Reforming the Regulation of Government-Sponsored Enterprises in the 110th Congress

Prepared for Members and Committees of Congress

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 mid-2008, troubles in
the mortgage market threatened the viability of the two GSEs; Congress responded by authorizing
the Treasury to provide emergency funding to either firm.
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 thth
legislative proposals considered in the 108 and 109 Congresses addressed GSE regulatory
reform, but none was enacted. However, the adequacy of GSE regulation remained 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. They will now be brought under a single regulatory umbrella with
Fannie and Freddie.
The Housing and Economic Recovery Act of 2008 (H.R. 3221, P.L. 110-289), enacted on July 30,
2008, replaces OFHEO with an independent agency to oversee the GSEs, with enhanced safety
and soundness, disclosure, and enforcement tools. The new law raises the conforming loan limit
(which sets a ceiling on the size of mortgages that the GSEs can buy) in high cost areas to 150%
of the national limit. P.L. 110-289 also establishes a fund, to be financed by Fannie and Freddie,
to support low-income housing programs. Finally, the law authorizes the Treasury to buy GSE
securities—debt or equity—in any amount, if necessary to provide stability to financial markets,
prevent disruptions in the availability of mortgage credit, or protect the taxpayer. This emergency
rescue authority expires on December 31, 2009.
This report provides background on the GSE reform issue and summarizes the provisions of
House- and Senate-passed versions of H.R. 3221. It will no longer be updated.

Introduc tion ..................................................................................................................................... 1
The Need for Reform......................................................................................................................3
Recent Developments......................................................................................................................3
The Reform Legislation...................................................................................................................4
An Independent Regulator with Enhanced Authority...............................................................5
Affordable Housing Fund..........................................................................................................5
Portfolio Limits.........................................................................................................................6
Conforming Loan Limits...........................................................................................................7
Table 1. Fannie Mae and Freddie Mac: Selected Combined Financial Statistics, 1992 and
2006 .............................................................................................................................................. 2
Table 2. Provisions of House- and Senate-Approved Versions of H.R. 3221 in the 110th
Congress ....................................................................................................................... ................ 9
Author Contact Information..........................................................................................................32
Acknowledgments ......................................................................................................................... 32

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 1
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 exchange for government sponsorship, their statutory charters restrict Fannie and Freddie to
buying, holding, guaranteeing, packaging, and selling mortgages that other firms originate and
require them 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-maximi zi ng.
Congress has long 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. OFHEO 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 2006. 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 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 2006. As a
percentage of all mortgages originated, however, the GSEs’ share fell, an indication that other 2
financial institutions are active in the mortgage market.

1 The most significant advantage comes from animplicit 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.
2 Fannie and Freddies 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 grew faster than
the conventional or conforming mortgage sector where they are dominant However, because of the many factors in
play, a single year’s figure does not necessarily indicate a long-term trend.

Table 1. Fannie Mae and Freddie Mac: Selected Combined Financial Statistics,
1992 and 2006
(all figures except percentages in billions of dollars)
% Growth,
1992 2006 1992-2006
Mortgages Purchased 442.7 909.3 105.4
Purchases as Percent of All Mortgages Originated 49.5 30.5
Mortgage-Backed Securities Issued 373.2 841.7 125.5
Percent of all MBS Issues 35.8 41.0
Mortgage-Backed Securities Outstanding 832.0 2,900.3 248.6
Percent of all MBS Outstanding 63.4 50.6
Retained Mortgage Portfolio 189.9 1,426.4 651.1
Financial Derivatives (Notional Amount Outstanding) 71.7 1,543.4 2,052.6
Sources: OFHEO Report to Congress, 2006, and Inside Mortgage Finance Publications, 2006 Mortgage Market Statistical
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 2006 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 remained relatively unchanged. Again, this suggests
rapid growth in all segments of the mortgage securitization market, including those where the
GSEs are not the major players.
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 that growth
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 market share
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 651% 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 in their own investment portfolios. 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
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.

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 thth3
priority in the 110 Congress (as it was in the 109) even if that growth had been managed
smoothly. But it was not: serious problems with financial accounting came to light at Freddie Mac 4
in 2003, then at Fannie Mae in 2004. Both GSEs had to restate their earnings for several years,
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.

