen the regulation of the GSEs, and will be updated as warranted.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Major Differences Between House and Senate Bills . . . . . . . . . . . . . . . . . . . . . . . 4
Affordable Housing Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conforming Loan Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Portfolio Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Subtitle A: Improvement of Safety and Soundness Regulation . . . . . . . 7
Subtitle B: Improvement of Mission Supervision . . . . . . . . . . . . . . . 24
Subtitle C: Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . 32
Subtitle D: Enforcement Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Title II: Federal Home Loan Bank Provisions . . . . . . . . . . . . . . . . . . 41
Transition Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
List of Tables
Table 1. Provisions of GSE Reform Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The author gratefully acknowledges the work of Loretta Nott, whose CRS
Report RL32069, Improving the Effectiveness of GSE Oversight: Legislative
Proposals in the 108th Congress, provides the basis for the introductory
material in this report.

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Government Sponsored Enterprises:
Regulatory Reform Legislation
Introduction
Government-sponsored enterprises (GSEs) are privately owned, congressionally
chartered financial institutions created for specific public policy purposes. They
benefit from certain exemptions and privileges, including an implied federal
guarantee,1 intended to enhance their ability to borrow money. Two of the largest
GSEs are Fannie Mae and Freddie Mac (herein referred to as the enterprises or
GSEs).2 These institutions were created by Congress to establish and maintain a
secondary mortgage market, increasing liquidity and improving the distribution of
capital available for home mortgage financing.3 To help these institutions
accomplish this mission, Congress has provided them with several benefits not
available to other financial institutions.4 These statutory benefits provide the
enterprises with lower funding costs, the ability to operate with less capital, and
lower direct costs.5 The advantages of GSE status have enabled the enterprises to
grow rapidly and become dominant players in the secondary mortgage market.
1 Although GSE bonds are not explicitly backed by the full faith and credit of the
government, market participants behave as if they were, believing that the Treasury will
never permit a GSE to default. This implicit guarantee allows the GSEs to borrow at lower
rates than private financial institutions, and to take on greater financial risk without a
corresponding drop in their credit ratings.
2 The other GSEs are the Federal Home Loan Bank System, the Farm Credit System, and
Farmer Mac. Sallie Mae, a former GSE, has been fully privatized.
3 For a detailed description of the development of the U.S. secondary mortgage market, see
Office of Federal Housing Enterprise Oversight, Report to Congress, June 2003, at
[http://www.ofheo.gov/media/pdf/WEBsiteOFHEOREPtoCongress03.pdf].
4 These statutory benefits include (1) exemption from state and local taxes, (2) a line of
credit with the U.S. Treasury up to $2.25 billion, (3) eligibility of their debt to serve as
collateral for public deposits, (4) eligibility of their securities for Federal Reserve open
market purchases, (5) eligibility for their corporate securities to be purchased without limit
by federally regulated financial institutions, (6) assignment of mortgage-related securities
they have issued or guaranteed to the second-lowest credit risk category at depository
institutions, and (7) exemption from the registration requirements of the Securities and
Exchange Commission.
5 For more information on these advantages, see the following reports: U.S. Department of
the Treasury, Government Sponsorship of the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation, July 11, 1996; U.S. Congressional Budget
Office, Assessing the Public Costs and Benefits of Fannie Mae and Freddie Mac, May 1996;
and U.S. Congressional Budget Office, Federal Subsidies and the Housing GSEs, May
2001.

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CRS-2
Congress has always been concerned that the safety and soundness of the
enterprises be maintained so that they can meet their public policy mission and not
pose risks to taxpayers. Prior to 1992, oversight was the responsibility of the
Department of Housing and Urban Development (HUD) and the Federal Home Loan
Bank Board. In 1992, Congress established the Office of Federal Housing Enterprise
Oversight (OFHEO), an independent agency within HUD, to oversee the financial
safety and soundness of the enterprises. The office is authorized to set capital
requirements, conduct annual risk-based examinations, and generally enforce
compliance with safety and soundness standards.
Since the creation of OFHEO, total assets at the GSEs have grown by more than
820% to $1.9 trillion.6 The GSEs have become two of the largest private debt issuers
in the world. At the end of 2003, outstanding debt securities of the enterprises
totaled $1.7 trillion — an amount equal to nearly half of all publicly held U.S.
Treasury debt. In addition to enterprise debt, investors hold about $1.7 trillion in
mortgage-backed securities issued by Fannie Mae and Freddie Mac.7
As a result of the rapid growth of these institutions and their implied federal
backing, there has been an increasing concern that the enterprises may pose a
problem of systemic risk to the financial system.8 Many financial institutions around
the world hold large quantities of GSE debt and default by either GSE could have
widespread, unpredictable, and potentially serious repercussions. Accordingly,
questions have been raised about the effectiveness of the current regulatory
environment.
Events of the past two years have brought a new urgency to the GSE reform
issue. In 2003, Freddie Mac admitted that it had used improper accounting policies
to create the appearance of steady earnings growth and issued a restatement of
financial results, revising net income for 2000-2002 upwards by $5 billion.9 OFHEO
6 Based on 2003 annual reports. Fannie Mae is reported to have reduced the size of its asset
portfolio since the accounting scandal broke in the fall of 2004, but exact figures will not
be available until its financial accounts have been restated.
7 For more information, see Office of Federal Housing Enterprise Oversight, FY 2003-2008
Strategic Plan, Sept. 30, 2003, at [http://www.ofheo.gov/media/pdf/0308stratplan93003a.
pdf].
8 For a comprehensive analysis of these risks, see Office of Federal Housing Enterprise
Oversight, Systemic Risk: Fannie Mae, Freddie Mac, and the Role of OFHEO, Feb. 2003,
at [http://www.ofheo.gov/media/archive/docs/reports/sysrisk.pdf]. Furthermore, the
International Monetary Fund (IMF) has stated that the GSE “regulators need to look closely
at whether agencies’ capital adequacy is sufficient, especially bearing in mind the questions
about internal controls that have emerged in Freddie Mac.... [I]t is unclear whether [the
GSEs] have taken sufficient account of the risk that the market may not be deep enough to
allow them to continuously hedge their growing portfolios in times of stress.” For more
information, see IMF, Global Financial Stability Report: Market Developments and Issues,
Sept. 2003, pp. 16-22, at [http://www.imf.org/external/pubs/ft/gfsr/2003/02/index.htm].
9 For more information, see CRS Report RS21567, Accounting and Management Problems
at Freddie Mac, by Mark Jickling.

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CRS-3
imposed a $125 million fine and is pursuing civil actions against several former
Freddie executives.
Following the special examination of Freddie Mac, OFHEO began to review the
accounting policies and practices at Fannie Mae, and published its preliminary
findings in September 2004.10 OFHEO charged that Fannie Mae did not follow
generally accepted accounting practices in two critical areas: (1) amortization of
discounts, premiums, and fees involved in the purchase of home mortgages and (2)
accounting for financial derivatives contracts. According to OFHEO, these
deviations from standard accounting rules allowed Fannie Mae to reduce volatility
in reported earnings, present investors with an artificial picture of steadily growing
profits, and, in at least one case, to meet financial performance targets that triggered
the payment of bonuses to company executives.11 On December 15, 2004, the
Securities and Exchange Commission (SEC) essentially endorsed OFHEO’s report
and directed Fannie Mae to restate its accounting results since 2001 after finding
inadequacies in Fannie’s accounting policies and methodologies. Fannie Mae’s CEO
and CFO stepped down soon thereafter.
While problems at Fannie Mae and Freddie Mac have provided the main
impetus for reform, the regulation of the Federal Home Loan Banks (FHLBs) may
also be affected by the GSE. The 12 FHLBs comprise one collective government-
sponsored enterprise. Originally chartered by Congress to provide liquidity to the
nation’s predominant lenders for home mortgage loans — savings and loan
associations and savings banks — the FHLBs have undergone a series of changes
over the years as financial institutions have changed. Still a lender to lenders
primarily for housing, the FHLBs can now lend for many other purposes as well, and
have special responsibilities for low- and moderate-income housing, for debts
incurred by the federal government in handling deposit insurance crises of the 1970s
and 1980s, and for some community development projects.
Several bills were considered in the 108th Congress that would have restructured
OFHEO. While the proposals took somewhat different approaches to regulatory
reform, all appeared to
! abolish OFHEO and reconstitute the GSE regulator within the
Department of the Treasury, or as an independent agency;12
! increase the budget autonomy of the new office by exempting its
assessments from the annual appropriations process; and
10 Office of Federal Housing Enterprise Oversight, Report of Findings to Date: Special
Examination of Fannie Mae, Sept. 17, 2004, available at [http://www.ofheo.gov/media/
pdf/FNMfindingstodate17sept04.pdf].
11 For a discussion of OFHEO’s findings, see CRS Report RS21949, Accounting Problems
at Fannie Mae, by Mark Jickling.
12 In some versions, the new regulator was to have authority over the FHLBs, as well as
Fannie and Freddie.

