Order Code RL33940
H.R. 1427: Reforming the Regulation of
Government-Sponsored Enterprises
March 23, 2007
Mark Jickling, Barbara Miles,
Edward Vincent Murphy, and N. Eric Weiss
Government and Finance Division
H.R. 1427: Reforming the Regulation of Government-
Sponsored Enterprises
Summary
As government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac are
hybrids: created and chartered by Congress for specific public policy purposes, they
are nonetheless private, profit-seeking businesses whose shares are traded on the
New York Stock Exchange. Their “government-sponsored†nature confers certain
advantages over their purely private competitors. As a result, their operations have
expanded rapidly over the years and they long ago assumed — and continue to play
— critical roles in the residential 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 two firms.
OFHEO is authorized to set capital requirements, conduct annual risk-based
examinations, and generally enforce compliance with safety and soundness standards.
With the rapid subsequent growth of the GSEs, and major accounting scandals
at both Fannie Mae and Freddie Mac, the effectiveness of current regulation has been
widely questioned. Several legislative proposals considered in the 108th and 109th
Congresses addressed GSE regulatory reform, but none was enacted. However, the
adequacy of GSE regulation remains a prominent legislative issue.
Although 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 current reform proposals, they would be brought under a single regulatory
umbrella with Fannie and Freddie.
H.R. 1427, introduced in the 110th Congress, would abolish OFHEO and
establish an independent agency — the Federal Housing Finance Agency — to
oversee the GSEs, with enhanced safety and soundness, disclosure, and enforcement
tools. The bill would also enable the new agency to monitor and control the GSEs’
investment portfolios, establish a fund to support housing for low- and extremely-low
income families, and raise the size limit on mortgages that Fannie and Freddie are
allowed to purchase.
This report provides background on the GSE reform issue, summarizes the
provisions of H.R. 1427, and compares them to legislation passed by the House in
the 109th Congress. It will be updated as the bill moves through Congress, and as
new legislation is introduced.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Need for Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Reform Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
An Independent Regulator with Enhanced Authority . . . . . . . . . . . . . . . . . . 4
Affordable Housing Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Portfolio Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Conforming Loan Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Provisions of H.R. 1427 (as introduced in the 110th Congress) and
H.R. 1461 (as passed by the House in the 109th Congress) . . . . . . . . . . . . . . 8
Title I — Reform of Regulation of Enterprises and Federal Home Loan Banks . . 8
Subtitle A — Improvement of Safety and Soundness . . . . . . . . . . . . . . . . . . . . . . 8
Duties and Authorities of the Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Federal Housing Enterprise Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Risk-Based Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Minimum Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Review of, and Authority over, Enterprise Assets and Liabilities
(Portfolio Limits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Sec Registration Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Subtitle B — Improvement of Mission Supervision . . . . . . . . . . . . . . . . . . . . . . 18
New Product Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Increase in Conforming Loan Limit for High-Cost Areas . . . . . . . . . . . . . . 20
Housing Goals Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Duty to Serve Underserved Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Establishment of an Affordable Housing Fund . . . . . . . . . . . . . . . . . . . . . . 28
Definition of “Total Mortgage Portfolio†. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Subtitle C — Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Capital Classifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Authority over Critically Undercapitalized Enterprises
(Liquidation Authority) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Subtitle D — Enforcement Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Removal and Prohibition Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Subtitle E — General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Enterprise Boards of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Title II — Federal Home Loan Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Title III — Transition Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Abolishment of OFHEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
List of Tables
Table 1. Fannie Mae and Freddie Mac: Selected Combined Financial
Statistics, 1992 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
H.R. 1427: Reforming the Regulation of
Government-Sponsored Enterprises
Introduction
Fannie Mae and Freddie Mac are hybrids: created and chartered by Congress for
specific public policy purposes, they are nonetheless private, profit-seeking
businesses whose shares are traded on the New York Stock Exchange. Their
“government-sponsored†nature confers certain advantages over their purely private
competitors.1 As a result, their operations have expanded rapidly over the years and
they long ago assumed — and continue to play — critical roles in the residential
mortgage market.
In exchange for government sponsorship, their statutory charters require Fannie
and Freddie to meet a set of housing goals, whose general thrust is to promote and
support home ownership among low- and moderate-income families, even where
such activities may not be profit-maximizing.
Congress has been concerned that the safety and soundness of the government-
sponsored enterprises (GSEs) be maintained in order that they meet their public
policy mission and not pose risks to the housing finance system or 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, in
recognition of the two GSEs’ growing importance to the mortgage market, Congress
established the Office of Federal Housing Enterprise Oversight (OFHEO), an
independent agency within HUD, whose exclusive mission is to oversee the financial
safety and soundness of the two firms. The office is authorized to set capital
requirements, conduct annual risk-based examinations, and generally enforce
compliance with safety and soundness standards.
Since Congress created OFHEO in 1992, Fannie Mae and Freddie Mac’s
business has continued to expand. Table 1 illustrates the expansion by comparing
certain figures for 1992 and 2005. The principal business activity of the two firms
is mortgage securitization. They buy mortgage loans from the original lenders, pool
them, and repackage them as mortgage-backed bonds, which may be sold to investors
1 The most significant advantage comes from an “implicit guarantee.†Although Fannie and
Freddie 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
either firm to default. The implicit guarantee allows them to borrow at lower rates than
private financial institutions, and to take on greater financial risk without a corresponding
drop in their credit ratings or rise in their cost of capital. In addition, their charters include
certain tax and regulatory exemptions and a line of credit with the U.S. Treasury.
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or held in the GSEs’ own investment portfolios. The two firms purchased $442.7
billion in mortgage loans in 1992, and more than double that amount in 2005. As a
percentage of all mortgages originated, however, the GSEs’ share fell, an indication
that other financial institutions are active in the mortgage securitization market.2
Table 1. Fannie Mae and Freddie Mac: Selected Combined
Financial Statistics, 1992 and 2005
(all figures except percentages in billions of dollars)
% Growth,
1992
2005
1992-2005
Mortgages Purchased
442.7
951.2
114.9
Purchases as Percent of All Mortgages
49.5
35.8
Originated
Mortgage-Backed Securities Issued
373.2
879.1
135.6
Percent of all MBS Issues
35.8
45.3
Mortgage-Backed Securities Outstanding
962.0
3,454.5
259.1
Percent of all MBS Outstanding
63.4
63.1
Retained Mortgage Portfolio
189.9
1,437.6
657.0
Financial Derivatives (Notional Amount
71.7
1,327.6
1,751.6
Outstanding)
Sources: OFHEO Report to Congress, 2006, and Inside Mortgage Finance Publications, 2006
Mortgage Market Statistical Annual.
Note: “Retained Mortgage Portfolio†includes whole mortgage loans and mortgage-related securities.
Derivatives total is for 1993; earlier figures are not available for Freddie Mac.
In terms of issues of new mortgage-backed securities (MBS), the figures in
Table 1 tell a similar story. The value of MBS issued by Fannie and Freddie in 2005
was more than double the 1992 figure, but their share of all MBS issued increased
much more slowly. The value of all Fannie and Freddie MBS outstanding more than
tripled over the period, but the percentage of MBS outstanding accounted for by the
two firms’ securities remained unchanged. Again, this suggests rapid growth in all
segments of the mortgage securitization market, including those where the GSEs are
not the major players.
2 Fannie and Freddie’s market share growth is constrained by two factors: they are not
allowed to purchase mortgages over a certain value (so-called “jumbo†loans), and they have
not been the leaders in securitization of subprime mortgages. The declining percentage
shown in Table 1 may suggest that jumbo and subprime lending has grown faster than the
conventional or conforming mortgage sector where they are dominant (Fannie and Freddie
securitized 80% of conforming mortgage loans made in 2005, up from 58% in 1992), but
because of the many factors at play, a single year’s figure does not necessarily indicate a
long-term trend.
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The figures in Table 1 relating to purchase and securitization of mortgages and
the value of MBS outstanding indicate that the GSEs have grown rapidly, but also
suggest that most of the increase can be attributed to the general expansion of the
home mortgage market. The fact that large increases in the volume of business occur
without correspondingly large increases in the percentage of the market served is
evidence that there are other major players in the marketplace, although these
institutions generally do not compete head-to-head with Fannie and Freddie in the
same market segments. The last two lines in Table 1, however, show a change in the
nature of the GSEs’ business, rather than a simple increase in scale.