In July 2008, the price of Fannie Mae’s and Freddie Mac’s shares plunged by more than 60%,
leading to new and more acute concerns about the future of the companies. The immediate fear
was that credit market participants would refuse to lend money to Fannie or Freddie. Since the
GSEs’ portfolios are financed by hundreds of billions of dollars in short-term debt, which must be
constantly refinanced or rolled over, neither firm could survive long without access to the credit
markets. This is what happened to the investment bank Bear Stearns in March 2008: essentially a
“non-bank run.” James B. Lockhart, the director of OFHEO, issued statements reaffirming that
the two companies were adequately capitalized. Although this was true in a regulatory sense, in
economic terms, both firms were extremely vulnerable to a loss of market confidence. Treasury
Secretary Henry M. Paulson Jr. asked Congress to pass legislation that would give the Treasury 5
broad authority to lend money to or invest in stock of Fannie Mae and Freddie Mac. Congress

3 For a summary of 109th Congress GSE legislation, see CRS Report RL32795, Government-Sponsored Enterprises
(GSEs): Reform Legislation in the 109th Congress, by Mark Jickling.
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,
by Mark Jickling, and CRS Report RS21567, Accounting and Management Problems at Freddie Mac, by Mark
5 See CRS Report RL34661, Fannie Mae’s and Freddie Mac’s Financial Problems, by N. Eric Weiss, for more
information on these developments.

responded swiftly: Section 1117 of the Housing and Economic Recovery Act of 2008 (H.R. 3221,
P.L. 110-289), enacted on July 30, 2008, authorizes the Treasury to purchase any amount of
Fannie or Freddie securities—debt or equity—if necessary to provide stability to financial
markets, prevent disruptions in the availability of mortgage credit, or protect the taxpayer. The
implicit guarantee has become nearly explicit.

H.R. 3221, as amended and approved by the House, includes provisions from H.R. 1427, which
was introduced by Chairman Frank and passed by the House on May 22, 2007. The bill took a
comprehensive approach to the reform of GSE regulation. The major changes between the House
version of H.R. 3221 and H.R. 1427 are (1) that H.R. 3221 would make permanent the higher
conforming loan limits in high-cost housing areas enacted by the Economic Stimulus Act of 2008, 6
and H.R. 3221 explicitly states that the GSEs may not obtain bankruptcy protection. The Senate
version of H.R. 3221 is generally similar to the House version—each would create a new agency
with enhanced regulatory authority.
Key differences between the House and Senate versions are as follows.
• The House version would make the new regulator a member of the Federal
Financial Institutions Examination Council (FFIEC) along with the Fed, Federal
Deposit Insurance Corporation (FDIC), National Credit Union Administration
(NCUA), Office of the Comptroller of the Currency (OCC), and Office of Thrift
Supervision (OTS). The Senate bill would not make the new regulator a member
• The House version increases the conforming loan limit in high cost areas to
175% of the national median house price while the Senate version would increase
the limit in high cost areas to 150%.
• The House version would create the new regulator six months after enactment;
the Senate version would create the new regulator immediately upon enactment.
Other key differences in non-GSE portions of H.R. 3221 include the following.
• The House version continues to permit seller-assisted downpayments on loans
guaranteed by the Federal Housing Administration (FHA) and to allow FHA to
implement risk-based pricing; the Senate version would eliminate seller 7
assistance and would not authorize risk-based pricing.

6 H.R. 3221, then called the New Direction for Energy Independence, National Security, and Consumer Protection Act,
was introduced in the House by Representative Nancy Pelosi on July 30, 2007. It passed the House on August 4, 2007.
The Senate amended and passed H.R. 3221 on April 10, 2008. The House amended and passed H.R. 3221 on May 8,
2008. The managers amendment to H.R. 3221 included other housing provisions in addition to those originally in H.R.
1427. On July 11, 2008, the Senate approved a bipartisan manager’s amendment in the nature of a substitute and sent
the bill to the House. The Economic Stimulus Act of 2008 became P.L. 110-185, 122 Stat. 163 et seq.
7 See CRS Report RS22662, H.R. 1852 and Revisiting the FHA Premium Pricing Structure: Proposed Legislation in
the 110th Congress, by Darryl E. Getter, and CRS Report RL33879, Housing Issues in the 110th Congress, by Libby
Perl et al., for more information.