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CRS-4
! enhance the safety and soundness and enforcement tools available
to the new regulator.
None of these bills, whose provisions are summarized in CRS Report RL32069,
Improving the Effectiveness of GSE Oversight: Legislative Proposals in the 108th
Congress, was enacted.
Legislative proposals in the 109th Congress incorporate most of the features of
the 108th Congress bills, but also include significant new provisions, as discussed
below, and set out in Table 1.
The Bush Administration has generally supported GSE regulatory reform.
Treasury Secretary John Snow issued a statement following the mark up of S. 190,
praising the legislation, though noting that certain elements the Administration
wanted were not present in the bill:
The legislation ... creates significantly enhanced market discipline and capital
requirements for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
The legislation strikes a proper and prudent balance in ensuring that the activities
undertaken by these entities do not engender systemic risk while providing broad
access to housing finance.13
Major Differences Between House and Senate Bills
The House and Senate bills take a common approach in the restructuring of the
GSE regulator. There is a general consensus that OFHEO needs to be strengthened
— given the importance of the GSEs to the financial system and the potential risks
they pose, there is very little support for keeping the GSE regulator inside HUD.
Both H.R. 1461 and S. 190 give the new agency tools and authorities that resemble
those of federal bank regulators. Where the bills differ most significantly is in their
approaches to the business operations of the GSEs, particularly Fannie and Freddie.
The House bill seeks to increase GSE support for low-income housing and would
permit Fannie and Freddie to buy larger mortgages than current law permits, while
the Senate bill seeks to shrink the companies’ portfolios by restricting the kinds of
assets they can purchase.
Affordable Housing Fund
Section 128 of H.R. 1461 (as passed the House) requires Fannie and Freddie to
establish affordable housing funds to increase homeownership among very low and
extremely low income families, to increase investment in housing in low income and
economically distressed areas, and to increase and preserve the supply of rental and
owner-occupied housing for very low and extremely low income families. Each
enterprise shall allocate to this fund 3.5% of its after-tax income during the first year
13 Statement of Secretary John W. Snow on Senate Banking Bill to Reform Housing
Government-Sponsored Enterprises, July 28, 2005 (js-2657), available online at
[http://www.ustreas.gov/press/releases/js2657.htm].

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CRS-5
after enactment, and 5% in subsequent years. (Had the 5% rate been in effect during
the five years ending with 2003, the two firms’ combined contributions to these funds
would have averaged about $620 million per year.) The Senate bill contains no
comparable provision.
Proponents of the affordable housing funds recognize that Fannie and Freddie
receive a valuable subsidy in the form of their GSE status, which permits them to
borrow at lower rates than other private financial firms. The affordable housing fund
proposal can be viewed as a means of capturing some of the value of this subsidy and
applying it to a worthy policy objective.
Opponents argue that Fannie and Freddie would likely use the funds to reward
political allies. During floor consideration of H.R. 1461, an amendment was adopted
that prohibited the use of money disbursed by the affordable housing funds for
political, lobbying, or advocacy purposes. Other amendments included a five-year
sunset for the fund (with the Director of the new regulator to recommend to Congress
whether the fund should be extended) and established a priority for activities in areas
affected by Hurricanes Katrina and Rita, and in other areas designated by the
President as major disaster areas.
Conforming Loan Limits
Current law sets a limit on the size of mortgages that Fannie and Freddie can
buy. Mortgages above the limit, called jumbo loans, are less likely to be securitized
than the conforming mortgages that Fannie and Freddie are allowed to purchase.
Partly as a result, mortgage rates for nonconforming loans are slightly higher than
conforming loan rates.14 Critics of the conforming loan limit argue that the limit has
a disparate geographical effect: in some areas of the country the current limit, which
is $359,650 for single-family homes, covers all but the high end of the market, while
in other areas, such as San Francisco or New York City, virtually all real estate
transactions take place over the limit.
H.R. 1461 would raise the conforming loan limit in metropolitan areas where
the median home price exceeds the current limit. In those areas, the limit would be
set at the median home price, up to a ceiling of 150% of the current limit. For more
information on this proposal, see CRS Report RS22172, Proposed Changes to the
Conforming Loan Limit.
Like the affordable housing fund provision, the proposal to raise the loan limit
in high-cost areas recognizes that GSE status confers a subsidy on Fannie and
Freddie, and seeks to attain a more uniform distribution of the benefits of that
subsidy. In the process, raising the limit increases the size of the subsidy: allowing
Fannie and Freddie to expand operations into the jumbo mortgage market enhances
the value of the GSEs’ funding advantage, which is dependent on their GSE status.
The Senate bill has no comparable provision.
14 The difference is in the range of 25-40 basis points, or hundredths of a percent. Some of
the difference might persist even if the loan limits were abolished.

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CRS-6
Portfolio Limits
While the two House bill provisions discussed above seek to redistribute the
fruits of the GSE subsidy, the Senate bill contains a provision that could dramatically
reduce the value of that subsidy. Both Fannie and Freddie hold large portfolios of
mortgages and mortgage-backed securities, which generate interest income. They
pay for those mortgage assets by issuing debt securities at rates below what the
mortgages and mortgage-backed bonds pay. The difference between the yield on
mortgage-related assets and the GSEs’ cost of funds is profit. Thus, the GSEs have
a strong incentive to pursue portfolio growth: the two firms together have over $1.5
trillion in portfolio assets, leading some observers to describe them as the world’s
largest savings and loan institutions. The size of their portfolios represents a
concentration of mortgage market risk that has led Federal Reserve Board Chairman
Alan Greenspan and others to urge Congress to consider ways to shrink the size of
the GSEs’ asset portfolios.15

Section 109 of S. 190 as reported enumerates the types of “permissible assets”
that Fannie and Freddie would be permitted to purchase. They would only be
allowed to acquire mortgages and mortgage-backed securities for purposes of
securitization, and for certain other limited purposes. Under this proposal, Fannie
and Freddie’s business models would be considerably altered: instead of very large
investment funds, they would be transformed into conduits, buying mortgages from
the original lenders, pooling them, packaging them into mortgage-backed securities,
and selling them to bond investors. This would greatly reduce their portfolio
earnings, currently one of the chief sources of their profits. Proponents of portfolio
limits argue that this step is necessary to reduce the cost of the GSE subsidy to
taxpayers, which takes the form not of annual appropriations, but of the assumption
of risk — the potential cost to the Treasury of having to bail out either Fannie or
Freddie to avoid the possibility of a systemic catastrophe in the financial markets,
should either firm encounter serious difficulties. Opponents argue that reducing the
GSE’s interest earnings would mean less support for low- and moderate-income
housing goals. The House bill contains no similar provision.
The table below report provides a side-by-side summary of legislative proposals
introduced in the 109th Congress that aim to reform the regulation of the GSEs. The
version of H.R. 1461 that is set out is the one reported by the Financial Services
Committee and later passed by the House. For ease of reference, amendments to the
reported version that were adopted on the House floor are set out in a separate
column.
15 E.g., testimony of Alan Greenspan, Chairman, Board of Governors of the Federal Reserve
System, before the House Committee on Financial Services, Feb. 17, 2005.