The 657% increase in the GSEs’ mortgage portfolios suggests that the GSEs’
business model has changed significantly. They appear to be less focused on serving
as a conduit between mortgage lenders and bond investors, and instead are placing
more emphasis on earning interest income by holding mortgage loans and MBS
directly. Fannie and Freddie’s low cost of capital, derived from their GSE status,
allows them to finance the purchase of mortgage assets by selling debt at interest
rates below the yield on the acquired mortgages. The difference, or spread, between
the rates is profit. As profit-seeking firms, the GSEs have an incentive to maximize
the size of their portfolios. Table 1 illustrates the magnitude of their response to this
incentive.
Holders of mortgage loans and mortgage-backed bonds face a range of financial
risks. Like any fixed-rate debt asset, a mortgage loses value if market interest rates
rise. In addition, mortgage investors are at risk when interest rates fall, because home
owners have the right to prepay or refinance their loans, and high interest mortgages
— most desirable from the investor’s point of view — are the first to be prepaid. To
manage these risks, Fannie and Freddie turn to the derivatives markets, where
contracts may be purchased that provide insurance against (or hedge the risks of)
unfavorable changes in interest rates. Table 1 shows that as their portfolios have
grown, the GSEs’ use of derivatives to manage risk has exploded. Financial
management at Fannie and Freddie has become a more complex job, and safety and
soundness regulation has become more challenging.
The Need for Reform
Growth in business volume and the risks posed by growing portfolios (and the
derivatives transactions needed to manage those risks) would likely have made GSE
regulatory reform a priority in the 110th Congress (as it was in the 109th)3 even if that
growth had been managed smoothly. But it has not been: serious problems with
financial accounting came to light at Freddie Mac in 2003, then at Fannie Mae in
3 For a summary of 109th Congress GSE legislation, see CRS Report RL32795,
Government-Sponsored Enterprises: Reform Legislation in the 109th Congress, by Mark
Jickling.
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2004. Both GSEs had to restate their earnings for several years,4 pay fines totaling
hundreds of millions of dollars, and replace their top managers.
The accounting scandals revealed serious weaknesses in accounting policies and
controls. In essence, both firms ignored generally-accepted accounting principles
(GAAP) and chose their accounting policies to produce the financial results that
management wanted. Particularly disturbing, beyond the basic willingness to
manipulate financial results, was that many of the lapses involved accounting for
financial derivatives contracts, upon which the GSEs depend to manage the financial
risks they face.
The Reform Legislation
H.R. 1427, introduced by Chairman Frank and referred to the House Committee
on Financial Services, takes a comprehensive approach to the reform of GSE
regulation. It has many features in common with H.R. 1461, which passed the House
in the 109th Congress, but also some important differences.
An Independent Regulator with Enhanced Authority
H.R. 1427, like its predecessor, proposes a restructuring of GSE regulation. It
would replace OFHEO with an independent agency, called the Federal Housing
Finance Agency, which would have enhanced safety and soundness powers, similar
to those of federal banking regulators. Given the importance of the GSEs to the
financial system, and the potential risks they pose, there is little support for keeping
the GSE regulator inside HUD. Among the new powers would be the authority to
set capital standards by order or regulation, to establish standards for the GSE
portfolios, and to initiate receivership or liquidation proceedings for a failing GSE.
Also included under the new agency’s regulatory umbrella would be the Federal
Home Loan Banks (FHLBs), which comprise one collective GSE, but have not
experienced the kinds of problems and business shifts seen at Fannie and Freddie in
recent years. (The bill refers to all GSEs — the FHLBs and Fannie and Freddie —
as “regulated entities.†In provisions that apply only to Fannie and Freddie, the term
“enterprises†is used.)
Besides creating a new regulator, the bill would make several important and
controversial changes to current law. These are briefly described below.
Affordable Housing Fund
Section 128 of H.R. 1427 requires Fannie and Freddie to contribute to an
affordable housing fund to increase homeownership among very low- and extremely
4 When the restatements were completed, Freddie Mac was found to have understated its net
income by $5 billion, while Fannie Mae overstated earnings by $6.3 billion. See CRS
Report RS21949, Accounting Problems at Fannie Mae, and CRS Report RS21567,
Accounting and Management Problems at Freddie Mac, by Mark Jickling.
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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 would be required to allocate to the fund 1.2 basis points (0.012%) of its
average total mortgage portfolio during the preceding year. 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 redirecting some of the value of this subsidy from private
shareholders and corporate management to a policy objective consistent with the
GSEs’ charters.
H.R. 1461 (109th Congress) included a similar provision, which proved to be
among the most controversial sections of the bill.5 Opponents argued that Fannie and
Freddie would use the funds to reward political allies or for indirect lobbying
purposes. 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.
These amendments are incorporated into H.R. 1427 (with some modifications).
Other changes include the allocation formula (in H.R. 1461, the enterprises were to
contribute 5% of their profits to the fund) and the distribution mechanism — under
H.R. 1427, the money would be paid to the new agency, which would pass it on to
the states, who would select the ultimate recipients. Under H.R. 1461, Fannie and
Freddie would have controlled the funds themselves, and dealt with recipients
directly.
Portfolio Limits
As noted above, both Fannie and Freddie hold large portfolios of mortgages and
mortgage-backed securities, 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 led former Federal Reserve Board
Chairman Alan Greenspan and others to urge Congress to consider ways to shrink the
size of the GSEs’ asset portfolios.6
In the 109th Congress, Section 109 of S. 190 (which was marked up by the
Banking Committee but never brought to the floor) included statutory provisions that
would have limited Fannie and Freddie’s ability to hold mortgage assets in portfolio.
They would have been allowed to acquire mortgages and mortgage-backed securities
5 See CRS Report RS22336, GSE Reform: A New Affordable Housing Fund, by N. Eric
Weiss.
6 See, 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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only for purposes of securitization (with certain limited excceptions). Under this
proposal, Fannie and Freddie’s business models would have been 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 change
would greatly reduce their portfolio earnings, currently one of the chief sources of
their profits.
Proponents of portfolio limits argue that such a step is needed to reduce the cost
of the GSE subsidy to taxpayers, which takes the form not of annual appropriations,
but of the assumption of risk, that is, 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 GSEs’ interest earnings would mean less support for low- and
moderate-income housing goals. The House bill in the 109th Congress, H.R. 1461,
authorized the new agency to require an enterprise to dispose of or acquire any asset
or liability, if the agency determined that such action was consistent with the safe and
sound operation of the enterprise, but did not include any provision that would have
mandated shrinkage of the portfolios. Differences on this point were key to the
failure of the 109th Congress to enact GSE reform legislation.
H.R. 1427 represents a compromise position. The director of the new agency
would be specifically directed to monitor portfolios, and would have the authority to
direct an enterprise to acquire or dispose of any asset, without requiring a
determination that such an action is consistent with the safe and sound operation of
the enterprise.
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. Critics of the conforming loan limit argue that the limit has
a disparate geographical effect: in some areas of the country the limit, which is
$417,000 for single-family homes in 2007, 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. 1427 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, by Barbara Miles and Mark Jickling.
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
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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.
Table 2 below provides brief summaries of the provisions of H.R. 1427 as
introduced, and compares them side-by-side with the provisions of H.R. 1461, as
passed by the House in the 109th Congress.
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Provisions of H.R. 1427 (as introduced in the 110th Congress)
and H.R. 1461 (as passed by the House in the 109th Congress)
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Title I — Reform of Regulation of Enterprises and Federal Home Loan Banks
Subtitle A — Improvement of Safety and Soundness
Short Title
Federal Housing Finance Reform Act of 2007
Federal Housing Finance Reform Act of 2005
Definitions
“Regulated Entity†refers to Fannie Mae and Freddie Mac
Same, except does not contain the category of “any
and affiliates, and each Federal Home Loan Bank.
other person, as determined by the director†in the
“Regulated Entity-Affiliated Party†means (1) directors,
definition of “regulated entity-affiliated party.â€
officers, employees, or agents of a regulated entity, or a
controlling shareholder; (2) shareholders, affiliates,
consultants or joint venture partners, or any other person as
determined by the director, that participates in the conduct of
the affairs of the regulated entity (except that shareholders
are not participants solely because they are members or
customers of the regulated entity); (3) any independent
contractor that knowingly or recklessly participates in
violation of law, breach of fiduciary duty, or unsafe or
unsound practice that may cause more than minimal loss to
the regulated entity; and (4) any not-for profit that receives
its principal funding from a regulated entity. (Sec. 2)
New Regulatory Agency
Federal Housing Finance Agency (Sec. 101)
Identical provisions.
Agency Status
Independent federal agency (Sec. 101)
Identical provisions.