• The Senate version would authorize $3.9 billion in Community Development
Block Grants (CDBG) to encourage local governments to buy and rehabilitate 8
foreclosed homes; the House bill does not have this provision. The
Administration has said it might veto a bill with this provision.
• The House version included some $11 billion in housing-related tax reductions;
these tax reductions are fully offset in the bill. The Senate version has $14.5 9
billion in tax reductions; $12.1 billion of the reductions is offset in the bill.
Both versions of H.R. 3221 propose a restructuring of GSE regulation. They 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 bills refer 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.)
Section 340 of the House version of H.R. 3221 would require Fannie and Freddie to contribute to
an affordable housing fund to support home ownership among very low- and extremely low-
income families, to increase investment in housing in low-income and economically distressed
areas, and to increase and preserve the supply of rental and owner-occupied housing for very low-
and extremely low-income families. Each enterprise would be required to contribute to the fund
to the fund 1.2 basis points (0.012%) annually 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 10
controversial sections of the bill. 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

8 For more details, see CRS Report RS22919, Community Development Block Grants: Legislative Proposals to Assist
Communities Affected by Home Foreclosures, by Eugene Boyd and Oscar R. Gonzales.
9 See CRS Report RL33879, Housing Issues in the 110th Congress, by Libby Perl et al.
10 See CRS Report RL34158, The New GSE Affordable Housing Funds: The Housing Trust Fund and the Capital
Magnet Fund, by N. Eric Weiss and Katie Jones.

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
These amendments are incorporated into H.R. 3221 (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. 3221, 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.
The Senate version also provides for such a fund, although the amount of funds to be contributed
and the allocation of funding are structured differently. The contributions would be divided
between affordable housing (65%) and a new community development Capital Magnet Fund
(35%). Initially, however, contributions would be used to provide a contingency fund for the FHA
mortgage relief program created elsewhere in the bill. After this is phased out 25% would
continue to go to a fund to hep to pay off bonds sold to finance the mortgage relief program.
The Senate version would require Fannie and Freddie to contribute 4.2 basis points (0.042%) of
the unpaid principal of mortgages purchased during a year. The House version would require
Fannie Mae and Freddie Mac to contribute 1.2 basis points (0.012%) of the annual average total
of mortgages retained in portfolio or sold in the secondary market, whether or not the mortgages
are pooled into an MBS, to the new GSE affordable housing fund. Based on 2007, the House
version would have raised $592 million and the Senate version would have raised $501 million
for the affordable housing funds. These provisions are in marked contrast to the Senate bill in the th

109 Congress, which did not provide for the creation of a fund.

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 11
consider ways to shrink the size of the GSEs’ asset portfolios. Supporters of portfolio limits
argue that reducing the size of the portfolios would prevent financial trouble at either Fannie or
Freddie from spilling over into the financial system at large.
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. The GSEs would have been allowed to
acquire mortgages and mortgage-backed securities only for purposes of securitization (with
certain limited exceptions). 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

11 See, e.g., testimony of Alan Greenspan, Chairman, Board of Governors of the Federal Reserve System, before the
House Committee on Financial Services, February 17, 2005.

them into mortgage-backed securities, and selling them to bond investors. This change would
have greatly reduced their portfolio earnings, currently one of the chief sources of their profits.
Proponents of portfolio limits have argued 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. Opponents argue that reducing the GSEs’ interest earnings would mean less support for
low- and moderate-income housing goals.
House legislation in the 109th Congress did not contain portfolio limits. This was one of the key
disagreements between House and Senate that prevented enactment of GSE reform.
Section 325 of the House version of H.R. 3221 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 formal determination
that such an action was consistent with the safe and sound operation of the enterprise. During
committee and floor consideration of H.R. 1427, two amendments were adopted that appear to
constrain the regulator’s authority to impose portfolio limits based on systemic risk concerns. In
the amended version, the regulator is directed to establish portfolio standards by taking into
consideration risks to the safety and soundness of Fannie and Freddie themselves, but not risks to
the financial system that might arise from the GSEs’ activities.
The Senate version of the bill takes a similar approach. The director of the new agency is
authorized to monitor the enterprises’ portfolios, and to ensure that the holdings are backed by
sufficient capital and consistent with the mission and the safe and sound operations of the th
enterprises. Thus, the sharp differences between House and Senate approaches in the 109
Congress appear to have been bridged.
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 was $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, the GSE reform bill passed by the House on May 22, 2007, would have raised the
limit permanently by up to 50% in high-cost housing areas, allowing the GSEs to expand into
markets now served by non-GSE institutions. In response to turmoil in the mortgage market,
however, the Economic Stimulus Act of 2008 (P.L. 110-185) enacted a temporary increase in the
conforming loan limit. For mortgages originated between July 1, 2007, and December 31, 2008,
the limit is capped at 175% of the statutory limit, or $729,750, in certain high-cost areas.
Section 333 of H.R. 3221 (House) would make the temporary measure in the Stimulus Act
permanent. It 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 175% of the national limit ($729,750). For more information on this proposal, see
CRS Report RS22172, The Conforming Loan Limit, by N. Eric Weiss and Mark Jickling.
The Senate-passed version also calls for a permanent increase in the conforming loan limits, but
only to 150% of the current ceiling of $417,000 ($625,500).
Table 2 below provides brief summaries of the provisions of the House and Senate approved
versions of H.R. 3221. Where there are significant differences between H.R. 3221 and H.R. 1427,
which passed the House in 2007, the provisions are set out in italics. Titles IV and VI and
Divisions B and C of the Senate bill, which do not deal with GSE reform, are not covered.