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CRS-7
Table 1. Provisions of GSE Reform Legislation
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Short Title
Federal Housing Finance Reform
Federal Housing Enterprise
Federal Housing Enterprise
Act of 2005
Regulatory Act of 2005
Regulatory Act of 2005
Subtitle A: Improvement of Safety and Soundness Regulation.
Name of New
Federal Housing Finance Agency
Federal Housing Enterprise
Federal Housing Enterprise
Regulatory Agency
(Sec. 101)
Regulatory Agency (Sec. 101)
Regulatory Agency (Sec. 101)
Agency Status
Independent federal agency (Sec.
Independent federal agency
Independent federal agency
101)
(Sec. 101)
(Sec. 101)
Jurisdiction
General supervisory and
General regulatory authority over
General regulatory authority
regulatory authority over Fannie
Fannie Mae, Freddie Mac, the
over Fannie Mae, Freddie Mac,
Mae, Freddie Mac, and the Federal Federal Home Loan Banks, and the
the Federal Home Loan Banks,
Home Loan Banks.
Federal Home Loan Bank Finance
and the Federal Home Loan
(Sec. 101)
Facility. (Sec. 101)
Bank Finance Corporation.
(Sec. 101)

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CRS-8
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Key Definitions
Removes the category of
Fannie Mae, Freddie Mac, their
Fannie Mae, Freddie Mac, their
Fannie Mae, Freddie Mac, their
“any other person, as
affiliates, and the Federal Home
affiliates, and the Federal Home
affiliates, and the Federal Home
determined by the
Loan Banks are defined as
Loan Banks are defined as
Loan Banks are defined as
Director” from the
“regulated entities.” The term
“regulated entities.” (Current law
“regulated entities.” (Under
defintion of “regulated
“enterprise” — used frequently in
defines Fannie and Freddie as
current law, Fannie Mae and
entity-affiliated party.”
H.R. 1461 — is defined in current
“enterprises” — many provisions of
Freddie Mac are defined as
law to mean Fannie Mae and
S. 190 refer only to them.) “Entity-
“enterprises” — many
Freddie Mac. “Regulated entity-
affiliated party” refers to directors,
provisions of S. 190 refer only
affiliated party” includes (1)
officers, employees, share holders,
to them.) “Enterprise-affiliated
directors, officers, employees,
consultants, partners, and other
party,” however, refers to
agents, and controlling
persons (determined by the Director) directors, officers, employees,
shareholders of regulated entities; affiliated with regulated entities.
shareholders, consultants,
(2) any shareholder, consultant,
The definition also encompasses
partners, and other persons (as
joint venture partner, or other
non-profits that receive principal,
determined by the Director)
person (as determined by the
ongoing funding from a regulated
affiliated with Fannie, Freddie,
Director) that participates in the
entity. Independent contractors
or the Federal Home Loan
affairs of a regulated entity; (3)
(such as attorneys or accountants)
Banks. Independent contractors
independent contractors (including also meet the definition of “entity-
(such as attorneys or
attorneys, appraisers, or
affiliated party” if they participate in accountants) also meet the
accountants) and (4) non-profits
violations of law or regulation,
definition of “enterprise-
that receive principal funding, on
breaches of fiduciary duty, or unsafe affiliated party” if they
an ongoing basis, from any
and unsound practices that have a
participate in violations of law
regulated entity. (Sec. 101)
significant adverse impact on a
or regulation, breaches of
regulated entity. Defines “violation” fiduciary duty, or unsafe and

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CRS-9
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
to include “causing, bringing about,
unsound practices that have a
participating in, counseling, or
significant adverse impact on a
aiding and abetting.” (Sec. 2)
regulated entity. (Sec. 2)
Agency Officials
Requires the Director to
A Director, appointed by the
A Director, appointed by the
A Director, appointed by the
establish an Office of the
President, with the advice and
President, with the advice and
President, with the advice and
Ombudsman, to hear
consent of the Senate, to a five-
consent of the Senate, to a six-year
consent of the Senate, to a six-
complaints from regulated
year term; and 3 deputy directors
term, and 3 deputy directors,
year term, and 3 deputy
entities or persons with
(appointed by the Director), for
appointed by the Director, for the
directors, appointed by the
business relationships to
the Divisions of (1) Enterprise
Divisions of Enterprise Regulation;
Director, for the Divisions of
the entities.
Regulation; (2) Home Loan Bank
Home Loan Bank Regulation; and
Enterprise Regulation; Home
Regulation; and (3) Housing.
Housing Mission and Goals. (Sec.
Loan Bank Supervision; and
(Sec. 101)
101) An Inspector General of the
Housing Mission and Goals.
Agency. (Sec. 105)
(Sec. 101) An Inspector
General of the Agency. (Sec.
105)
Qualifications of
U.S. citizens, with a demonstrated
U.S. citizens, with a demonstrated
U.S. citizens, with a
Agency Officials
understanding of financial
understanding of financial
demonstrated understanding of
management or oversight and
management or oversight and
financial management or
housing finance, with additional
housing finance, with additional
oversight and housing finance,
specialized experience and
specialized experience requirements
with additional specialized
knowledge requirements for the
for the deputy director positions.
experience requirements for the
deputy director positions. (Sec.
(Sec. 101)
deputy director positions.
101)
(Sec. 101)

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H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Duties and
To oversee the prudential
To oversee the prudential operations To oversee the prudential
Authorities of the
operations of regulated entities
of regulated entities and to ensure
operations of regulated entities
Director
and to ensure that each entity (1)
that each entity (1) operates in a safe and to ensure that each entity (1)
operates in a safe and sound
and sound manner and maintains
operates in a safe and sound
manner and maintains adequate
adequate capital and internal
manner and maintains adequate
capital and internal controls, (2)
controls, (2) fosters well-functioning capital and internal controls, (2)
fosters well-functioning housing
housing finance markets (including
fosters well-functioning housing
finance markets (including low-
low- and moderate-income housing), finance markets (including low-
and moderate-income housing),
(3) complies with applicable laws
and moderate-income housing),
(3) complies with applicable laws
and regulations, (4) engages only in
(3) complies with applicable
and regulations, and (4) engages
activities authorized by statute, (5)
laws and regulations, (4)
only in activities authorized by
serves the public interest, (6)
engages only in activities
statute. The Director may review
remains adequately capitalized, and
authorized by statute, (5) serves
and reject attempts to acquire a
(7) in the case of the FHLBs, that
the public interest, and (6)
controlling interest in a regulated
they provide funds through their
remains adequately capitalized,
entity. The Director may exercise
members for small businesses and
after consideration of the risk to
necessary and appropriate
farms. The Director may review and such entity. The Director may
incidental powers to fulfill the
reject attempts to acquire a
review and reject attempts to
agency’s duties and
controlling interest in a regulated
acquire a controlling interest in
responsibilities. The Director
entity. The Director may exercise
a regulated entity. The Director
shall be a member of the Federal
necessary and appropriate incidental may exercise necessary and
Financial Institutions Examination powers to fulfill the agency’s duties
appropriate incidental powers to
Council. (Sec. 102)
and responsibilities. (Sec. 102)
fulfill the agency’s duties and
responsibilities. (Sec. 102)

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H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Prudential
The Director shall establish
The Director may establish
The Director may establish
Management and
standards for each regulated entity standards for the enterprises
standards for the enterprises
Operations Standards
regarding (1) internal controls and
regarding (1) internal controls and
regarding (1) internal controls
information systems, (2) internal
information systems, (2) internal
and information systems, (2)
audit systems, (3) credit and
audit systems, (3) interest rate risk
internal audit systems, (3)
counterparty risk, (4) interest rate
management, (4) monitoring and
interest rate risk management,
risk management, (5) monitoring
management of market risk, (5)
(4) monitoring and management
and management of market risk,
adequacy and maintenance of
of market risk, (5) adequacy and
(6) adequacy and maintenance of
liquidity and reserves, (7) asset and
maintenance of liquidity and
liquidity and reserves, (7) asset
portfolio growth, (8) overall risk
reserves, (7) asset and portfolio
and portfolio management, (8)
management, including backup
growth, (8) overall risk
investments and acquisitions, (9)
facilities to protect against
management, including backup
record keeping, (10) issuance of
disruptive events, and (9) other
facilities to protect against
subordinated debt, as the Director
standards deemed to be appropriate. disruptive events, and (9) other
considers necessary, (11) overall
(Sec. 108)
standards deemed to be
risk management, including
appropriate. (Sec. 108)
backup facilities to protect against
disruptive events, and (12) other
standards the Director determines
to be appropriate. (Sec. 102)