Jurisdiction
General supervisory and regulatory authority over Fannie
Identical provisions.
Mae, Freddie Mac, and the Federal Home Loan Banks.
(Sec. 101)
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Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Agency Officials
A Director, appointed by the President, with advice and
Identical provisions.
consent of the Senate for a five-year term. Should the office
be vacant, a new Director shall be appointed to fill only the
remainder of the term.
Three Deputy Directors, appointed by the Director for the
Divisions of Enterprise Regulation, Federal Home Loan Bank
Regulation, and Housing.
An Office of the Ombudsman to consider complaints and
appeals from any regulated entity and any person with a
business relationship with any regulated entity. (Sec. 101)
Qualifications of Officials
The Director and Deputies must be U.S. citizens, who have a
Identical provisions.
demonstrated understanding of financial management, with
specialized knowledge and experience required for deputy
Directors relevant to the offices they head. (Sec. 101)
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Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Duties and Authorities of the Director
Principal duties are to oversee the operations of each
Identical provisions.
regulated entity and to ensure that each entity: (1) operates in
a safe and sound manner, and maintains adequate capital and
internal controls; (2) fosters liquid, efficient, competitive, and
resilient national housing finance markets that minimize the
cost of housing finance (including for housing for low- and
moderate-income families); (3) complies with applicable
rules, guidelines, orders and regulations pursuant to
applicable law; (4) carries out its statutory mission only
through activities consistent with applicable law.
The Director may review and reject acquisition or transfer of
a controlling interest in a regulated entity; may exercise any
necessary or appropriate incidental powers to fulfill agency’s
duties of supervision and regulation; may enforce actions it
takes, or administer conservatorship or receivership through
litigation either independently (in consultation with the
Attorney General) or through the Attorney General.
(Sec. 102)
Prudential Management and Operations
The Director shall establish standards for each regulated
Identical provisions.
Standards
entity for (1) internal controls and information systems, (2)
internal audit systems, (3) credit and counterparty risk, (4)
interest rate risk management, (5) monitoring and
management of market risk, (6) adequacy and maintenance of
liquidity and reserves, (7) asset and portfolio management,
(8) investments and acquisitions, (9) record keeping, (10)
issuance of subordinated debt, as the Director considers
necessary, (11) overall risk management, including
reputational risk and maintenance of remote facilities to
protect against disruption, and (12) other standards the
Director finds appropriate. (Sec. 102)
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Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Failure to Meet Prudential Standards
If the Director finds that a regulated entity has failed to meet
Identical provisions.
any prudential standard, the entity must submit a plan within
30 days to correct the deficiency, and the Director may
prohibit any increase in total assets of the entity, require an
increase in regulatory capital, or take other actions until the
deficiency is corrected. The Director shall take one or more
of these actions if the entity fails to meet prescribed
standards, if the deficiency is not corrected, and if the entity
underwent extraordinary growth in the 18 months prior to the
date when it first failed to meet the standard. (Sec. 102)
Federal Housing Enterprise Board
Creates the Federal Housing Enterprise Board to advise the
Creates the Housing Finance Oversight Board
Director on overall strategies and policies. The Board is to
(made up of the Director, the Secretaries of the
have three members including the Secretaries of the Treasury
Treasury and HUD, or their designees, and two
and Housing and Urban Development and the Director, who
individuals with relevant experience appointed by
chairs the Board. The Board meets at least once every three
the President to three-year terms, with the advice
months and shall testify annually before Congress on the
and consent of the Senate) to advise the Director on
safety and soundness of the regulated entities, any material
overall strategies and policies. The two appointees
deficiencies in the conduct of the entities’ operations, the
are full-time employees of the Board and may not
overall operational status of the entities, an evaluation of how
have a financial interest in the regulated entities.
the entities are carrying out their missions, the operations,
Staff of the Oversight Board are to be federal
resources and performance of the Agency, and other matters
employees subject to Title 5.
the Board deems appropriate. (Sec. 103)
Provisions regarding meetings and annual
testimony are identical.
CRS-12
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Annual Report of the Director
The annual report of the Director is expanded to include an
Identical provisions.
assessment of the Board or any of its members with respect
to (1) safety and soundness of the regulated entities; (2)
material deficiencies in conduct of the operations or the
entities; (3) overall operational status of the regulated
entities; and (4) evaluation of the performance of the entities
in carrying out their missions; (5) operations, resources, and
performance of the Agency; and (6) other matters relating to
the Agency and its fulfillment of its mission. (Sec. 103)
Authority to Require Reports by
Adds reports on “management, activities, or operations as the
Identical provisions.
Regulated Entities
Director considers appropriate†to regular reports the
Director may require. Adds a requirement to report in a
timely manner on discovery by or suspicion of a regulated
entity of any fraudulent financial transactions it may have
participated in. The Director is to require the entities to
establish and maintain procedures to discover such
transactions. (Sec. 104)
Charitable Contributions
The Director shall require each enterprise to submit an annual
Identical provisions.
report on the total value of contributions to non-profit
organizations; including the name of the organization and
value of contributions (for contributions exceeding an
amount determined by the Director); and for contributions
above the designated amount to any nonprofit of which a
director, officer, or controlling person of the enterprise, or a
spouse, was a director or trustee, the name of the nonprofit
and value of the contribution. Such information is to be
publicly available. (Sec. 105)
CRS-13
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Assessments
The Director shall establish and collect annual assessments
Identical provisions.
from the regulated entities to provide for reasonable costs and
expenses of the Agency, including (1) costs of examinations,
reviews, and credit assessments, and (2) amounts in excess of
actual expenses to maintain necessary working capital.
Assessments may be increased to cover costs of enforcement
activities or if an entity is inadequately capitalized. Salaries
and other expenses shall be paid from assessments, which
shall not be construed to be government funds or
appropriated monies. The Agency shall provide OMB with
financial plans and forecasts, prepare annual financial
statements (including an assertion of the effectiveness of
internal accounting controls), and be audited annually by the
Government Accountability Office (GAO) at the Agency’s
expense. (Sec. 106)
Examiners and Accountants — Special
The Director may hire examiners, accountants, specialists in
Identical provisions.
Hiring Authority
technology or financial markets, and economists in
accordance with rules governing the excepted service,
notwithstanding any rules governing the competitive service.
(Sec. 107)
Executive Compensation
The prohibition (in current law) of executive compensation
Identical provisions.
that is not reasonable or comparable is 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. 108)
Regulations and Orders
The Director is authorized to issue any regulations,
Identical provisions.
guidelines, or orders that are necessary to carry out the
authorizing statutes. (Sec. 110)
CRS-14
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Risk-Based Capital Requirements
The Director shall, by regulation, establish risk-based capital
Identical provisions.
requirements for the enterprises to ensure safe and sound
operation and maintenance of sufficient capital and reserves
to support risk exposure. The Director shall establish
risk-based capital requirements for the FHLBs.
Confidentiality of information enabling risk-based capital
standards shall be maintained. (Sec. 111)
Minimum Capital Requirements
The Director may by regulation establish minimum capital
Identical, except (1) there is no reference to
levels for regulated entities that are higher than the statutory
“unsafe or unsound conditions†as a justification
levels. The Director may, by order, increase minimum
for a temporary increase in capital levels, and (2)
capital levels on a temporary basis if the regulated entity has
H.R. 1461 directs the Director to periodically
violated prudential standards or if an unsafe or unsound
review amounts of core capital held by enterprises,
condition exists. The Director may, by order or regulation,
the amount of capital held by FHLBs, and the
establish additional capital or reserve requirements with
minimum capital standards for regulated entities.
respect to any particular program or activity.
The Director shall, by regulation, set critical capital levels for
the Federal Home Loan Banks. (Sec. 112)
CRS-15
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Review of, and Authority Over,
The Director shall, by regulation, establish standards by
The Director shall periodically review the
Enterprise Assets and Liabilities
which the portfolio holdings, or rate of growth of the
on-balance sheet and off-balance sheet assets and
(Portfolio Limits)
portfolio holdings, of the enterprises will be consistent with
liabilities of the enterprises.
the mission and safe and sound operations. In developing
standards, the Director shall consider (1) the size or growth
of the mortgage market; (2) the need for the portfolio in
maintaining liquidity or stability of the secondary mortgage
market; (3) the need for an inventory of mortgages in
connection with securitizations; (4) the need for the portfolio
to directly support the affordable housing mission of the
enterprises; (5) the liquidity needs of the enterprises; (6) any
potential risks posed by the nature of the portfolio holdings;
and (7) any additional factors the Director determines to be
appropriate. The Director may, by order, make temporary
adjustments to the standards during market stress or
disruption. The standards shall be issued within 180 days of
the effective date of this legislation. (Sec. 113)
Authority to Require Disposition or
The Director shall monitor the portfolio of each enterprise.