Table 2. Provisions of House- and Senate-Approved Versions of H.R. 3221 in the 110th Congress
Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Title Title III—Reform of Regulation of Enterprises and Federal Home Title I—Reform of Regulation of Enterprises
Loan Banks
Subtitle Subtitle A—Reform of Regulation of Enterprises and Federal Subtitle A—Improvement of Safety and Soundness
Home Loan Banks Supervision
Chapter Chapter 1—improvement of Safety and Soundness
Short Title Federal Housing Finance Reform Act of 2008 Federal Housing Finance Regulatory Reform Act of 2008
Federal Housing Finance Reform Act of 2007
Definitions “Regulated Entity” refers to Fannie Mae and Freddie Mac and affiliates, and Same definition of “regulated entity.”
each Federal Home Loan Bank. Definition of “entity-affiliated party” is identical to H.R. 3221‘s
“Regulated Entity-affiliated Party” means-(A) any director, officer, employee, definition of “regulated entity-affiliated party.”
or agent for, a regulated entity, or controlling shareholder of an enterprise; Also includes definitions of danger of default, very low income,
(B) any shareholder, affiliate, consultant, or joint venture partner of a conforming mortgage, extremely low income, and low income area.
iki/CRS-RL33940regulated entity, and any other person, as determined by the Director (by (Sec. 1128)

g/wregulation or on a case-by-case basis) that participates in the conduct of the affairs of a regulated entity, except that a shareholder of a regulated entity
s.orshall not be considered to have participated in the affairs of that regulated
leakentity solely by reason of being a member or customer of the regulated
://wikientity; (C) any independent contractor for a regulated entity (including any attorney, appraiser, or accountant), if—(i) the independent contractor
httpknowingly or recklessly participates in—(I) any violation of any law or
regulation; (II) any breach of fiduciary duty; or (III) any unsafe or unsound
practice; and (ii) such violation, breach, or practice caused, or is likely to
cause, more than a minimal financial loss to, or a significant adverse effect
on, the regulated entity; and (D) any not-for-profit corporation that receives
its principal funding, on an ongoing basis, from any regulated entity. (Sec.
Regulated Entity” refers to Fannie Mae and Freddie Mac and affiliates, and each
Federal Home Loan Bank.
“Regulated Entity-Affiliated Party” means (1) directors, 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

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
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. 302)
New Regulatory Agency Federal Housing Finance Agency (Sec. 311) Federal Housing Finance Agency (Sec. 1101)
Agency Status Independent federal agency. (Sec. 301) Identical provisions. (Sec. 1101)
Jurisdiction General supervisory and regulatory authority over Fannie Mae, Freddie Mac, General supervisory and regulatory authority over Fannie Mae, Freddie
and the Federal Home Loan Banks. (Sec. 311) Mac, the Federal Home Loan Banks, and the Finance Facility. (Sec.
Agency Officials A Director, appointed by the President, with advice and consent of the Similar, except that the third deputy director’s title will be “Deputy
Senate for a five-year term. Should the office be vacant, a new Director shall Director for Housing Mission and Goals.” (Sec. 1105)
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
iki/CRS-RL33940regulated entity and any person with a business relationship with any regulated entity. (Sec. 311)
s.orQualifications of Officials The Director and Deputies must be U.S. citizens, who have a demonstrated Identical provisions. (Sec. 1101)
leakunderstanding of financial management, with specialized knowledge and experience required for deputy Directors relevant to the offices they head.
://wiki(Sec. 301)
httpDuties and Authorities of the Director Principal duties are to oversee the operations of each regulated entity and to ensure that each entity: (1) operates in a safe and sound manner, and Similar provisions, with the additional duties to ensure that the activities of regulated entities are consistent with the public interest,
maintains adequate capital and internal controls; (2) fosters liquid, efficient, that the entities remain adequately capitalized.
competitive, and resilient national housing finance markets that minimize the Does not require consultation with the Attorney General in
cost of housing finance (including for housing for low- and moderate-income conservator or receivership proceedings. (Sec. 1102)