---

CRS-12
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Failure to Meet
If the Director finds that a
No comparable provision.
No comparable provision.
Prudential Standards
regulated entity has failed to meet
one of the above standards, the
entity shall (within 30 days)
submit a plan to correct the
deficiency. If the deficiency is not
corrected, the Director may
prohibit the entity from increasing
its total assets, may require an
increase in regulatory capital, or
take other measures. (Sec. 102)
Authority to Require
The Director is authorized to
The Director is authorized to require The Director is authorized to
Reporting by
require regulated entities to submit regulated entities to submit regular
require regulated entities to
Regulated Entities
regular reports on their operations
reports, including financial
submit regular reports, including
and financial condition.
statements determined on a fair
financial statements determined
Regulated entities would be
value basis. Establishes penalties for on a fair value basis. (Sec. 104)
required to report in a timely
failure to make reports.
Regulated entities would be
manner the discovery of a
(Sec. 104)
required to report in a timely
purchase or sale of a fraudulent
Regulated entities would be required manner the discovery of a
loan.
to report in a timely manner the
purchase or sale of a fraudulent
(Sec. 104)
discovery of a purchase or sale of a
loan. (Sec. 112)
fraudulent loan.
(Sec. 113)

---

CRS-13
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Advisory Board
Creates the Housing Finance
Creates the Federal Housing
Creates the Federal Housing
Oversight Board (made up of the
Enterprise Board (made up of the
Enterprise Board (made up of
Director, the Secretaries of the
Director, the Secretaries of the
the Director, the Secretaries of
Treasury and HUD, or their
Treasury and HUD, and the
the Treasury and HUD, and the
designees, and two individuals
Chairman of the SEC) to advise the
Chairman of the SEC) to advise
with relevant experience
Director on overall strategies and
the Director on overall strategies
appointed by the President to
policies. The board is to meet at
and policies. The board is to
three-year terms, with the advice
least every three months, and testify
meet at least every three months,
and consent of the Senate) to
to Congress annually on the safety
and testify to Congress annually
advise the Director on overall
and soundness of the regulated
on the safety and soundness of
strategies and policies. The board
entities and the performance of the
the regulated entities and the
is to meet at least every three
agency.
performance of the agency.
months, and testify to Congress
(Sec. 103)
(Sec. 103)
annually on the safety and
soundness, operational status, and
mission performance of the
regulated entities, and the
operations and performance of the
agency and board.
(Sec. 103)

---

CRS-14
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Assessments and
The Director shall establish and
Removes the Agency from the
Removes the Agency from the
Appropriations
collect annual assessments from
appropriations process. The Director appropriations process. The
the regulated entities to provide
would establish and collect annual
Director shall establish and
for reasonable costs and expenses
assessments from the regulated
collect annual assessments from
of the Agency, including (1) costs
entities, in amounts sufficient to
the regulated entities, in
of examinations, reviews, and
provide for reasonable costs and
amounts sufficient to provide for
credit assessments, and (2)
expenses of the agency, including
reasonable costs and expenses of
amounts in excess of actual
(1) costs of examinations, reviews,
the agency, including (1) costs
expenses to maintain necessary
and credit assessments, and (2)
of examinations, reviews, and
working capital. Assessments may amounts in excess of actual
credit assessments, and (2)
be increased to cover costs of
expenses to maintain necessary
amounts in excess of actual
enforcement activities or if an
working capital. Salaries and other
expenses to maintain necessary
entity is inadequately capitalized.
expenses of the agency shall be paid
working capital. Salaries and
Salaries and other expenses shall
from assessments, which shall not
other expenses of the agency
be paid from assessments, which
be construed to be government funds shall be paid from assessments,
shall not be construed to be
or appropriated monies.
which shall not be construed to
government funds or appropriated
(Sec. 106)
be government funds or
monies. The agency shall provide
appropriated monies.
OMB with financial plans and
(Sec. 106)
forecasts, prepare annual financial
statements (including an assertion
of the effectiveness of internal
accounting controls), and be
audited annually by GAO (at the

---

CRS-15
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Direct Hire Authority
Director may hire examiners,
Director may hire examiners,
Director may hire examiners,
accountants, specialists in
accountants, economists, and
accountants, economists, and
technology or financial markets,
specialists in financial markets and
specialists in financial markets
and economists in accordance with technology in accordance with rules
and technology in accordance
rules governing the excepted
governing the excepted service,
with rules governing the
service, notwithstanding any rules
notwithstanding any rules governing excepted service,
governing the competitive service. the competitive service. (Sec. 105)
notwithstanding any rules
(Sec. 106)
governing the competitive
service. (Sec. 105)
Prohibition and
The prohibition (in current law) of No comparable provision
No comparable provision
Withholding of
executive compensation that is not
Executive
reasonable or comparable is
Compensation
amended by permitting the
Director to take into account
wrongdoing on the part of the
executive, and to hold pay in
escrow while a determination is
made. (Sec. 107)
Regulations and
The Director is authorized to issue The Director is authorized to issue
The Director is authorized to
Orders
any regulations, guidelines, or
any regulations, directives,
issue any regulations, directives,
orders that are necessary to carry
guidelines, or orders that are
guidelines, or orders that are
out the authorizing statutes. (Sec.
necessary to carry out the
necessary to carry out the
109)
authorizing statutes. (Sec. 107)
authorizing statutes. (Sec. 107)

---

CRS-16
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Control over
The Director shall periodically
Director shall, by regulation,
Authorizes the Director to
Enterprise Assets,
review the on-balance sheet assets
establish criteria regarding the assets determine the type and amount
Portfolios, and
liabilities of the enterprises, and
that an enterprise may hold,
of nonmission-related assets that
Obligations
may order the disposition or
considering safety and soundness of
an enterprise may hold at any
acquisition of any asset or
the enterprises and systemic risk.
time. Any regulation issued for
obligation, if the Director
“Permissible assets” are to include
this purpose shall include a
determines that such action is
only the following: (1) mortgages
definition of “nonmission-
consistent with safe and sound
and mortgage-backed securities
related asset.” (Sec. 109)
operation.
acquired for purposes of
(Sec. 112)
securitization, (2) mortgages related
to affordable housing goals that
cannot be readily securitized, (3) a
limited inventory of mortgages to
support the guarantee business, (4)
cash, (5) real estate acquired through
foreclosure, (6) U.S. Treasury
securities, and (7) real estate,
equipment, and intellectual property
related to the enterprise’s operations.
(Sec. 109)

---

CRS-17
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Risk-Based and
The Director shall, by regulation,
The Director shall, by regulation,
The Director shall, by
Minimum Capital
establish risk-based capital
establish risk-based capital
regulation, establish risk-based
Levels
requirements for the enterprises to
requirements for each regulated
capital requirements for each
ensure safe and sound operation
entity, to ensure safe and sound
regulated entity, to ensure safe
and maintenance of sufficient
operation and maintenance of
and sound operation and
capital and reserves to support risk sufficient capital and reserves to
maintenance of sufficient capital
exposure. The Director shall
support risk exposure.
and reserves to support risk
establish risk-based capital
(Sec. 110)
exposure.
requirements for the Federal
(Sec. 110)
Home Loan Banks.
Confidentiality of information
enabling risk-based capital
standards shall be maintained.
(Sec. 110)

---

CRS-18
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Minimum and
The Director may, by regulation,
The Director is authorized to
With regard to the enterprises
Critical Capital
establish minimum capital levels
establish minimum capital levels for
(Fannie and Freddie), the
Levels
for regulated entities that are
regulated entities that are higher
Director may establish
higher than the statutory levels.
than those specified in statute.
minimum capital levels that are
The Director may, by order or
(Sec. 110)
higher than those specified in
regulation, establish a capital or
the statute.
reserve requirement with respect
Authorizes the Director to establish
(Sec. 110)
to a particular program or activity, critical capital levels for the
to ensure that the entity operates in enterprises that are different from
a safe and sound manner. The
the levels specified in statute, and to
Director shall, by regulation,
establish critical capital levels for
establish a critical capital level for the FHLBs. (Sec. 141)
the Home Loan Banks. (Sec. 111)