Pursuant to such a review and notwithstanding the
Acquisition of Assets
Pursuant to subsection (a) and notwithstanding the capital
capital classifications of the enterprises, the
classifications of the enterprises, the Director may, by order,
Director may by order require an enterprise, under
require an enterprise, under such terms and conditions as the
such terms and conditions as the Director
Director determines to be appropriate, to dispose of or
determines to be appropriate, to dispose of or
acquire any asset. (Sec. 113)
acquire any asset or liability, if the Director
determines that such action is consistent with the
safe and sound operation of the enterprise or with
the purposes of this act.
CRS-16
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Corporate Governance of Enterprises
Requires a majority of the board to be independent directors,
Identical provisions.
as 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. Boards shall include audit, compensation, and
nominating committees, to be composed and empowered
according to SEC and NYSE rules. (Sec. 114)
Compensation by Enterprises
Compensation of Directors, executives, and employees shall
Identical provisions.
not exceed what is reasonable and appropriate, shall be
commensurate with duties and responsibilities, consistent
with the long-term goals of the enterprise, and 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
involving misconduct. (Sec. 114)
Code of Conduct and Ethics
An enterprise shall establish and enforce a written code of
Identical provision.
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. The code shall be reviewed at least once every three
years. (Sec. 114)
Responsibilities of the Board of
The board of an enterprise shall oversee (1) corporate
Identical provisions.
Directors
strategy, risk 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. 114)
CRS-17
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Prohibition of Extensions of Credit
An enterprise may not (directly, indirectly, or through a
Identical provision.
subsidiary) make any personal loan to a board member or
executive officer. (Sec. 114)
Certification of Disclosures
The CEO and CFO of an enterprise shall review annual and
Identical provisions.
quarterly reports and shall make the certifications required by
Section 302 of the Sarbanes-Oxley Act. (Sec. 114)
Change of Audit Partner
Requires that the lead partner of the external auditor of an
Identical provisions.
enterprise be changed every five years. (Sec. 114)
Compliance Program
Each enterprise shall establish a compliance program
Identical provisions.
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. 114)
Risk Management Program
Each enterprise shall establish a risk management program
Identical provisions.
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. 114)
Sec Registration Requirements
Requires each regulated entity to register at least one class of
Identical provisions.
capital stock with the SEC, and requires enterprises (Fannie
Mae and Freddie Mac) to comply with Sections 14 and 16 of
the Securities Exchange Act of 1934 (which deal with proxy
reporting and disclosure of insider transactions in company
stock). (Sec. 115)
Enterprises whose stock is not registered or deregistered
remain subject to certain provisions of the Securities
Exchange Act. (Sec. 114)
CRS-18
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Federal Financial Institutions
The FHFA shall be a member of the FFIEC. (Sec. 116)
Identical provision.
Examination Council (FFIEC)
Guarantee Fee Study
The GAO, in consultation with the heads of the federal
Identical provision.
banking agencies and the OFHEO, shall, not later than one
year after the date of the enactment, submit to Congress a
study of the pricing, transparency and reporting of the
regulated entities with regard to guarantee fees and analogous
practices, transparency and reporting requirements of other
participants in the business of mortgage purchases and
securitization. The study shall examine various factors such
as credit risk, counterparty risk, and economic value
considerations. (Sec. 117)
Subtitle B — Improvement of Mission Supervision
Transfer of Product Approval and
This section transfers HUD’s authority for new product
Identical, except “program and activities approvalâ€
Housing Goal Oversight
approval and housing goals to the FHFA. (Sec. 121)
is used where “product approvalâ€appears in H.R.
1427.
New Product Approval
The enterprises must obtain approval from the Director
An enterprise may not undertake any new program,
before offering any new products. (Sec. 122)
including a pilot program, or any new business
activity except in accordance with the procedures
set forth in this section and orders and regulations
issued under this section.
Standard for Approval
The Director shall determine that a new product is consistent
The Director may approve, or conditionally
with the enterprise’s charter, is in the public interest, is
approve, a new program based on the same criteria,
consistent with the safety and soundness of the enterprise or
except that “material impairment of the efficiency
the mortgage finance system, and does not materially impair
of the mortgage finance system†does not appear in
the efficiency of the mortgage finance system. (Sec. 122)
this bill.
CRS-19
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Procedure for Approval
The enterprises make a written request to the Director, who
Immediately upon receipt of a written application
shall publish the request in the Federal Register with a 30-
for a new program, the Director shall publish in the
day public comment period. The Director will have 30 days
Federal Register a description of the proposed new
after the close of the comment period to approve or deny the
program, with a 30-day public comment period.
request. (Sec. 122)
Not less than 15 days, but not more than 30 days
after the conclusion of the comment period, the
Director shall approve, conditionally approve, or
reject, such program, in writing. (Sec. 122)
Expedited Review
If an enterprise determines that any new activity, service,
No provision.
undertaking, or offering is not a product, it shall notify the
Director. The Director shall immediately make a
determination whether or not the activity, service,
undertaking, or offering is a product. If it is determined to be
a new product, the enterprise shall submit a new product
approval request. (Sec. 122)
Definition of Product or New Business
The term “product†does not include the enterprises’
A “new business activity†is one that is materially
Activity
automated loan underwriting systems in existence on the date
changed or materially different from the businesses
of enactment of this legislation, or any modifications or
the enterprises were engaged in on the date of
upgrades to such systems that do not (1) include services or
enactment.
financing other than residential mortgage financing, or (2)
create significant new exposure to risk for the enterprise or
the holder of the mortgage. (Sec. 122)
No Limitation
Nothing in this section shall restrict the Director’s safety and
The Director shall have authority to prohibit any
soundness authority over all new and existing products or
new business activity by an enterprise that (1) is
activities, or the Director’s authority to review all new and
inconsistent with the enterprises’ charters or (2) is
existing products or activities to determine that such products
inconsistent with the safety and soundness of the
or activities are consistent with the statutory mission of the
enterprise; or (3) is not in the public interest.
enterprise. (Sec. 122)
CRS-20
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Conforming Loan Limit — Indexation
The conforming loan limit will increase or decrease to reflect
Identical provision.
the annual change in a housing price index maintained by the
Director. (Sec. 123)
Increase in Conforming Loan Limit for
The conforming loan limit shall be increased in areas where
Identical provision.
High-Cost Areas
the median price exceeds the general limitation to the lesser
of (1) 150% of such general limitation or (2) the median price
in the area. The Director may limit such an increase to
mortgages which are securitized and sold by the enterprise.
(Sec. 123)
House Price Index
The Director shall maintain an index of national average
Identical provision.
single family house prices for use for adjusting the
conforming loan limitations of the enterprises. GAO shall
audit this index within 180 days of the creation of the index
and after any modification to the index. (Sec. 123)
Conditions on Conforming Loan Limit
The Director shall conduct a study to determine (1) the
Identical provision. (Sec. 123)
Increases for High-Cost Areas
effects of restricting the higher conforming loan limits only
to mortgages securitized and sold by the enterprises on the
availability of mortgages for housing in high-cost areas and,
(2) the extent to which the enterprises will be able to sell
securities based on mortgages for housing located in such
high-cost areas. If the Director determines that costs to
borrowers in such high-cost areas will be increased by such
restrictions, the Director may issue an order terminating such
restrictions. (Sec. 123)
Annual Reports
After receiving the annual reports from the regulated entities,
Identical provision.
the Director shall submit an annual report to Congress.
(Sec. 124)
CRS-21
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Contents of Annual Report to Congress
The report shall (1) discuss the extent to which the regulated
Identical provision. (Sec. 123)
entity is meeting (or could better meet) its statutory purposes,
including housing goals, community investment, and
affordable housing programs; (2) analyze data on income,
race, and gender, and discuss violations of fair lending
procedures by lenders; (3) examine credit conditions in the
multifamily housing mortgage markets and the status of
efforts to provide standard credit terms and underwriting
guidelines for multifamily housing and securitize such
mortgage products; (4) examine the use of alternative credit
scoring and other means to expand opportunities for
first-time home buyers; (5) analyze existing trends in pricing
and other conditions in the housing markets and mortgage
markets; and (6) identify the extent to which each enterprise
is involved in the subprime mortgage market, and compare
the characteristics of subprime loans purchased and
securitized by the enterprises to other loans purchased and
securitized by the enterprises. (Sec. 124)
Standards for Subprime Loans
Within one year of the effective date of this legislation the
Identical provision.