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. 312)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Prudential Management andThe Director shall establish standards for each regulated entity for (1) Similar provisions, except does not include specific reference to
Operations Standards internal controls and information systems, (2) internal audit systems, (3) subordinated debt. (Sec. 1107)
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. 312)
Failure to Meet Prudential If the Director finds that a regulated entity has failed to meet any prudential Identical provisions. (Sec. 1108)
Standards 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
iki/CRS-RL33940months prior to the date when it first failed to meet the standard. (Sec. 312)
g/wFederal Housing Enterprise Creates the Federal Housing Enterprise Board to advise the Director on Similar, except that the Board is called the Federal Housing Finance
s.orBoard overall strategies and policies. The Board is to have three members: the Oversight Board and it is to have four members (the chairman of the
leakSecretaries of the Treasury and Housing and Urban Development and the Securities and Exchange Commission (SEC) is added). (Sec. 1103)
Director, who chairs the Board. The Board meets at least once every three
://wikimonths and shall testify annually before Congress on the safety and
httpsoundness of the regulated entities, any material deficiencies in the conduct of the entities’ operations, the overall operational status of the entities, an
evaluation of how the entities are carrying out their missions, the
operations, resources and performance of the Agency, and other matters
the Board deems appropriate. (Sec. 312)
Annual Report of the The annual report of the Director is expanded to include an assessment of Similar provisions. (Sec. 1103)
Director 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.
Authority to Require Adds reports on “management, activities, or operations as the Director Similar authority to require regular financial reports. Establishes
Reports by Regulated considers appropriate” to regular reports the Director may require. penalties for regulated entities’ failure to report or the reporting of
Entities (Sec. 314) false or misleading information. (Sec. 1104)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Duty to Report Fraudulent Requires a regulated entity to report in a timely manner the discovery (or Similar provisions. (Sec. 1113)
Transactions suspicion of) any fraudulent loan or financial instrument the entity may have
purchased or sold. The Director is to require the entities to establish and
maintain procedures to discover such transactions. (Sec. 304)
Charitable Contributions The Director shall require each enterprise to submit an annual report on No comparable provision.
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. 305)
Assessments The Director shall establish and collect annual assessments from the Assessments collected from the enterprises shall not exceed the
regulated entities to provide for reasonable costs and expenses of the amounts sufficient to provide for the costs and expenses described in
Agency, including (1) costs of examinations, reviews, and credit assessments, subsection relating to the enterprises. Assessments collected from the
and (2) amounts in excess of actual expenses to maintain necessary working Federal Home Loan Banks shall not exceed the amounts sufficient to
iki/CRS-RL33940capital. Assessments may be increased to cover costs of enforcement activities or if an entity is inadequately capitalized. Salaries and other provide for the costs and expenses of regulating the Federal Home Loan Banks. (Sec. 1106)
g/wexpenses shall be paid from assessments, which shall not be construed to be
s.orgovernment funds or appropriated monies. The Agency shall provide OMB
leakwith financial plans and forecasts, prepare annual financial statements
(including an assertion of the effectiveness of internal accounting controls),
://wikiand be audited annually by the Government Accountability Office (GAO) at
httpthe Agency’s expense. (Sec. 316)
Examiners and The Director may hire examiners, accountants, specialists in technology or Similar provisions. (Sec. 1105)
Accountants—Special financial markets, and economists in accordance with rules governing the
Hiring Authority excepted service, notwithstanding any rules governing the competitive
service. (Sec. 317)
Inspector General No provision. Reference to Inspector General of Department of Housing There shall be within the Agency an Inspector General. (Sec, 1105)
and Urban Development. (Sec. 317)
Executive Compensation The prohibition (in current law) of executive compensation that is not Identical provisions. (Sec. 1113)
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. 318)
Ratings Agencies Director may contract with other than nationally recognized statistical No similar provision.
ratings agencies for to conduct reviews of regulated entities. (Sec. 319)
Regulations and Orders The Director is authorized to issue any regulations, guidelines, or orders Similar provisions (Sec. 1107)

that are necessary to carry out the authorizing statutes. (Sec. 321)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Inclusion of Women and Each regulated entity shall create or designate an Office of Minority and No comparable provision.
Minorities; Diversity Women Inclusion, to ensure the inclusion and utilization of minorities and
women in all levels of business activities, to the maximum extent possible.
(Sec. 320)
Risk-Based Capital The Director shall, by regulation, establish risk-based capital requirements Similar, but no specific mention of confidentiality. (Sec. 1110)
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. 323)
Minimum Capital The Director may by regulation establish minimum capital levels for The Director may by regulation or order establish minimum capital
Requirements regulated entities that are higher than the statutory levels. The Director levels for regulated entities that are higher than the statutory levels.
may, by order, increase minimum capital levels on a temporary basis if the (Sec. 1111)

