Text: S.1592 — 111th Congress (2009-2010)All Information (Except Text)

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Introduced in Senate (08/06/2009)


111th CONGRESS
1st Session
S. 1592


To establish a Federal Board of Certification to enhance the transparency, credibility, and stability of financial markets, and for other purposes.


IN THE SENATE OF THE UNITED STATES

August 6, 2009

Ms. Snowe (for herself and Mr. Cardin) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs


A BILL

To establish a Federal Board of Certification to enhance the transparency, credibility, and stability of financial markets, and for other purposes.

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

SECTION 1. Short title.

This Act may be cited as the “Federal Board of Certification Act of 2009”.

SEC. 2. Purpose.

It is the purpose of this Act to establish a Federal Board of Certification, which shall certify that the mortgages within a security instrument meet the underlying standards they claim to meet with regards to mortgage characteristics including but not limited to: documentation, loan to value ratios, debt service to income ratios, and borrower credit standards and geographic concentration. The purpose of this certification process is to increase the transparency, predictability and reliability of securitized mortgage products.

SEC. 3. Definitions.

As used in this Act—

(1) the term “Board” means the Federal Board of Certification established under this Act;

(2) the term “mortgage security” means an investment instrument that represents ownership of an undivided interest in a group of mortgages;

(3) the term “insured depository institution” has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1803); and

(4) the term “Federal financial institutions regulatory agency” has the same meaning as in section 1003 of the Federal Financial Institutions Examination Council Act of 1978 (12 U.S.C. 3302).

SEC. 4. Voluntary participation.

Market participants, including firms that package mortgage loans into mortgage securities, may elect to have their mortgage securities evaluated by the Board.

SEC. 5. Standards.

The Board is authorized to promulgate regulations establishing enumerated security standards which the Board shall use to certify mortgage securities. The Board shall promulgate standards which shall certify that the mortgages within a security instrument meet the underlying standards they claim to meet with regards to documentation, loan to value ratios, debt service to income rations and borrower credit standards. The standards should protect settled investor expectations, and increase the transparency, predictability and reliability of securitized mortgage products.

SEC. 6. Composition.

(a) Establishment; composition.—There is established the Federal Board of Certification, which shall consist of—

(1) the Comptroller of the Currency;

(2) the Secretary of Housing and Urban Development;

(3) a Governor of the Board of Governors of the Federal Reserve System designated by the Chairman of the Board;

(4) the Undersecretary of the Treasury for Domestic Finance; and

(5) the Chairman of the Securities and Exchange Commission.

(b) Chairperson.—The members of the Board shall select the first chairperson of the Board. Thereafter the position of chairperson shall rotate among the members of the Board.

(c) Term of office.—The term of each chairperson of the Board shall be 2 years.

(d) Designation of officers and employees.—The members of the Board may, from time to time, designate other officers or employees of their respective agencies to carry out their duties on the Board.

(e) Compensation and expenses.—Each member of the Board shall serve without additional compensation, but shall be entitled to reasonable expenses incurred in carrying out official duties as such a member.

SEC. 7. Expenses.

The costs and expenses of the Board, including the salaries of its employees, shall be paid for by excise fees collected from applicants for security certification from the Board, according to fee scales set by the Board.

SEC. 8. Board responsibilities.

(a) Establishment of principles and standards.—The Board shall establish, by rule, uniform principles and standards and report forms for the regular examination of mortgage securities.

(b) Development of uniform reporting system.—The Board shall develop uniform reporting systems for use by the Board in ascertaining mortgage security risk. The Board shall assess, and publicly publish, how it evaluates and certifies the composition of mortgage securities.

(c) Affect on Federal regulatory agency research and development of new financial institutions supervisory agencies.—Nothing in this Act shall be construed to limit or discourage Federal regulatory agency research and development of new financial institutions supervisory methods and tools, nor to preclude the field testing of any innovation devised by any Federal regulatory agency.

(d) Annual report.—Not later than April 1 of each year, the Board shall prepare and submit to Congress an annual report covering its activities during the preceding year.

(e) Reporting schedule.—The Board shall determine whether it wants to evaluate mortgage securities at issuance, on a regular basis, or upon request.

SEC. 9. Board authority.

(a) Authority of Chairperson.—The chairperson of the Board is authorized to carry out and to delegate the authority to carry out the internal administration of the Board, including the appointment and supervision of employees and the distribution of business among members, employees, and administrative units.

(b) Use of personnel, services, and facilities of Federal financial institutions regulatory agencies, and Federal Reserve banks.—In addition to any other authority conferred upon it by this Act, in carrying out its functions under this Act, the Board may utilize, with their consent and to the extent practical, the personnel, services, and facilities of the Federal financial institutions regulatory agencies, and Federal Reserve banks, with or without reimbursement therefor.

(c) Compensation, authority, and duties of officers and employees; experts and consultants.—The Board may—

(1) subject to the provisions of title 5, United States Code, relating to the competitive service, classification, and General Schedule pay rates, appoint and fix the compensation of such officers and employees as are necessary to carry out the provisions of this Act, and to prescribe the authority and duties of such officers and employees; and

(2) obtain the services of such experts and consultants as are necessary to carry out this Act.

SEC. 10. Board access to information.

For the purpose of carrying out this Act, the Board shall have access to all books, accounts, records, reports, files, memorandums, papers, things, and property belonging to or in use by Federal financial institutions regulatory agencies, including reports of examination of financial institutions, their holding companies, or mortgage lending entities from whatever source, together with work papers and correspondence files related to such reports, whether or not a part of the report, and all without any deletions.

SEC. 11. Regulatory review.

(a) In general.—Not less frequently than once every 10 years, the Board shall conduct a review of all regulations prescribed by the Board, in order to identify outdated or otherwise unnecessary regulatory requirements imposed on insured depository institutions.

(b) Process.—In conducting the review under subsection (a), the Board shall—

(1) categorize the regulations described in subsection (a) by type; and

(2) at regular intervals, provide notice and solicit public comment on a particular category or categories of regulations, requesting commentators to identify areas of the regulations that are outdated, unnecessary, or unduly burdensome.

(c) Complete review.—The Board shall ensure that the notice and comment period described in subsection (b)(2) is conducted with respect to all regulations described in subsection (a), not less frequently than once every 10 years.

(d) Regulatory response.—The Board shall—

(1) publish in the Federal Register a summary of the comments received under this section, identifying significant issues raised and providing comment on such issues; and

(2) eliminate unnecessary regulations to the extent that such action is appropriate.

(e) Report to Congress.—Not later than 30 days after carrying out subsection (d)(1) of this section, the Board shall submit to the Congress a report, which shall include a summary of any significant issues raised by public comments received by the Board under this section and the relative merits of such issues.

SEC. 12. Liability.

Any publication, transmission, or webpage containing an advertisement for or invitation to buy a mortgage security shall include the following notice, in conspicuous type: “Certification by the Federal Board of Certification can in no way be considered a guarantee of the mortgage security. Certification is merely a judgment by the Federal Board of Certification of the degree of risk offered by the security in question. The Federal Board of Certification is not liable for any actions taken in reliance on such judgment of risk.”.