Summary: H.R.6094 — 102nd Congress (1991-1992)All Information (Except Text)

Bill summaries are authored by CRS.

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Passed House amended (10/03/1992)

Federal Housing Enterprises Financial Safety and Soundness Act of 1992 - Sets forth congressional findings and definitions.

Declares that this Act and the amendments it makes may not be construed: (1) as obligating the Federal Government, either directly or indirectly, to provide any funds to the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), or the Federal Home Loan Banks, or to honor, reimburse, or otherwise guarantee any of their obligations or liabilities; or (2) as implying that any such enterprise or Bank, or any obligations or securities of such an enterprise or Bank, are backed by the full faith and credit of the United States.

Title I: Supervision and Regulation of Enterprises - Subtitle A: Financial Safety and Soundness Regulator - Establishes within the Department of Housing and Urban Development (HUD) the Office of Federal Housing Enterprise Oversight, managed by a presidentially appointed Director, who shall ensure that Fannie Mae and Freddie Mac (the enterprises) and their affiliates are adequately capitalized and operating safely.

Authorizes the Director to require financial reports from the enterprises in addition to quarterly and annual reports required under specified Acts.

Authorizes the Director to establish and collect from the enterprises annual assessments for the reasonable costs and expenses of the Office, including an initial assessment of $1.5 million to cover its start-up costs.

Establishes a Federal Housing Enterprises Oversight Fund for the deposit of such assessments.

Requires the Director to conduct annual on-site examinations of each enterprise to determine its condition. Authorizes other examinations as necessary. Permits contracting out to specified Federal offices or instrumentalities for examiners.

Requires the Director to prohibit the enterprises from paying any officer compensation that is not reasonable and comparable with compensation in other similar businesses involving similar duties, but prohibits the Director from prescribing or setting a specific level or range of compensation.

Permits the Director to contract with nationally recognized statistical rating organizations to conduct enterprise reviews.

Requires each enterprise to establish a minority outreach program to ensure inclusion in its contracts of minorities and women and businesses owned by them.

Requires annual reports by the Director to specified congressional committees.

Requires immediate public disclosure of all final orders and agreements, except in certain circumstances.

Prohibits the Director and any former officer or employee of the Office, who was compensated at certain levels higher than GS-15 while employed by the Office, from accepting compensation from any enterprise during the two years following separation from the Office.

Requires General Accounting Office audits of the Office.

Subtitle B: Authority of Secretary - Grants the Secretary of HUD, except for specified authority of the Director of the Office, general regulatory power over each enterprise. Requires the Secretary to require each enterprise to obtain the Secretary's approval for any new program before implementing it. Sets forth approval standards.

Directs the Secretary to make mortgage information (except proprietary information) submitted by the enterprises available to the public.

Requires annual reports by the Secretary to specified congressional committees, including an annual housing report aggregating and analyzing certain data.

Directs the Secretary, by regulation, to impose on the enterprises specified fair housing requirements and prohibitions.

Prohibits the public disclosure of proprietary information.

Requires the Secretary to establish specified housing goals for each enterprise, including goals for purchase of mortgages on housing for low- and moderate-income families (adjustable annually to meet unaddressed needs of such families for affordable housing), and on housing located in underserved areas (both urban and rural). Sets forth factors to be applied in establishing such goals.

Requires the Secretary to monitor and enforce compliance with such goals, establishing guidelines, filing goal failure notices, and requiring (of noncompliant enterprises) submission of housing plans. Prescribes deadlines for approval or disapproval of such housing plans.

Authorizes the Secretary to issue cease-and-desist orders, subject to administrative hearings. Provides for judicial review of such orders by the U.S. Court of Appeals for the District of Columbia Circuit. Sets forth civil money penalties for noncompliance with housing plan requirements, ranging from $10,000 to $25,000 for each day of failure.

Requires immediate public disclosure of final orders and agreements, except in certain circumstances.

Requires the Secretary to issue final regulations implementing this subtitle by a certain deadline.

Subtitle C: Miscellaneous Provisions - Amends Federal law to make certain amendments conforming to this title.

Amends the Department of Housing and Urban Development Act to prohibit the Secretary from merging or consolidating the Office of Federal Housing Enterprise Oversight, or any of its functions or responsibilities, with any function or program the Secretary administers.

Requires each of the enterprises to review and report to the Secretary and specified congressional committees on its underwriting guidelines, examining: (1) the extent to which they prevent or inhibit the purchase or securitization of mortgages for housing located in mixed-use, urban center, and predominantly minority neighborhoods and for housing for low- and moderate-income families; (2) the standards employed by private mortgage insurers and the extent to which they inhibit such purchases or securitizations; and (3) the implications of implementing underwriting standards that establish a downpayment requirement for mortgagors of five percent or less, allow the use of cash on hand as a downpayment source, and approve borrowers with a credit history of delinquencies if the borrower can demonstrate a satisfactory credit history for at least the 12 months ending on the date of the mortgage application.

Directs the Comptroller General, the Secretary of HUD, the Secretary of the Treasury, and the Director of the Congressional Budget Office each to study and report to specified congressional committees on the desirability and feasibility of repealing the Federal charters of Fannie Mae and Freddie Mac, eliminating any Federal sponsorship of them, and allowing them to continue to operate as fully private entities. Requires each study to examine the effects of privatization on specified requirements, markets, and other factors.