regulated entity has violated prudential standards or if an unsafe or unsound
condition exists. The Director may, by order or regulation, establish
additional capital or reserve requirements with respect to any particular
iki/CRS-RL33940program or activity.
g/wThe Director shall, by regulation, set critical capital levels for the Federal
s.orHome Loan Banks.
leakThe Director shall periodically review the amount of core capital held by
the enterprises, and shall rescind any temporary minimum capital level
://wikiincrease if the conditions that warranted the increase no longer exist.
http(Sec. 324)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Review of, and Authority The Director shall, by regulation, establish standards by which the portfolio The Director shall, by regulation, establish criteria governing the
Over, Enterprise Assets holdings, or rate of growth of the portfolio holdings, of the enterprises will portfolio holdings of the enterprises, to ensure that the holdings are
and Liabilities (Portfolio be consistent with the mission and safe and sound operations. In developing backed by sufficient capital and consistent with the mission and the safe
Limits) standards, the Director shall consider (1) the size or growth of the and sound operations of the enterprises. In establishing such criteria,
mortgage market; (2) the need for the portfolio in maintaining liquidity or the Director shall consider the ability of the enterprises to provide a
stability of the secondary mortgage market; (3) the need for an inventory of liquid secondary market through securitization activities, the portfolio
mortgages in connection with securitizations; (4) the need for the portfolio holdings in relation to the overall mortgage market.
to directly support the affordable housing mission of the enterprises; (5) the The Director may temporarily adjust these regulations if necessary to
liquidity needs of the enterprises; (6) any potential risks posed to the mitigate market disruptions in the housing finance system. (Sec. 1109)
enterprises by the nature of the portfolio holdings; and (7) any additional
factors that the Director determines to be necessary to carry out the
purpose under the first sentence of this subsection to establish standards
for assessing whether the portfolio holdings are consistent with the mission
and safe and sound operations of the enterprises. The Director may, by
order, make temporary adjustments to the standards during market stress
or disruption. Standards shall be issued within 180 days of the effective date
of this legislation. (Sec. 325)
iki/CRS-RL33940Authority to Require The Director shall monitor the portfolio of each enterprise. Pursuant to Similar provisions. (Sec. 1109)
g/wDisposition or Acquisition subsection (a) and notwithstanding the capital classifications of the
s.orof Assets enterprises, the Director may, by order, require an enterprise, under such terms and conditions as the Director determines to be appropriate, to
leakdispose of or acquire any asset. (Sec. 325)
://wikiCorporate Governance of Requires a majority of the board to be independent directors, as defined by Similar provision.
httpEnterprises 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. 326)
Compensation by Compensation of Directors, executives, and employees shall not exceed Similar provisions. (Sec. 1113)
Enterprises 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. 318)
Golden Parachutes No provision Under certain circumstances, the Director is authorized to prohibit
indemnification or golden parachute payments to entity-affiliated
parties. (Sec. 1114)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Code of Conduct and An enterprise shall establish and enforce a written code of conduct designedNo provision.
Ethics 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.
Responsibilities of the The board of an enterprise shall oversee (1) corporate strategy, risk policy, No provision.
Board of Directors 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. 326)
Prohibition of Extensions An enterprise may not (directly, indirectly, or through a subsidiary) make No provision.
of Credit any personal loan to a board member or executive officer. (Sec. 326)
Certification of Disclosures The CEO and CFO of an enterprise shall review annual and quarterly No provision.
reports and shall make the certifications required by Section 302 of the
Sarbanes-Oxley Act. (Sec. 326)
iki/CRS-RL33940Change of Audit Partner Requires that the lead partner of the external auditor of an enterprise be No provision.
g/wchanged every five years. (Sec. 326)
leakCompliance Program Each enterprise shall establish a compliance program reasonably designed to No provision.
ensure that the enterprise complies with applicable laws, regulations, and
://wikiinternal controls. The program shall be headed by a compliance officer, who reports directly to the CEO and regularly to the board. (Sec. 326)
Risk Management Program Each enterprise shall establish a risk management program reasonably No provision.
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. 326)
SEC Registration Requires each regulated entity to register at least one class of capital stock Provides that equity securities issued by the enterprises are not exempt
Requirements with the SEC, and requires enterprises (Fannie Mae and Freddie Mac) to from SEC registration requirements, and requires enterprises (Fannie
comply with Sections 14 and 16 of the Securities Exchange Act of 1934 Mae and Freddie Mac) to comply with Sections 12, 13, 14 and 16 of the
(which deal with proxy reporting and disclosure of insider transactions in Securities Exchange Act of 1934 . (Sec. 1112)
company stock). (Sec. 327)
Enterprises whose stock is not registered or deregistered remain subject to
certain provisions of the Securities Exchange Act. (Sec. 326)
Federal Financial The FHFA shall be a member of the FFIEC. (Sec. 328) No provision.