---

CRS-19
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
SEC Registration
Requires each regulated entity to
Requires each regulated entity to
Requires each regulated entity to
Requirements
register at least one class of capital register at least one class of capital
register at least one class of
stock with the SEC, and requires
stock with the SEC, and requires
capital stock with the SEC, and
enterprises (Fannie and Freddie) to enterprises (Fannie and Freddie) to
requires enterprises (Fannie and
comply with Sections 14 and 16 of comply with Sections 14 and 16 of
Freddie) to comply with
the Securities Exchange Act of
the Securities Exchange Act of
Sections 14 and 16 of the
1934 (which deal with proxy
1934, which deal with proxy
Securities Exchange Act of
reporting and disclosure of insider
reporting and disclosure of insider
1934, which deal with proxy
transactions in company stock).
transactions in company stock.
reporting and disclosure of
Enterprises whose stock is not
(Sec. 111)
insider transactions in company
registered or is deregistered
stock. (Sec. 110) Sec. 205 (see
remain subject to certain
below) exempts the Federal
provisions of the Securities
Home Loan Banks from several
Exchange Act.
provisions of securities law.
(Sec. 114)
Corporate
Requires a majority of the board to No comparable provision
No comparable provision
Governance of
be independent directors, as
Enterprises
defined by the NYSE. Requires
boards to meet at least eight times
a year, and requires non-
management directors to meet
regularly in executive session
without management participation.
(Sec. 113)

---

CRS-20
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Compensation by
Compensation of directors,
No comparable provision
No comparable provision
Enterprises
executives, and employees shall
not exceed what is reasonable and
appropriate, shall be
commensurate with duties and
responsibilities, consistent with
the long-term goals of the
enterprise, shall not focus solely
on earnings performance.
Enterprises are made subject to
Section 304 of the Sarbanes-Oxley
Act, which requires CEOs and
CFOs to reimburse the company
under certain circumstances after
an accounting restatement. (Sec.
113)
Code of Conduct and
An enterprise shall establish and
No comparable provision
No comparable provision
Ethics
enforce a written code of conduct
designed to ensure that directors,
officers, and employees act in an
impartial and objective manner,
including standards under section
406 of the Sarbanes-Oxley Act.
(Sec. 113)

---

CRS-21
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Responsibilities of
The board of an enterprise shall
No comparable provision
No comparable provision
the Board of
oversee (1) corporate strategy, risk
Directors
policy, and compliance programs,
(2) hiring and retention of
qualified executives, (3)
compensation programs, (4) the
integrity of accounting and
financial reporting systems, (5)
disclosures to shareholders and
investors, (6) extensions of credit
to officers and directors, and (7)
responsiveness in reporting to
federal regulators. (Sec. 113)
Prohibition of
An enterprise may not (directly,
No comparable provision
No comparable provision
Extensions of Credit
indirectly, or through a subsidiary)
make any personal loan to a board
member or executive officer.
(Sec. 113)
Certification of
The CEO and CFO of an
No comparable provision
No comparable provision
Disclosures
enterprise shall review annual and
quarterly reports and shall make
the certifications required by
section 302 of the Sarbanes-Oxley
Act. (Sec. 113)

---

CRS-22
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Change of Audit
Requires that the lead partner of
No comparable provision
No comparable provision
Partner
the external auditor of an
enterprise be changed every five
years. (Sec. 113)
Compliance Program
Each enterprise shall establish a
No comparable provision
No comparable provision
compliance program reasonably
designed to ensure that the
enterprise complies with
applicable laws, regulations, and
internal controls. The program
shall be headed by a compliance
officer, who reports directly to the
CEO and regularly to the board.
(Sec. 113)
Risk Management
Each enterprise shall establish a
No comparable provision
No comparable provision
Program
risk management program
reasonably designed to manage the
risks of operation. The program
shall be headed by a risk
management officer, who reports
directly to the CEO and regularly
to the board.
(Sec. 113)

---

CRS-23
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Restrictions on
No comparable provision, but such The Agency may prohibit or limit,
The Agency may prohibit or
Certain Golden
payments could be subject to the
by regulation or order, any golden
limit, by regulation or order, any
Parachute Payments
“reasonable and appropriate” tests
parachute or indemnification
golden parachute or
in Section 113(c).
payment. Sets out criteria that the
indemnification payment that
Agency may consider in deciding
would be received by any
whether to prohibit a payment. (Sec. enterprise-affiliated party after
112)
an enterprise became insolvent,
was determined to be in a
troubled condition, or following
the appointment of a conservator
or receiver. (Sec. 111)
Reporting of
Regulated entities would be
The Director shall, by regulation,
The Director shall, by
Fraudulent Loans
required to report in a timely
require enterprises to timely disclose regulation, require enterprises to
manner the discovery of a
the discovery of the purchase or sale timely disclose the discovery of
purchase or sale of a fraudulent
of a fraudulent loan. Regulated
the purchase or sale of a
loan. (Sec. 104)
entities must have procedures
fraudulent loan. (Sec. 112)
designed to discover fraudulent
loans. (Sec. 113)

---

CRS-24
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Subtitle B: Improvement of Mission Supervision.
Oversight of
Program and housing goal
Oversight of affordable housing
Oversight of affordable housing
Affordable Housing
oversight is transferred from HUD goals is transferred from Secretary
goals is transferred from
Goals
to the Agency.
of HUD to the Director. HUD
Secretary of HUD to the
(Sec. 121)
retains fair housing responsibilities.
Director. HUD retains fair
(Secs. 121, 123 and 124) The
housing responsibilities. (Secs.
Inspector General of the Agency
121 and 124-126) The
shall conduct an annual audit of
Inspector General of the Agency
affordable housing programs.
shall conduct an annual audit of
(Sec. 402)
affordable housing programs.
Incorporates into statute (and
(Sec. 402)
modifies) several regulatory
provisions dealing with definitions
and oversight of housing goals.
(Sec. 127)

---

CRS-25
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Prior Approval of
Enterprises may not undertake
Prior approval authority is
Prior approval authority is
New Business
new programs or business
transferred from HUD to the
transferred from HUD to the
Activities by
activities without the Director’s
Director. (Sec. 121) The Director
Director. (Sec. 121)
Enterprises
prior approval. Approval is
shall consider whether proposed new Authorizes the Director to
contingent upon consistency with
products are (1) consistent with the
review any enterprise activities,
statutory authority, safety and
GSEs’ authorizing statutes, (2) in
to determine their conformance
soundness, and the public interest. the public interest, (3) consistent
with the purposes of the statutes,
The Director may prohibit any
with safety and soundness of the
and to protect the safety and
activity that is inconsistent with
enterprise and the mortgage finance
soundness of the enterprises.
the law, otherwise inconsistent
system, and (4) not harmful to the
The Director may prohibit or
with safety and soundness, or not
stability or competitiveness of the
limit any activities found to be
in the public interest. Requires
mortgage finance system. Requests
impermissible or inappropriate.
enterprises to submit a report to
for approval of new products would
(Sec. 122)
the director describing each
trigger a 30-day public comment
program and business activity
period, after which the Agency
within 180 days of enactment.
would have 30 days to act on the
(Sec. 122)
request. (Sec. 122)

---

CRS-26
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Mission Clarification
Within six months of the effective
No comparable provision, but the
The Director shall define by
date of this legislation, the
Director could consider the
regulation “loan origination,”
Director shall, by regulation,
distinction between primary and
establishing thereby which
define “mortgage loan
secondary markets when deciding
activities are impermissible for
origination” and “secondary
whether to approve new products.
the enterprises. The Director
mortgage market.” (Sec. 122)
(Sec. 122)
shall define the boundary
between the secondary mortgage
market (where the enterprises
are allowed to operate) and the
primary mortgage market
(where they are not).
Grandfathering of enterprise
activities that do not accord with
these definitions is not
automatically presumed, but
may be permitted by the
Director. (Sec. 107)

---

CRS-27
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Conforming Loan
Sets conforming loan limits and
Provides for annual adjustments to
No comparable provision
Limits
requires the agency to make
the conforming loan limit based on
annual adjustments to the limits
changes in a housing price index to
based on increases or decreases in
be established and maintained by the
a housing price index maintained
Director.
by the agency. The accuracy of
(Sec. 126)
the housing price index is to be
audited by GAO. For high-cost
metropolitan statistical areas, the
conforming loan limit is raised to
the lesser of 150% of the statutory
limit or the median home price in
that area. (Sec. 123)
Annual Housing
The Director shall report annually
No comparable provision
No comparable provision
Report
to the House Financial Services
and Senate Banking Committees
on the achievement of housing
goals, actions to promote or
expand goals, to expand
opportunities for first-time home
buyers, fair housing issues, and
conditions in housing markets. To
assist in the preparation of this
report, the Director shall conduct a
monthly survey of housing
markets. (Sec. 124)