Director shall issue standards by which mortgages purchased
shall be considered subprime for the purpose of complying
with the reporting requirement in Housing and Community
Development Act of 1992. (Sec. 124)
Housing Goals Authority
The authority to establish and monitor housing goals for the
Identical provision.
enterprises is moved to the Director from HUD. (Sec. 125)
Housing Goals, General
There are three single-family housing goals and one
Identical provision.
multifamily housing goal. In addition, the enterprises are
required to provide the Director with sufficient information to
determine if minorities are charged a different interest rate
than non-minorities are charged. (Sec. 125)
CRS-22
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Single-Family Housing Goals
The Director shall establish annual goals for the purchase by
Identical provision, except that there was no
each enterprise of conventional, conforming, single-family,
refinance goal.
owner-occupied, purchase money mortgages financing
housing for (1) low-income families, (2) very low-income
families, and (3) families that reside in low-income areas.
The Director shall establish a separate low-income goal for
mortgages used to refinance existing mortgages. (Sec. 125)
Establishment of Single-family Housing
The target for the single-family housing goals (and subgoal)
Identical provision.
Goals
for a year shall be the average percentage, for the three most
recently available years of data collected under the Home
Mortgage Disclosure Act of 1975, of the number of
conventional, conforming, single-family, owner-occupied,
home-purchase mortgages originated in such year that serves
such type of family, as determined by the Director.
(Sec. 125)
Authority to Increase Targets
The Director may by regulation increase the single-family
Identical provision.
goals set out previously to reflect expected changes in market
performance related to such information under the Home
Mortgage Disclosure Act of 1975. In establishing such
targets, the Director shall consider (1) national housing
needs, (2) economic, housing, and demographic conditions,
(3) the performance and effort of the enterprises toward
achieving the housing goals in previous years, (4) the size of
the conventional mortgage market serving each of the types
of families relative to the size of the overall conventional
mortgage market, and (5) the need to maintain the sound
financial condition of the enterprises. (Sec. 125)
CRS-23
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Notice of Determination and Enterprise
Within 30 days of making a determination regarding housing
Identical provision.
Comment
goal compliance of an enterprise and before any public
disclosure thereof, the Director shall provide notice of the
determination to the enterprise, which shall include an
analysis and comparison of the performance of the enterprise
for the year and the targets for the year under this subsection.
The Director shall provide each enterprise an opportunity to
comment on the determination during the 30-day period
beginning upon receipt by the enterprise of the notice.
(Sec. 125)
Multifamily Special Affordable
The Director shall establish, by regulation, an annual goal for
Identical provisions.
Housing Goal
the purchase by each enterprise of each of the following types
of mortgages on multifamily housing: (1) mortgages that
finance dwelling units for low-income families, (2)
mortgages that finance dwelling units for very low-income
families, and (3) mortgages that finance dwelling units
assisted by the low-income housing tax credit under section
42 of the Internal Revenue Code of 1986. (Sec. 125)
Additional Requirements for Smaller
The Director shall establish, within the multifamily special
Identical provision.
Projects
affordable housing goal, additional requirements for the
purchase by each enterprise of mortgages for multifamily
housing projects of a smaller or limited size, which may be
based on the number of dwelling units in the project or the
amount of the mortgage, or both, and shall include
multifamily housing projects of such smaller sizes as are
typical among such projects that serve rural areas. (Sec. 125)
CRS-24
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Establishment of Multifamily Special
In establishing the special multifamily affordable housing
Identical provision.
Affordable Housing Goal
goal for an enterprise for a year, the Director shall consider:
(1) national multifamily mortgage credit needs; (2) the
performance and effort of the enterprise in making mortgage
credit available for multifamily housing in previous years; (3)
the size of the multifamily mortgage market; (4) the ability of
the enterprise to lead the industry in making mortgage credit
available, especially for underserved markets, such as for
small multifamily projects of 5 to 50 units, multifamily
properties in need of rehabilitation, and multifamily
properties located in rural areas; and (5) the need to maintain
the sound financial condition of the enterprise. (Sec. 125)
Units Financed by Housing Finance
The Director shall give credit toward the achievement of the
Identical provision.
Agency Bonds
multifamily special affordable housing goal to dwelling units
in multifamily housing that is financed by tax-exempt or
taxable bonds issued by a State or local housing finance
agency, but only if such bonds are secured by a guarantee of
the enterprise, or are not investment grade and are purchased
by the enterprise. (Sec. 125)
Use of Tenant Income or Rent
The Director shall monitor the performance of each
Identical provision.
enterprise in meeting housing goals and shall evaluate such
performance based on the income of the prospective or actual
tenants of the property, where such data are available; or
where the data are not available, rent levels affordable to
low-income and very low-income families. A rent level shall
be considered to be affordable if it does not exceed 30% of
the maximum income level of the income category, with
appropriate adjustments for unit size as measured by the
number of bedrooms. (Sec. 125)
CRS-25
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Discretionary Adjustment of Housing
The Director may reduce the level for a goal pursuant to such
Identical provision.
Goals
a petition by one of the enterprises only if (1) market and
economic conditions or the financial condition of the
enterprise require such action; or (2) efforts to meet the goal
would result in the constraint of liquidity, over-investment in
certain market segments, or other consequences contrary to
the intent of the law.
Determination
The Director shall make a determination regarding any
Identical provision.
proposed reduction within 30 days of receipt of the petition
regarding the reduction. The Director may extend such period
for a single additional 15-day period, but only if the Director
requests additional information from the enterprise. A denial
by the Director to reduce the level of any goal under this
section may be appealed to a U.S. District Court. (Sec. 125)
CRS-26
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Definitions
Very low-income: in the case of owner-occupied units,
Identical provisions.
income not in excess of 50% of area median income; and in
the case of rental units, income not in excess of 50% of area
median income, adjusted for family size.
Low-income area: census tract or block numbering area in
which the median income does not exceed 80% of the median
income for the area in which such census tract or block
numbering area is located, and shall include families having
incomes not greater than 100% of the area median income
who reside in minority census tracts.
Extremely low-income: in the case of owner-occupied units,
income not in excess of 30% of the area median income; and
(B) in the case of rental units, income not in excess of 30% of
the area median income, with adjustments for family size.
Conforming mortgage: a conventional mortgage having an
original principal obligation that does not exceed the dollar
limitation, in effect at the time of such origination, specified
in the enterprise’s charter.
“Rural†and “rural area†as currently defined are revised to
Identical provision, except for technical change.
include micropolitan areas and tribal trust lands. (Sec. 127)
Duty to Serve Underserved Markets
The enterprises shall (1) purchase mortgages on housing for
Identical provisions.
very low-, low-, and moderate-income families involving a
reasonable economic return that may be less than the return
earned on other activities; and (2) have the duty to improve
the liquidity of and the distribution of capital available for
mortgage financing for underserved markets. (Sec. 126)
CRS-27
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Underserved Markets
Each enterprise shall lead the industry in developing loan
Identical provision.
products and flexible underwriting guidelines for: (1)
manufactured housing purchased by very low-, low-, and
moderate-income families; (2) Affordable housing
preservation; (C) housing for very low-, low-, and
moderate-income families in rural areas, and for any other
underserved market for very low-, low-, and
moderate-income families that the Secretary identifies as
lacking adequate credit through conventional lending sources.
Such underserved markets may be identified by borrower
type, market segment, or geographic area. (Sec. 126)
Evaluation and Reporting of
Not later than six months after the effective date, the Director
Identical provision.
Compliance
shall establish a manner for evaluating whether, and the
extent to which, the enterprises have complied with the duty
to serve underserved markets and for rating the extent of such
compliance. The Director shall annually evaluate the
compliance and rate the performance of each enterprise.
(Sec. 126)
Enforcement of Duty to Provide
The duty to serve underserved markets shall be enforceable to
Identical provision.
Mortgage Credit to Underserved
the same extent and under the same provisions that the
Markets
housing goals are enforceable. (Sec. 126)
Housing Goal Enforcement
If the Director preliminarily determines that an enterprise has
Identical provision.
failed, or is likely to fail to meet any housing goal, the
Director shall provide written notice including the reasons for
such determination. (Sec. 127)
CRS-28
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Cease and Desist Orders, Civil Money
If the Director finds that there is a substantial probability that
Identical provision.