Institutions Examination
Council (FFIEC)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Guarantee Fee Study The GAO, in consultation with the heads of the federal banking agencies The Director shall conduct an on-going study of fees charged to
and the OFHEO, shall, not later than one year after the date of the guarantee mortgages and annually report to Congress on pricing,
enactment, submit to Congress a study of the pricing, transparency and revenues, costs, average fee charged, and any change in fees. (Sec.
reporting of the regulated entities with regard to guarantee fees and 1501)
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. 329)
Chapter 2—Improvement of Mission Supervision Subtitle B—Improvement of Mission Supervision
Transfer of Product This section transfers HUD’s authority for new product approval and Identical provision. (Sec. 1121)
Approval and Housing Goalhousing goals to the FHFA. (Sec. 331)
New Product Approval The enterprises must obtain approval from the Director before offering any Similar provision. (Sec. 1123)
new “products,” which are defined. This section transfers HUD’s authority
for new product approval and housing goals to the FHFA. (Sec. 332)
iki/CRS-RL33940Standard for Approval The Director shall determine that a new product is consistent with the enterprise’s charter, is in the public interest, is consistent with the safety Identical, except that the there is no standard concerning “materially impair the efficiency...” as in H.R. 3221. (Sec. 1123)
g/wand soundness of the enterprise or the mortgage finance system, and does
s.ornot materially impair the efficiency of the mortgage finance system.
leak(Sec. 332)
://wikiProcedure for Approval The enterprises make a written request to the Director, who shall publish the request in the Federal Register with a 30-day public comment period. The Similar, but Director may give temporary approval without public comment under exigent circumstances. (Sec. 1123)
httpDirector will have 30 days after the close of the comment period to
approve or deny the request. (Sec. 332)
Definition of Product or The term “product” does not include the enterprises’ automated loan No specific reference to “significant new exposure to risk for the
New Business Activity underwriting systems in existence on the date of enactment of this enterprise or the holder of the mortgage.” (Sec. 1123)
legislation, or any modifications or upgrades to such systems that do not (1)
include services or financing other than residential mortgage financing, or (2)
create significant new exposure to risk for the enterprise or the holder of
the mortgage. (Sec. 332)
Conforming Loan Limit—The conforming loan limit will increase or decrease to reflect the annual Limit cannot decline. Decreases are “banked” and used against later
Indexation change in a housing price index maintained by the Director. (Sec. 333) increases. (Sec. 1124)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Increase in Conforming In areas where 125% of the median house price exceeds the national limit, Limit is increased to lesser of 100% of area median or 132% of national
Loan Limit for High-Cost the area limit is 125% of the area median, but not more than 175% of the loan limit ($550,440). (Sec. 1124)
Areas national limit. Areas shall be the same as used to determine the FHA
guarantee limits. (Sec. 333)
H.R. 1427: The conforming loan limit shall be increased in areas where 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. 133)
House Price Index The Director shall maintain an index of national average single family house Similar provisions relating to index; no GAO audit. (Sec. 1124)
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. 333)
Conditions on Conforming H.R. 3221: No provision. Loans above the national conforming loan limit may not be held in a
Loan Limit Increases for GSE’s portfolio, but must be securitized. (Sec. 1124)
High-Cost Areas H.R. 1427: The Director shall conduct a study to determine (1) the effects
iki/CRS-RL33940of restricting the higher conforming loan limits only to mortgages securitized and sold by the enterprises on the availability of mortgages for
g/whousing in high-cost areas and, (2) the extent to which the enterprises will
s.orbe able to sell securities based on mortgages for housing located in such
leakhigh-cost areas. If the Director determines that costs to borrowers in such
://wikihigh-cost areas will be increased by such restrictions, the Director may issue an order terminating such restrictions. (Sec. 133)
httpContents of Annual Report The report shall (1) discuss the extent to which the regulated entity is Director shall report annually to Congress on GSE achievements of
to Congress meeting (or could better meet) its statutory purposes, including housing housing goals, aggregate data on housing goals, incomes, race, gender,
goals, community investment, and affordable housing programs; (2) analyze subprime mortgage purchases, and nontraditional loans.
data on income, race, and gender, and discuss violations of fair lending The Director shall conduct a monthly survey of characteristics of
procedures by lenders; (3) examine credit conditions in the multifamily conforming and non-conforming mortgages, house prices, underwriting
housing mortgage markets and the status of efforts to provide standard characteristics, etc. Such data shall be made public in a timely manner.
credit terms and underwriting guidelines for multifamily housing and (Sec. 1125)