Title II: Requires Capital Levels for Enterprises and Special Enforcement Powers - Requires the Director to establish by regulation a risk-based capital test for the enterprises. Requires such test, when applied to an enterprise, to determine the amount of regulatory capital sufficient for the enterprise to maintain positive capital during a ten-year period ("stress period") in which specified circumstances occur with respect to credit risk, interest rate risk, and new enterprise business.

Requires the minimum capital level for each enterprise to be the sum of: (1) 2.5 percent of its aggregate on-balance sheet assets; (2) 0.45 percent of the unpaid principal balance of outstanding mortgage-backed securities and substantially equivalent instruments issued or guaranteed by it that are not included in (1); and (3) 0.45 percent of other off-balance sheet obligations not included in (2) (excluding certain commitments), adjusted to reflect differences in the credit risk of such obligations in relation to the instruments included in (2).

Requires the critical capital level for each enterprise to be the sum of: (1) 1.25 percent of the aggregate on-balance sheet assets of the enterprise; (2) 0.25 percent of the unpaid principal balance of outstanding mortgage-backed securities and substantially equivalent instruments issued or guaranteed by it that are not included in (1); and (3) 0.25 percent of other off-balance sheet obligations not included in (2) (excluding certain commitments), adjusted to reflect differences in the credit risk of such obligations in relation to the instruments included in (2).

Requires the Director to classify the enterprises as adequately capitalized (maintaining total capital equal to or exceeding the established risk-based capital level, and core capital equal to or exceeding the established minimum capital level), undercapitalized, significantly undercapitalized, or critically undercapitalized. Authorizes the Director to lower an enterprise's capital classification upon determining that the enterprise is engaging in unapproved conduct that could result in a rapid depletion of core capital or that the value of property subject to mortgages held or securitized by the enterprise has decreased significantly. Requires the Director to determine capital classifications quarterly.

Sets forth the contents of capital restoration plans. Subjects the Director's actions to judicial review. Requires the Director to conduct an annual financial condition examination of each enterprise.

Requires undercapitalized and significantly undercapitalized enterprises to submit capital restoration plans to the Director and, after approval, carry them out. Prohibits such enterprises from making any capital distribution that would result in a lower classification. Authorizes the Director, in the event an enterprise fails to submit a substantially compliant plan or make reasonable good-faith efforts to comply with an approved plan, to: (1) reclassify an undercapitalized enterprise as significantly undercapitalized, or a significantly undercapitalized enterprise as critically undercapitalized; and (2), with respect to significantly undercapitalized enterprises, limit increases in obligations, limit or prohibit asset growth, restrict certain activities, require new capital, and (in certain circumstances) appoint a conservator.

Requires the Director to appoint a conservator for a critically undercapitalized enterprise, unless to do so would have serious adverse effects on economic conditions of national financial markets or on the financial stability of the housing finance market, and the public interest would be better served by some other enforcement action.

Requires written notification of an enterprise before any proposed discretionary enforcement action may be taken. Grants such an enterprise a 30-day period in which to respond to such a notice, although this response period may be lengthened or shortened.

Provides a procedure for the appointment of a conservator, judicial review of such appointment, and termination of a conservatorship. Specifies the powers of a conservator, and provides for errors or omissions liability protection.

Specifies the general contents of a capital restoration plan, requiring restoration of an enterprise's core capital to at least its minimum capital level and its total capital to at least its risk-based capital level.

Provides for judicial review of certain classifications or supervisory enforcement actions by the U.S. Court of Appeals for the District of Columbia Circuit.

Title III: Enforcement Actions - Sets forth general procedures for: (1) issuing temporary and permanent cease-and-desist orders against enterprises; (2) hearings; (3) judicial review; (4) civil money penalties; (5) notice after separation from service; (7) private rights of action; and (8) public disclosure of final orders and agreements.

Title IV: Amendments to Charter Acts of Enterprises - Makes conforming amendments to the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act.

Requires establishment of an Affordable Housing Advisory Council in each enterprise.

Title V: Regulation of Federal Home Loan Bank System - Amends the Federal Home Loan Bank Act to declare that: (1) the primary duty of the Federal Housing Finance Board is to ensure that the Federal Home Loan Banks operate in a financially safe and sound manner; (2) all Board directors shall serve on a full-time basis beginning January 1, 1994; and (3) the aggregate amount of advances permissible by the Federal Home Loan Bank System to members that are not qualified thrift lenders shall not exceed 30 percent of the System's total advances.

Declares that an otherwise qualified advance to a State housing finance agency to facilitate mortgage lending that benefits individuals and families meeting certain income requirements (with respect to mortgage revenue bonds and qualified residential rental project exempt facility bonds) need not be collateralized by a mortgage insured under the National Housing Act or otherwise, if any real estate collateral for such loan comprises single family or multifamily residential mortgages.

Requires the Federal Housing Finance Board, the Comptroller General of the United States, the Director of the Congressional Budget Office, and the Secretary to study and report to the Congress on specified aspects of the Federal Home Loan Bank System. Requires the Secretary of the Treasury and certain Federal agencies to submit opinions to the Congress to the extent that their views differ from those of the study participants.

Requires the Federal Home Loan Banks to set up a Study Committee to study and report to specified congressional committees, the Federal Housing Finance Board, and the presidents of the Federal Home Loan Banks on the same topics covered by the above study, as well as the costs and benefits of consolidating the Federal Home Loan Bank System. Requires the Board of Directors of each Federal Home Loan Bank to report to such congressional committees their evaluation of the costs and benefits of such consolidation.