---

CRS-28
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Establishment of
The Director shall establish goals,
No comparable provision
No comparable provisions
Housing Goals and
with annual targets, for the
Home Purchase Goal
purchases of mortgage loans made
to low and very low income
families, or families in low
income areas. Annual goals shall
also be established for purchases
of mortgages on multifamily
housing units serving very low
income families, or units assisted
by the low-income housing tax
credit.
(Sec. 125)
Creates a duty to serve
underserved markets, by
undertaking activities related to
mortgages on housing for low,
very low, and moderate income
familes, including manufactured
housing.
(Sec. 126)

---

CRS-29
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Monitoring and
Upon a written finding that an
No comparable provision
No comparable provision
Enforcing Housing
enterprise has failed to meet a
Goal Compliance
housing goal, the Director is
authorized to take any of several
steps to enforce compliance,
including cease-and-desist orders,
refusal to authorize new programs,
and civil money penalties not to
exceed $50,000 per day. Other
sanctions may include a
prohibition on new activities or
programs. (Sec. 127)

---

CRS-30
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Affordable Housing
Expands the mission of the
Each enterprise shall establish an
No comparable provision
No comparable provision
Fund
fund to include increasing
affordable housing fund to
investment in public
increase homeownership among
infrastructure and
very- and extremely-low income
leveraging investments
families, to increase investment in
from other sources in
housing in low income and
connection with low- and
economically distressed areas, and
extremely-low income
to increase and preserve the
housing. Adds a five-year
supply of rental and owner-
sunset to the affordable
occupied housing for very- and
housing fund, and requires
extremely-low income families.
the Director to report to
Each enterprise shall allocate to
Congress with
this fund 3.5% of its after-tax
recommendations as to
income during the first year after
whether the fund should be
enactment, and 5% in subsequent
extended or modified.
years. No allocation would be
Prohibits use of fund
required when an enterprise was
disbursements for political
less than adequately capitalized.
purposes, and requires the
(Sec. 128)
enterprises to track the use
of funds by recipients.

---

CRS-31
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Affordable Housing
Requires the Board to
The Director shall appoint an
No comparable provision
No comparable provision
Board
establish a priority for
affordable housing board, whose
funding activities in areas
members shall include the
affected by Hurricanes
Secretaries of HUD and
Katrina and Rita, or any
Agriculture (or their designees),
area declared a major
and 2 persons each from (1)
disaster area.
businesses and (2) non-profits
actively engaged in promoting or
providing housing for very- or
extremely-low income
households. The board shall
determine very- and extremely-
low income housing needs and
advise the director on priorities for
the use of the affordable housing
funds. (Sec. 128)

---

CRS-32
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Subtitle C: Prompt Corrective Action.
Capital
The Director may reclassify a
The Director may reclassify a
The Director may reclassify a
Classifications
regulated entity (1) whose conduct regulated entity whose conduct
regulated entity whose conduct
could rapidly deplete core or total
could rapidly deplete core capital, or could rapidly deplete core
capital, or (in the case of an
whose mortgage assets have
capital, or whose mortgage
enterprise) whose mortgage assets
declined significantly in value, or
assets have declined
have declined significantly in
which is determined (after notice
significantly in value, or which
value, or (2) which is determined
and opportunity for a hearing) to be
is determined (after notice and
(after notice and opportunity for a
in an unsafe or unsound condition. opportunity for a hearing) to be
hearing) to be in an unsafe or
(Sec. 142)
in an unsafe or unsound
unsound condition. (Sec. 141)
condition. (Sec. 141)
Restriction on
A regulated entity shall make no
A regulated entity shall make no
A regulated entity shall make no
Capital Distributions
capital distribution that would
capital distribution that would cause
capital distribution that would
cause it to become
it to become undercapitalized,
cause it to become
undercapitalized, except as
except as permitted by the Director
undercapitalized, except as
permitted by the Director under
under certain circumstances.
permitted by the Director under
certain circumstances.
(Sec. 142)
certain circumstances.
(Sec. 141)
(Sec. 141)

---

CRS-33
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Supervisory Actions
The Director must monitor the
The Director must monitor the
The Director must monitor the
Applicable to
entity’s condition, its compliance
entity’s condition, its compliance
entity’s condition, its
Undercapitalized
with its capital restoration plan,
with its capital restoration plan, and
compliance with its capital
Regulated Entities
and the efficacy of the plan. No
the efficacy of the plan. No growth
restoration plan, and the efficacy
growth in total assets is permitted
in total assets is permitted for an
of the plan. No growth in total
for an undercapitalized GSE,
undercapitalized GSE, unless the
assets is permitted for an
unless the director has accepted
director has accepted the GSE’s
undercapitalized GSE, unless
the GSE’s capital restoration plan, capital restoration plan, an increase
the director has accepted the
an increase in assets is consistent
in assets is consistent with the plan,
GSE’s capital restoration plan,
with the plan, and the ratio of
and the ratio of tangible equity to
an increase in assets is
tangible equity to assets is
assets is increasing. No new
consistent with the plan, and the
increasing. No new activities or
activities or acquisitions permitted
ratio of tangible equity to assets
acquisitions permitted without the
without the Director’s prior approval is increasing. No new activities
Director’s prior approval and
and determination that such
or acquisitions permitted
determination that such activities
activities would be consistent with
without the Director’s prior
would be consistent with the
the capital restoration plan. Actions
approval and determination that
capital restoration plan. Actions
that may be taken under current law
such activities would be
that may be taken under current
with regard to significantly
consistent with the capital
law with regard to significantly
undercapitalized GSEs may be taken restoration plan. Actions that
undercapitalized GSEs may be
with regard to undercapitalized
may be taken under current law
taken with regard to
GSEs. (Sec. 142)
with regard to significantly
undercapitalized GSEs. (Sec. 142)
undercapitalized GSEs may be
taken with regard to
undercapitalized GSEs. (Sec.
142)

---

CRS-34
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Supervisory Actions
Supervisory actions that the
Supervisory actions that the
Supervisory actions that the
Applicable to
regulator may take under current
regulator may take under current law regulator may take under current
Significantly
law must be taken, including one
must be taken, including one or
law must be taken, including one
Undercapitalized
or more of the following: new
more of the following: new election
or more of the following: new
Regulated Entities
election of directors, dismissal of
of directors, dismissal of directors
election of directors, dismissal
directors and/or executives, and
and/or executives, and hiring of
of directors and/or executives,
hiring of qualified executive
qualified executive officers, or other and hiring of qualified executive
officers, or other actions. Without actions. Without prior written
officers, or other actions.
prior written approval of the
approval of the Director, executives
Without prior written approval
Director, executives of a
of a significantly undercapitalized
of the Director, executives of a
significantly undercapitalized GSE GSE may not receive bonuses or pay significantly undercapitalized
may not receive bonuses or pay
raises. (Sec. 143)
GSE may not receive bonuses or
raises. (Sec. 143)
pay raises. (Sec. 143)

---

CRS-35
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Authority Over
The Director may appoint (or the
The Director may appoint (or the
The Director may appoint (or
Critically
agency may serve as) a receiver or agency may serve as) a receiver or
the agency may serve as) a
Undercapitalized
conservator for several specified
conservator for several specified
receiver or conservator for
Enterprises
causes related to financial
causes related to financial difficulty
several specified causes related
(Liquidation
difficulty and/or violations of law
and/or violations of law or
to financial difficulty and/or
Authority)
or regulation. Sets out powers of
regulation. Sets out powers of
violations of law or regulation.
conservators or receivers, and
conservators or receivers, and
Sets out powers of conservators
procedures for settlement of
procedures for settlement of claims
or receivers, and procedures for
claims and other aspects of
and other aspects of liquidation.
settlement of claims and other
liquidation. Authorizes the
Authorizes the Director to appoint a
aspects of liquidation.
Director to appoint a limited-life
limited-life enterprise to deal with
Authorizes the Director to
enterprise to deal with the affairs
the affairs of an enterprise in default. appoint a limited-life enterprise
of an enterprise in default.
Prohibits a receiver from
to deal with the affairs of an
Prohibits a receiver from
terminating or revoking the charter
enterprise in default. Prohibits a
terminating or revoking the charter of an enterprise.
receiver from terminating or
of an enterprise. (Sec. 144)
(Sec. 144)
revoking the charter of an
enterprise. (Sec. 144)