Penalties, and Remedies Including
an enterprise will fail, or has actually failed, to meet any
Housing Plans
housing goal and that the achievement of the housing goal
was or is feasible, the Director may require that the enterprise
submit a housing plan. If the Director makes such a finding
and the enterprise refuses to submit such a plan, submits an
unacceptable plan, fails to comply with the plan or the
Director finds that the enterprise has failed to meet any
housing goal, in addition to requiring an enterprise to submit
a housing plan, the Director may issue a cease and desist
order, impose civil money penalties, or order other remedies
as set forth in this subsection. (Sec. 127)
Review of Housing Plan
The Director shall review any submission by an enterprise,
Identical provision.
including a housing plan, and not later than 30 days after
submission, approve or disapprove the plan or other action.
The Director may extend the period for approval or
disapproval for a single additional 30-day period. (Sec. 127)
Additional Remedies for Failure to
The Director also may seek other actions when an enterprise
The Director may seek other actions when an
Meet Goals
fails to meet a goal, and exercise appropriate enforcement
enterprise fails to meet a goal, and exercise
authority available to the Director under this act to prohibit
appropriate enforcement authority available to the
the enterprise from initially offering any product or engaging
Director under this act to prohibit the enterprise
in any new activities, services, undertakings, and offerings
from entering into new programs and new business
and to order the enterprise to suspend products and activities,
activities and to order the enterprise to suspend
services, undertakings, and offerings pending its achievement
programs and business activities pending its
of the goal. (Sec. 127)
achievement of the goal.
Establishment of an Affordable
The Director of the Federal Housing Finance Agency (in
Each enterprise (Fannie Mae and Freddie Mac)
Housing Fund
consultation with HUD Secretary) shall establish and manage
shall establish and manage an affordable housing
an affordable housing fund. (Sec. 128)
fund.
CRS-29
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Purpose of the Fund
To increase homeownership and the supply of rental housing
Identical provision.
among very low-income families, to increase investment in
public infrastructure, to increase investment in low-income
areas. (Sec. 128)
Allocation of Amounts by Enterprises
For fiscal years 2007 through 2011, each enterprise shall
Each enterprise shall allocate to the fund 3.5% of
allocate to the fund 1.2 basis points (0.012%) of its average
its after-tax income during the first two years
total mortgage portfolio during the preceding year.
following enactment, and 5% for the three
(Sec. 128)
following years.
Definition of “Total Mortgage
The term “total mortgage portfolio†means, with respect to a
No provision.
Portfolioâ€
year, the sum of the dollar amount of the unpaid outstanding
principal balances on all mortgages outstanding during that
year in any form, including whole loans, mortgage-backed
securities, participation certificates, or other structured
securities backed by mortgages. This includes all such
mortgages or securitized obligations, whether retained in
portfolio or sold in any form. The Director is authorized to
promulgate rules further defining such terms as necessary to
implement this section and to address market developments.
(Sec. 128)
Limitation on Contributions
No comparable provision.
No contribution required for any year during which
an enterprise did not earn an after-tax profit. (Sec.
128)
Suspension of Contributions
The Director shall temporarily suspend the allocation by an
Identical provision.
enterprise to the affordable housing fund upon a finding by
the Director that such allocations would contribute to the
financial instability of the enterprise, would cause the
enterprise to be classified as undercapitalized, or would
prevent the enterprise from successfully completing a capital
restoration plan under Section 1369C. (Sec. 128)
CRS-30
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Five-Year Sunset and Report
The enterprises shall not be required to make allocations to
Identical provision, except that sunset would occur
the affordable housing fund in 2012 or in any year thereafter.
five years after enactment.
Not later than June 30, 2011, the Director shall submit to
Congress a report making recommendations on whether the
fund should be extended or modified. (Sec. 128)
Affordable Housing Needs Formulas:
For 2007, 75% of allocations shall go to the Louisiana
Additional weight shall be given to applications for
Allocations for 2007
Housing Finance Agency; 25% to the Mississippi
victims of Hurricanes Rita and Katrina for the first
Development Authority. (Sec. 128)
two years.
Affordable Housing Needs Formulas:
HUD Secretary shall establish a formula to allocate funds to
Priority in funding shall be based upon (1) disaster-
Allocations for Later Years
states and Indian tribes based on specified factors, including
related needs, (2) greatest impact, (3) geographic
population, housing affordability, percentage of extremely
diversity, (4) ability to timely undertake activities,
low- and very low-income families, and the extent of
and (5) affordability in rental projects.
substandard housing. If such a formula is not established by
the time the Director is to make allocations, the allocations
will be distributed to states based on HOME allocations to
states and participant jurisdictions. (Sec. 128)
Allocation of Formula Amounts
The Director shall determine the formula amount for each
The enterprises could make grants to any
grantee (states and Indian tribes) and publish in the Federal
organization (including for-profit, non-profit, or
Register the available amounts. (Sec. 128)
faith-based entities, or Indian tribes) with a
demonstrated capacity for carrying out permitted
housing activities.
Recipients of Allocations
Each grantee may designate a state housing finance agency,
No comparable provision (but see above for list of
housing and community development entity, tribally
eligible recipients).
designated housing entity, or other qualified instrumentality
of the grantee to receive grants. (Sec. 128)
Reduction for Failure to Return
An annual allocation to a grantee shall be reduced by the
Misuse of funds could lead to a recipient being
Misused Funds
amount of misused funds that were not returned or
permanently barred from the program.
reimbursed in the preceding year. (Sec. 128)
CRS-31
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Grantee Allocation Plans
Each grantee shall establish and publish a plan for
Affordable Housing Board shall advise the Director
distribution of grant amounts each year. The plan shall set
with respect to establishment of selection criteria to
forth requirements for applications to receive assistance.
provide for appropriate use of funds.
(Sec. 128)
Eligible Activities
Grant amounts shall be used only for (1) the production,
Identical provisions.
preservation, and rehabilitation of rental housing, including
housing under the programs identified in Section
1335(a)(2)(B), except that such grant amounts may be used
for the benefit only of extremely and very low-income
families; (2) the production, preservation, and rehabilitation
of housing for homeownership (including such forms as
downpayment assistance, closing cost assistance, and
assistance for interest-rate buy-downs) for extremely and
very low-income first-time home buyers; and (3) public
infrastructure development activities in connection with
housing activities funded under paragraph (1) or (2).
(Sec. 128)
Eligible Recipients
Funds may be provided only to organizations, agencies, or
Similar provisions, except that grants would be
entities (including for-profit, non-profit, or faith-based
received directly from the enterprises. Other
entities) (1) with a demonstrated capacity for carrying out
provisions (not included in H.R. 1427) excluded
eligible housing activities, and (2) that make assurances to
not-for-profit entities which engaged in certain
the grantee (as required by the Director) that they will
Federal election activities, electioneering
comply with the requirements of the program. (Sec. 128)
communication, lobbying activities, or were
affiliated with entities engaged in such activities.
CRS-32
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Limitations on Use
Of aggregate amounts allocated each year, 25% shall be used
Identical provisions.
by Refcorp, as provided in Section 21B(f)(2)(E) of the
Federal Home Loan Bank Act (12 U.S.C. 1441b(f)(2)(E));
not less than 10% shall be for homeownership activities; and,
not more than 12.5% shall go to public infrastructure
projects. All funds must be used or committed within two
years of the grant date, or be subject to recapture. (Sec. 128)
Prohibited Uses
The Director shall by regulation, set forth prohibited uses of
Identical provision, except for a reference to the
grant amounts, which shall include use for (1) political
administrative costs of the enterprises.
activities; (2) advocacy; (3) lobbying, whether directly or
through other parties; (4) counseling services; (5) travel
expenses; and (6) preparing or providing advice on tax
returns. The Director shall provide by regulation that grant
amounts may not be used for administrative, outreach, or
other costs of the grantee or any recipient of such grant
amounts, except that grant amounts may be used for
administrative costs of the grantee of carrying out the
program required under this section. (Sec. 128)
Housing Goals
Amounts contributed by the enterprises to the affordable
Identical provision.
housing fund shall not count toward meeting housing goals or
duty to serve. (Sec. 128)
Accountability of Recipients and
The Director shall require each grantee to develop and
Identical provisions.
Grantees
maintain a system to ensure that all recipients of funds use
those funds in accordance with this section, and any
applicable regulations, requirements, or conditions. The
Director shall establish minimum requirements for grantees
and recipients, which shall include appropriate financial
reporting, record retention, and audit requirements.
(Sec. 128)
CRS-33
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Misuse of Funds by Recipients
If the Director or a grantee (subject to the Director’s review)
If an enterprise determines that any recipient of
determines that any recipient of assistance has used any
assistance has used any amounts in a manner that is
amounts in a manner that is materially in violation of this
materially in violation of this section, the
section, the regulations issued under this section, or any
regulations issued under this section, or any
requirements or conditions under which such amounts were
requirements or conditions under which such
provided, the grantee shall require that, within 12 months
amounts were provided, the enterprise shall notify
after the determination of such misuse, the recipient shall
the Director of the amounts and actions taken. Such
reimburse the grantee for misused amounts and return to the
recipients shall be in perpetuity ineligible to
grantee any amounts that remain unused or uncommitted for
receive any further funding and shall be required to
use. The remedies under this clause are in addition to any
reimburse the enterprise any amounts that remain
other remedies that may be available under law. (Sec. 128)
unused or uncommitted for use. The remedies
under this clause are in addition to any other
remedies that may be available under law.
Reports by Grantees
The Director shall require each grantee receiving affordable
Each enterprise shall submit a quarterly report to
housing fund grant amounts for a year to submit an annual
the Director describing activities funded. The
report to the Director that describes the activities funded
Director shall make these reports publicly
under this section and the manner in which the grantee
available.
complied with the allocation plan established for the grantee.
The Director shall make these reports publicly available.
(Sec. 128)
CRS-34
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Misuse of Funds by Grantees
If the Director determines, after reasonable notice and
No comparable provision.
opportunity for hearing, that a grantee has failed to comply
substantially with any provision of this section and until the
Director is satisfied that there is no longer any such failure to
comply, the Director shall reduce the amount of assistance
under this section to the grantee by an amount equal to the
amount of the affordable housing fund grant amounts that
were not used in accordance with this section; require the
grantee to repay an amount equal to the amount of the
affordable housing fund grant amounts which were not used
in accordance with this section; limit the availability of
assistance under this section to the grantee to activities or
recipients not affected by such failure to comply; or terminate
any assistance under this section to the grantee. (Sec. 128)
Capital Requirements
The utilization or commitment of amounts from the
Identical provision.
affordable housing fund shall not be subject to the risk-based
capital requirements established pursuant to Section 1361(a).
(Sec. 128)
Affordable Housing Board
No provision.
Creates an Affordable Housing Board to determine
extremely and very low-income housing needs, and
to advise the Director with respect to selection
criteria and the operation of the program. The
Board shall also review the quarterly reports
submitted by the enterprises.
Consistency with Mission
The housing goals and the affordable housing fund do not
Identical provision.
authorize an enterprise to engage in any program or activity
that contravenes or is inconsistent its charter. (Sec. 129)
Cease-and-Desist Orders
The Director is authorized to issue cease-and-desist orders
Identical provision.
under certain circumstances. (Sec. 130)
CRS-35
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Grounds for Issuance
The Director may issue a notice of charges if the Director
Identical provision.
determines the enterprise has failed to meet requirements
under Sections 1336, 1314, or their charters. (Sec. 130)
Enforcement
The Director may apply to the United States District Court
Identical provision.
for the District of Columbia, or the United States district
court within the jurisdiction of which the headquarters of the
enterprise is located, for the enforcement of any effective and
outstanding notice or order issued under section 1341 or
1345, or request that the Attorney General of the United
States bring such an action. Such court shall have jurisdiction
and power to order and require compliance with such notice
or order. (Sec. 130)
Civil Money Penalties
The Director may impose a civil money penalty, on any
Identical provision.
enterprise that has failed to (1) meet any housing goal,
following a written notice and determination; (2) submit a
report following a notice of such failure, an opportunity for
comment by the enterprise, and a final determination by the
Director; (3) submit its charters; (4) comply with any
provision of this part or any order, rule or regulation under
this part; (5) submit a housing plan within the required
period; or (6) comply with a housing plan for the enterprise.
(Sec. 130)
Amount of Penalty
The amount of the penalty, as determined by the Director,
Identical provision.
may not exceed (1) for any failure described in paragraph (1),
(5), or (6) of subsection (a), $50,000 for each day that the
failure occurs; and (2) for any failure described in paragraph
(2), (3), or (4) of subsection (a), $20,000 for each day that the
failure occurs. In determining the penalty, the Director shall
give consideration to the length of time the enterprise should
reasonably take to achieve the goal. (Sec. 130)
CRS-36
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Enforcement of Subpoenas
Section 1348(c) of the Housing and Community
Identical provision.
Development Act of 1992 (12 U.S.C. 4588(c)) is amended by
striking “request the Attorney General of the United States
to†and inserting “, in the discretion of the Director,†and by
inserting “or request that the Attorney General of the United
States bring such an action,†after “District of Columbia..â€
(Sec. 130)
Subtitle C — Prompt Corrective Action
Capital Classifications
The Director shall establish capital classifications for the
Identical provisions.
FHLBs, reflecting differences in operations between the
banks and the enterprises. (Sec. 141(a)) These regulations
are to be issued within 180 days of the effective date of this
legislation. (Sec. 141(b))
The Director may reclassify a regulated entity (1) whose
conduct could rapidly deplete core or total capital, or (in the
case of an enterprise) whose mortgage assets have declined
significantly in value, (2) which is determined (after notice
and opportunity for a hearing) to be in an unsafe or unsound
condition, or (3) which is engaging in an unsafe or unsound
practice. (Sec. 141(a))
Restriction on Capital Distributions
A regulated entity shall make no capital distribution that
Identical provision.
would cause it to become undercapitalized, except that
certain capital restructuring transactions may be permitted by
the Director if they improve the financial condition of the
entity. (Sec. 141(a))
CRS-37
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Supervisory Actions Applicable to
The Director must monitor an undercapitalized entity’s
Identical provisions, except that the prohibition on
Undercapitalized Regulated Entities
condition, its compliance with its capital restoration plan, and
new activities without prior approval extends only
the efficacy of the plan. No growth in total assets is
to acquisition of “interest in any entity†or
permitted for an undercapitalized GSE, unless (1) the
engaging in any “new program or new business
Director has accepted the GSE’s capital restoration plan, (2)
activity.â€
an increase in assets is consistent with the plan, and (3) the
ratio of total capital to assets is increasing. An
undercapitalized entity shall not, directly or indirectly,
acquire any interest in any entity or initially offer any new
product (as such term is defined in section 1321(f)) or engage
in any new activity, service, undertaking, or offering without
the Director’s prior approval and determination that such
activities would be consistent with the capital restoration
plan. Actions that may be taken under current law with
regard to significantly undercapitalized GSEs may be taken
with regard to undercapitalized GSEs, if the Director finds it
necessary. (Sec. 142)
Supervisory Actions Applicable to
Of the supervisory actions that the regulator may take under
Identical provisions.
Significantly Undercapitalized
current law, one or more of the following must be taken: new
Regulated Entities
election of Directors, dismissal of Directors and/or
executives, and hiring of qualified executive officers, or other
actions.
Without prior written approval of the Director, executives of
a significantly undercapitalized regulated entity may not
receive bonuses or pay raises. (Sec. 143)
CRS-38
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Authority over Critically
The Director may appoint (or the Agency may serve as) a
Similar provisions, but does not include the
Undercapitalized Enterprises
receiver or conservator for several specified causes related to
mandatory receivership requirement.
(Liquidation Authority)
financial difficulty and/or violations of law or regulation.
Sets out powers of conservators or receivers, and procedures
for settlement of claims, disposal of assets, and other aspects
of liquidation, including judicial review. Authorizes the
Director to appoint a limited-life regulated entity to deal with
the affairs of an entity in default. Prohibits a receiver from
terminating, revoking, or annulling the charter of a regulated
entity.
Mandatory receivership: requires the Director to appoint the
Agency as a receiver if a regulated entity’s assets are (and
have been for 30 days) less than its obligations to its
creditors, or if the regulated entity has (for 30 days) not been
generally paying its debts as they come due. (Sec. 144)
CRS-39
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Subtitle D — Enforcement Actions
Cease-and-Desist Proceedings
The Director may issue cease-and-desist orders against a
Identical provisions.
regulated entity, a regulated entity-affiliated party, or the
Federal Home Loan Bank Finance Corporation (created by
Sec. 204) for unsafe or unsound practices (actual or
imminent), violations of laws and regulations, or for a
receiving a less-than-satisfactory rating for asset quality,
earnings, management, or liquidity, where the identified
deficiency is not corrected. This authority may not be used to
enforce compliance with housing goals. (Sec. 161)
Temporary Cease-and-Desist
If a violation (or threatened violation) or an unsafe or
Identical provisions.