---

CRS-36
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Subtitle D: Enforcement Actions.
Cease-and-Desist
The Director may issue cease-and- The Director may issue cease-and-
The Director may issue cease-
Orders
desist orders against a regulated
desist orders against a regulated
and-desist orders against a
entity, a regulated entity-affiliated
entity, an entity-affiliated party, or
regulated entity, an entity-
party, or the Federal Home Loan
the Federal Home Loan Bank
affiliated party, or the Federal
Bank Finance Corporation
Finance Corporation (created by
Home Loan Bank Finance
(created by Sec. 204) for unsafe or Sec. 204) for unsafe or unsound
Corporation (created by Sec.
unsound practices (actual or
practices (actual or imminent),
204) for unsafe or unsound
imminent), violations of laws and
violations of laws and regulations,
practices (actual or imminent),
regulations, or for a less-than-
or for a less-than-satisfactory rating
violations of laws and
satisfactory rating where the
where the identified deficiency is
regulations, or for a less-than-
identified deficiency is not
not corrected.
satisfactory rating where the
corrected. (Sec. 161)
(Sec. 151)
identified deficiency is not
corrected. (Sec. 151)
Temporary cease-and-desist orders Temporary cease-and-desist orders
may be issued if actions taken (or
may be issued if actions taken (or
Temporary cease-and-desist
not taken) by the regulated entity
not taken) by the regulated entity are orders may be issued if actions
are likely to cause insolvency or
likely to cause insolvency or weaken taken (or not taken) by the
weaken its financial condition
its financial condition prior to the
regulated entity are likely to
prior to the conclusion of a cease-
conclusion of a cease-and-desist
cause insolvency or weaken its
and-desist proceeding. (Sec. 162)
proceeding. (Sec. 152)
financial condition prior to the
conclusion of a cease-and-desist
proceeding. (Sec. 152)

---

CRS-37
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Removal and
After written notice and
The Director may issue cease-and-
The Director may issue cease-
Prohibition Authority
opportunity for a hearing, the
desist orders against a regulated
and-desist orders against a
Director may suspend or remove
entity, an entity-affiliated party, or
regulated entity, an entity-
regulated entity-affiliated parties
the Federal Home Loan Bank
affiliated party, or the Federal
who have (1) violated a law or a
Finance Facility (created by Sec.
Home Loan Bank Finance
cease-and-desist or other written
204) for unsafe or unsound practices Corporation (created by Sec.
order, (2) engaged in an unsafe or
(actual or imminent), violations of
204) for unsafe or unsound
unsound practice, or (3) breached
laws and regulations, or for a less-
practices (actual or imminent),
fiduciary duty, such that (1) the
than-satisfactory rating where the
violations of laws and
regulated entity is likely to suffer
identified deficiency is not
regulations, or for a less-than-
loss or the enterprise affiliated
corrected. (Sec. 151)
satisfactory rating where the
party gain, and (2) the unsafe or
identified deficiency is not
unsound practice involves
Temporary cease-and-desist orders
corrected. (Sec. 151)
personal dishonesty or
may be issued if actions taken (or
demonstrates willful and
not taken) by the regulated entity are Temporary cease-and-desist
continuing disregard for the safety likely to cause insolvency or weaken orders may be issued if actions
and soundness of the regulated
its financial condition prior to the
taken (or not taken) by the
entity. Also provides for industry- conclusion of a cease-and-desist
regulated entity are likely to
wide suspensions under certain
proceeding. (Sec. 152)
cause insolvency or weaken its
circumstances. Provides for
financial condition prior to the
judicial review of such orders or
conclusion of a cease-and-desist
suspensions. (Sec. 166)
proceeding. (Sec. 152)

---

CRS-38
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Enforcement and
Authorizes the Director to apply to Authorizes the Director to apply to
Authorizes the Director to apply
Jurisdiction
Federal District Court for
Federal District Court for
to Federal District Court for
enforcement of outstanding notice
enforcement of outstanding orders
enforcement of outstanding
or order, and to request the
or subpoenas, and to request the
orders or subpoenas, and to
Attorney General to bring actions
Attorney General to bring actions
request the Attorney General to
for that purpose. (Sec. 164)
for that purpose. (Sec. 154)
bring actions for that purpose.
(Sec. 154)
Civil Money
Establishes three tiers of fines: (1)
Establishes three tiers of fines: (1)
Establishes three tiers of fines:
Penalties
$10,000 per day for violations of
$10,000 per day for violations of
(1) $10,000 per day for
orders, etc., (2) $50,000 per day
orders, etc., (2) $50,000 per day for
violations of orders, etc., (2)
for recklessly engaging in an
a pattern of misconduct or material
$50,000 per day for a pattern of
unsafe or unsound practice, or a
breach of fiduciary duty with
misconduct or material breach
pattern of misconduct or material
financial gain to the entity or
of fiduciary duty with financial
breach of fiduciary duty with
individual, and (3) up to a maximum gain to the entity or individual,
financial gain to the entity or
of $2 million for knowingly
and (3) up to a maximum of $2
individual, and (3) up to a
engaging in violations, breaches of
million for knowingly engaging
maximum of $2 million per day
fiduciary duties, or unsafe or
in violations, breaches of
for knowingly engaging in
unsound practices that cause
fiduciary duties, or unsafe or
violations, breaches of fiduciary
substantial losses to a regulated
unsound practices that cause
duties, or unsafe or unsound
entity. (Sec. 155)
substantial losses to a regulated
practices that cause substantial
entity. (Sec. 155)
losses to a regulated entity. (Sec.
165)

---

CRS-39
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Criminal Penalties
Anyone who participates directly
Anyone who participates directly or
Anyone who participates
or indirectly in the affairs of a
indirectly in the affairs of a
directly or indirectly in the
regulated entity while under
regulated entity while under
affairs of a regulated entity
suspension or order of removal
suspension or order of removal shall while under suspension or order
shall be liable for a fine of up to
be liable for a fine of up to $1
of removal shall be liable for a
$1 million, or five years
million, or five years imprisonment. fine of up to $1 million, or five
imprisonment. (Sec. 167)
(Sec. 156)
years imprisonment. (Sec. 156)
Studies and Reports
In addition to the study in Section
(1) The Federal Reserve shall study
(1) The Director and federal
Required
182 (described to the right), the
and report to Congress on the effects bank regulators shall report to
reported bill calls for (1) a study
of the Basel II Capital Accord on
Congress on holdings of GSE
by the Director of the effect that
regulated entities. (Sec. 401)
debt by insured depository
restrictions on conforming loan
(2) The Director and federal bank
institutions and whether such
limits have on mortgage markets;
regulators shall report to Congress
holdings are a source of
(2) a study on guarantee fees by
on holdings of GSE debt by insured
systemic risk.
the Comptroller General in
depository institutions and whether
(2) The Director, in consultation
consultation with the federal
such holdings are a source of
with GAO, shall report to
banking agencies and the new
systemic risk. (Sec 403) (3) The
Congress on GSE portfolio
director of the FHFA; (3) a review Director shall submit a quarterly
operations, risk management,
by the GSEs of disparities in
report to Congress on the risk-based
and mission. (3) The Director
interest rates charged on
capital levels for the enterprises.
shall report to Congress on the
mortgages for minority borrowers; (Sec. 404) (4) The GAO shall
appropriate level of debt
(4) an affordable housing study
submit an annual report to Congress, issuance by GSEs. (4) The
related to long-term-care facilities; with recommendations, on the
Director shall submit a quarterly
and
allocation of resources within the
report to Congress on the risk-
(5) a study of alternative
Agency and the level of assessments based capital levels for the
secondary mortgage markets
collected from the regulated entities. enterprises. (5) The GAO shall