Proceedings
unsound practice is likely to cause insolvency or significant
dissipation of assets or earnings of a regulated entity, or is
likely to weaken the condition of the regulated entity prior to
the completion of cease-and-desist proceedings, the Director
may issue a temporary order requiring the regulated entity to
cease and desist from any such violation or practice and to
take affirmative action to prevent or remedy such insolvency,
dissipation, condition, or prejudice pending completion of
such proceedings. The Director may apply to the U.S.
District Court for an injunction to enforce such temporary
order. (Sec. 162)
Prejudgment Attachment
Permits the courts to freeze assets, funds, or other property of
Identical provisions.
persons subject to civil or administrative actions for
violations. (Sec. 163)
CRS-40
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Enforcement and Jurisdiction
The Director may apply to the U.S. District Court for the
Identical provision.
District of Columbia, or the U.S. district court within the
jurisdiction of which the headquarters of the regulated entity
is located, for the enforcement of any effective and
outstanding notice or order issued, or request that the
Attorney General bring such an action. The court shall have
jurisdiction and power to require compliance with such notice
or order. (Sec. 164)
Civil Money Penalties
Establishes three tiers of fines: (1) $10,000 per day for
Identical provisions.
violations of orders, (2) $50,000 per day for recklessly
engaging in an unsafe or unsound practice, or a pattern of
misconduct or material breach of fiduciary duty with
financial gain to the entity or individual, and (3) up to a
maximum of $2 million per day for knowingly engaging in
violations, breaches of fiduciary duties, or unsafe or unsound
practices that cause substantial losses to a regulated entity.
(Sec. 165)
Removal and Prohibition Authority
After written notice and opportunity for a hearing, the
Identical provisions.
Director may suspend or remove regulated entity-affiliated
parties who have (1) violated a law, a cease-and-desist, or
other written order, (2) engaged in an unsafe or unsound
practice, or (3) breached fiduciary duty, such that (1) the
regulated entity is likely to suffer loss (or the enterprise-
affiliated party receive financial gain), and (2) the unsafe or
unsound practice involves personal dishonesty or
demonstrates willful and continuing disregard for the safety
and soundness of the regulated entity. Also provides for
industry-wide suspensions under certain circumstances.
Provides for judicial review of such orders or suspensions.
(Sec. 166)
CRS-41
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Criminal Penalty
Anyone who participates, directly or indirectly, in the affairs
Identical provision.
of a regulated entity while under suspension or order of
removal shall be liable for a fine of up to $1 million, or five
years’ imprisonment. (Sec. 167)
Subpoena Authority
Authorizes the Director to issue subpoenas. (Sec. 168)
Identical provision.
Subtitle E — General Provisions
Enterprise Boards of Directors
Eliminates the requirement that five Directors on the boards
Identical provision.
of Fannie Mae and Freddie Mac be appointed by the
President. Reduces the size of enterprise boards from 18 to
between 7 and 15. (Sec. 181)
Report on Enterprise Portfolios
The Director shall report to Congress, within 12 months of
Identical provision.
enactment, on the portfolio holdings of the enterprises, the
risk implications for the enterprises of such holdings and the
consequent risk management undertaken by the enterprises
(including the use of derivatives for hedging purposes),
whether portfolio holdings serve safety and soundness
purposes, whether portfolio holdings fulfill the mission of the
enterprises, and the potential systemic risk implications for
the enterprises, the housing and capital markets, and the
financial system of portfolio holdings, and whether such
holdings should be limited or reduced over time. (Sec. 182)
CRS-42
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Study of Alternative Secondary Market
The Director, in consultation with the Federal Reserve, the
Systems
Treasury, and HUD, shall conduct a study of the effects on
financial and housing finance markets of alternatives to the
current secondary market system for housing finance, taking
into consideration changes in the structure of financial and
housing finance markets and institutions since the creation of
the enterprises. This study is to be completed within 12
months of the effective date of this legislation. (Sec. 184)
Title II — Federal Home Loan Banks
Directors, Number
Each FHLB will be managed by a Board of 13 Directors, or
Identical provisions.
other number as the Director of FHFA determines. (Sec.
202)
Directors, Citizenship
Board Directors must be U.S. citizens. (Sec. 202)
Identical provisions.
Directors, Members
Majority of Directors of each FHLB must be officers of
Identical provisions.
member banks of that FHLB. (Sec. 202)
Member Directors shall be elected by the members. Election
does not include independent directors. (Sec. 202)
All Directors shall be elected by the members.
(Sec. 202)
Directors, Independent
At least 2/5 of each Bank’s Directors must be independent.
At least 1/3 of each Bank’s Directors must be
(Sec. 202)
independent. (Sec. 202)
Independent Directors shall be appointed by the Director of
No distinction between election of member
the FHFA. (Sec. 202)
Directors above and election of Independent
Directors
Independent Directors will residents of the District of the
Bank. (Sec. 202)
Identical provisions.
CRS-43
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Directors, Independent, Public Interest
At least two of the independent Directors for each Bank shall
Identical provisions.
be chosen from consumer/community organizations with
more than a two year history. (Sec. 202)
Directors, Independent, Other
Independent Directors who are not public interest Directors
Identical provisions.
shall have financial expertise. (Sec. 202)
Directors, Independent, Conflicts of
An Independent Director may not serve as an officer of a
Identical provisions.
Interest
FHLB or member bank during Directorship. (Sec. 202)
Directors, Terms
Terms increased from three to four years. Terms will be
Identical with technical changes.
staggered so that 1/4 are completing each year rather than
1/3. The change in term length does not apply to current
Directors. (Sec. 202)
Expiration of Independent Director
An appointive Director (Independent Director) may continue
Directors are elected, not appointed. Vacancies are
Terms
to serve until a successor is appointed. (Sec. 202)
filled by a vote of a majority of remaining board
members.
FHFA Oversight
The FHFA replaces the Finance Board. (Sec. 203)
Identical provisions.
Joint Activities of Banks
FHLBs may jointly provide bank services or require the
Identical provisions.
Office of Finance to provide bank services if the FHLBs may
perform the services individually. (Sec. 204)
Information Sharing
A FHLB may have access to information needed to determine
Identical provisions.
extent of its joint and several liability. Information sharing
pursuant to liability does not waive any privilege. (Sec. 205)
FHLB Reorganization and Voluntary
FHLBs may merge with other FHLBs with the approval of
Identical provisions.
Merger
the FHFA Director. (Sec. 206)
CRS-44
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Sec Disclosures
FHLBs are exempt from some SEC reporting regulations,
Identical provisions.
including ownership of capital stock in the FHLB, tender
offers related to FHLB capital stock, and reporting related
party transactions in the FHLB system.
Shares of FHLB capital stock are defined as “exempted
securities†for the purposes of defining a government
securities broker or a government securities dealer. (Sec. 207)
Community Financial Institution
Raises the Total Asset Requirement from $500 million to $1
Identical provisions.
Members
billion. (Sec. 208)
Study on Affordable Housing
The Comptroller of the Currency will conduct a study of the
Identical provisions.
FHLB affordable housing programs and submit the report
within one year.
Effective Date
Six months from enactment. (Sec. 211)
One year from enactment.
Title III — Transition Provisions
Abolishment of OFHEO
Sets the abolishment of OFHEO six months after enactment.
Identical provisions.
Provides for continuity of employee status, use of property,
and agency services. Suits and other actions in progress
against OFHEO will be transferred to the new agency.
(Sec. 301)
Continuation of Regulations and Orders
All regulations, orders, resolutions, and determinations made
Identical provisions.
by OFHEO or a court will remain in force, and become
enforceable by the new agency. (Sec. 302)
Transfer of Employees from OFHEO
Governs the transfer of OFHEO employees to FHFA
Identical provisions.
employment and provides for continuity in benefit programs.
(Sec. 303)
CRS-45
Provision
H.R. 1427 (110th Congress)
H.R. 1461 (109th Congress)
Abolishment of the Federal Housing
Provides for the transition from FHFB to FHFA with
Identical provisions.
Finance Board
provisions similar to Sections 301-303. (Secs. 321-324)
Termination of Enterprise-Related
Directs the Secretary of HUD to determine, within three
Identical provisions.
Functions at HUD
months of enactment, which employees to transfer to the
FHFA to maintain oversight of the enterprises. Six months
from enactment, all such oversight functions are to be
transferred to the new agency. (Sec. 341)
Provides for continuity of employee status, regulations, use
of property, and agency services. Provides for transfer from
HUD of related appropriations, property, and facilities.
(Secs. 342-344)
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