---

CRS-40
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
systems, such as privatization or
(Sec. 405) (5) The Director shall
submit an annual report to
competition from new GSEs.
conduct an ongoing study of
Congress, with
guarantee fees, and collect data
recommendations, on the
regarding such fees. The Director
allocation of resources within
shall submit an annual report to
the Agency and the level of
Congress regarding the amount of
assessments collected from the
such fees and the way they are set.
regulated entities. (Sec. 161)
(Sec. 406) (6) The Agency, the
(6) The Federal Reserve shall
SEC, and the Treasury shall study
study and report to Congress on
and report to Congress on
the effects of the Basel II
registration of debt securities of
Capital Accord. (Sec. 401)
regulated entities under the
Securities Act of 1933. (Sec. 407)
All reports required by this title shall
include recommendations regarding
legislation, regulations, or other
actions to deal effectively and
appropriately with the issues raised.
(Sec. 408)
End of Presidential
Eliminates the requirement that
Abolishes the requirement that five
Abolishes the requirement that
Appointment of
five directors on the boards of
directors on the boards of Fannie
five directors on the boards of
Enterprise Directors
Fannie Mae and Freddie Mac be
Mae and Freddie Mac be appointed
Fannie Mae and Freddie Mac be
appointed by the President.
by the President.
appointed by the President.
Reduces the size of enterprise
(Sec. 172)
(Sec. 172)
boards from 18 to between 7 and
15. (Sec. 181)

---

CRS-41
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Title II: Federal Home Loan Bank Provisions.
Boards of Directors
Provides that boards of FHLBs
Provides that all directors of Federal Provides that all directors of
shall contain 13 members, or such
Home Loan Banks shall be elected
Federal Home Loan Banks shall
number as the Director
by the membership. The 13-member be elected by the membership.
determines, all elected by the
boards shall include (1) member
The 13-member boards shall
membership (none appointed). A
directors — officers or directors of
include (1) member directors —
majority of each board shall
member banks located in the bank
officers or directors of member
consist of member directors —
district — and (2) at least five non- banks located in the bank
officers or directors of member
member directors (at least 1/3 of the
district — and (2) at least five
banks located in the FHLB
board), who shall be residents of the
nonmember directors, who shall
district. At least 1/3 of the
bank district, and who shall include
be residents of the bank district,
members shall be independent
at least two representatives of
and who shall include at least
directors: bona fide residents of
consumer or community interests.
two representatives of consumer
the bank district, at least two of
Directors’ terms are extended from
or community interests.
whom represent consumer or
three to four years.
Directors’ terms are extended
community interests. Other
(Sec. 201)
from three to four years.
independent directors shall have
(Sec. 201)
financial or management
expertise. Independent directors
may not serve as officers of a
FHLB or member bank. Terms of
service are set at four (rather than
three) years. The cap on director
pay is lifted, but compensation
must be reasonable and
appropriate. (Sec. 202)

---

CRS-42
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Debt Issuing Facility
No directly comparable provision,
Establishes a Federal Home Loan
Establishes a Federal Home
but permits two or more FHLBs to Bank Finance facility to issue and
Loan Bank Finance Corporation
establish a joint office to provide
service debt obligations, to act as
(as a jointly owned subsidiary of
services to banks on a common or
fiscal agent, and to perform other
the Federal Home Loan Banks)
collective basis. The FHLBs may
functions now performed by the
to issue and service debt
require the Office of Finance to
Office of Finance. Provides for a
obligations, to act as fiscal
provide such services as the banks
governing Board of Directors,
agent, and to perform other
are authorized to perform or
comprising the presidents of the
functions now performed by the
provide individually. (Sec. 204)
Federal Home Loan Banks, and sets
Office of Finance. Provides for
out the Board’s duties and powers.
a governing Board of Directors,
(Sec. 204)
comprising the presidents of the
Federal Home Loan Banks, and
sets out the Board’s duties and
powers. (Sec. 204)
FHLB Mergers and
Permits voluntary mergers
No comparable provision
No comparable provision
Reorganization
between FHLBs, subject to the
approval and regulation of the
Director. (Sec. 206)

---

CRS-43
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Community
Insured depository institutions
No comparable provision
No comparable provision
Financial Institution
with less than $1 billion in assets
Members
may use Federal Home Loan Bank
advances for lending to
community development
activities, and use such secured
loans as collateral for advances
generally. (Sec. 208)

---

CRS-44
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Exemption from
Exempts the Federal Home Loan
Exempts the Federal Home Loan
Exempts the Federal Home
Certain SEC
Banks from certain disclosure
Banks from certain disclosure
Loan Banks from certain
Reporting
requirements with regard to
requirements with regard to
disclosure requirements with
Requirements
transactions involving capital
transactions involving capital stock
regard to transactions involving
stock of the banks. Shares of
of the banks. Shares of Federal
capital stock of the banks.
Federal Home Loan Bank capital
Home Loan Bank capital stock are
Shares of Federal Home Loan
stock are defined as “exempted
defined as “exempted securities.”
Bank capital stock are defined as
securities.” Debentures, bonds,
Debentures, bonds, and other debt
“exempted securities.”
and other FHLB debt obligations
obligations are defined as
Debentures, bonds, and other
are defined as “exempted
“exempted securities” and
debt obligations are defined as
securities” and “government
“government securities.” A person
“exempted securities” and
securities.” A person that effects
that effects transactions in Federal
“government securities.” A
transactions in Federal Home
Home Loan Bank capital stock or
person that effects transactions
Loan Bank capital stock or other
other obligations is excluded from
in Federal Home Loan Bank
obligations is excluded from the
the definition of “government
capital stock or other obligations
definition of “government
securities dealer.” The Federal
is excluded from the definition
securities dealer.” The Federal
Home Loan Banks shall be exempt
of “government securities
Home Loan Banks shall be exempt from reporting requirements
dealer.” The Federal Home
from reporting requirements
regarding related party transactions
Loan Banks shall be exempt
regarding related party
and sale of unregistered securities.
from reporting requirements
transactions and sale of
Tender offer rules shall not apply to
regarding related party
unregistered securities. Tender
transactions in Federal Home Loan
transactions and sale of
offer rules shall not apply to
Bank capital stock.
unregistered securities. Tender
transactions in Federal Home
(Sec. 205)
offer rules shall not apply to
Loan Bank capital stock.
transactions in Federal Home
(Sec. 207)
Loan Bank capital stock.
(Sec. 205)

---

CRS-45
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Limitations on
No comparable provision
The Agency may prohibit or limit,
The agency may prohibit or
Golden Parachutes
by regulation or order, any golden
limit, by regulation or order, any
parachute or indemnification
golden parachute or
payment. Sets out criteria that the
indemnification payment that
Agency may consider in deciding
would be received by any
whether to prohibit a payment.
affiliated party when there is a
(These provisions apply to all
reasonable basis to believe that
regulated entities.) (Sec. 112)
the party may have committed
fraud or breach of fiduciary duty
that had a material impact on the
bank’s financial condition, or
where there is a reasonable basis
to believe that the party was
substantially responsible for the
bank’s insolvency, troubled
condition, or for the
appointment of a conservator or
receiver, and other factors. (As
in Sec. 111, “golden parachute”
is defined as a post-employment
payment that would be received
by any enterprise-affiliated party
after an enterprise had become
insolvent, had been determined
to be in a troubled condition, or
following the appointment of a
conservator or receiver.) (Sec.

---

CRS-46
H.R. 1461 (amendments
Provision
adopted during House
H.R. 1461 (as reported)
S. 190 (as reported)
S. 190 (as introduced)
passage)
Transition Provisions.
Abolishment of
Various provisions dealing with
Various provisions dealing with
Various provisions dealing with
OFHEO and the
abolition of OFHEO and the
abolition of OFHEO and the FHFB,
abolition of OFHEO and the
Federal Housing
FHFB, transfer of certain HUD
continuation of certain regulations,
FHFB, continuation of certain
Finance Board
employees to the agency,
transfer of property and facilities,
regulations, transfer of property
continuation of certain regulations, employee rights and benefits, etc.
and facilities, employee rights
transfer of property and facilities,
(Title III)
and benefits, etc. (Title III)
employee rights and benefits, etc.
(Title III)
Effective Date
Six months after the date of One year after the date of
The date of enactment, except as
The date of enactment, except as
enactment, unless
enactment, unless otherwise
specifically provided otherwise.
specifically provided otherwise.
otherwise specified.
specified. (Secs. 184 and 210)
(Sec. 163)
(Sec. 173)

---