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. 334)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Standards for Subprime Within one year of the effective date of this legislation the Director shall No comparable provision.
Loans 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. 334)
Mortgagor Identification Prohibits regulated entity involvement with mortgages where the borrower No comparable provision.
Requirements does not have a Social Security account number. (Sec. 336)
Housing Goals Authority The authority to establish and monitor housing goals for the enterprises is Similar provisions (Sec. 1128)
moved to the Director from HUD. (Sec. 337)
Housing Goals, General There are three single-family housing goals and one multifamily housing goal. Similar, but no authority given to Director to remediate rate
In addition, the enterprises are required to provide the Director with disparities. (Sec. 1129)
sufficient information to determine if minorities are charged a different
interest rate than non-minorities. (Sec. 337)
Single-Family Housing The Director shall establish annual goals for the purchase by each enterpriseSimilar, except for treatment of single-family rental units. (Sec. 1129)
Goals of conventional, conforming, single-family, owner-occupied, purchase money
mortgages financing housing for (1) low-income families, (2) very low-
iki/CRS-RL33940income families, and (3) families that reside in low-income areas. The Director shall establish a separate low-income goal for mortgages used to
g/wrefinance existing mortgages. (Sec. 337)
leakAuthority to Increase The Director may by regulation increase the single-family goals set out No comparable provision.
Targets previously to reflect expected changes in market performance related to
://wikisuch information under the Home Mortgage Disclosure Act of 1975. In establishing such targets, the Director shall consider (1) national housing
httpneeds, (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. 337)
Multifamily Special The Director shall establish, by regulation, an annual goal for the purchase The Director shall establish, by regulation, an annual goal for the
Affordable Housing Goal by each enterprise of each of the following types of mortgages on purchase by each enterprise of mortgages on multifamily housing that
multifamily housing: (1) mortgages that finance dwelling units for low-income(1) finance dwelling units affordable to very low-income families, and (2)
families, (2) mortgages that finance dwelling units for very low-income that finance dwelling units assisted by the low-income housing tax
families, and (3) mortgages that finance dwelling units assisted by the low-credit. (Sec. 1128)

income housing tax credit under section 42 of the Internal Revenue Code of
1986. (Sec. 337)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Setting Multifamily Special In establishing the special multifamily affordable housing goal for an Similar, except that there is no reference to a specific data source, and
Affordable Housing Goal enterprise for a year, the Director shall consider: (1) national multifamily Agency must review goals annually for feasibility. (Sec. 1128)
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. \ Director to use a rolling three-year
average of data collected under the Home Mortgage Disclosure Act.
(Sec. 337)
Additional Requirements The Director shall establish, within the multifamily special affordable housing Similar provisions (Sec. 1128)
for Smaller Projects 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
iki/CRS-RL33940such smaller sizes as are typical among such projects that serve rural areas.
g/w(Sec. 337)
s.orUnits Financed by Housing The Director shall give credit toward the achievement of the multifamily Similar provisions. (Sec. 1128)
leakFinance Agency Bonds 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
://wikifinance agency, but only if such bonds are secured by a guarantee of the
httpenterprise, or are not investment grade and are purchased by the enterprise. (Sec. 337)
Use of Tenant Income or The Director shall monitor the performance of each enterprise in meeting Similar provisions. (Sec. 1128)

Rent 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. 337)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Discretionary Adjustment The Director may reduce the level for a goal pursuant to such a petition by Regulated entity may petition Director to reduce the level of any goal.
of Housing Goals one of the enterprises only if (1) market and economic conditions or the (Sec. 1128)
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. (Sec. 337)
Definitions Very low-income: in the case of owner-occupied units, income not in excess Similar provisions. (Sec. 1128)
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,
iki/CRS-RL33940income not in excess of 30% of the area median income, with adjustments
g/wfor family size.
s.orConforming mortgage: a conventional mortgage having an original principal
leakobligation that does not exceed the dollar limitation, in effect at the time of
such origination, specified in the enterprise’s charter. (Sec. 337)
://wikiDefinitions “Rural” and “rural area” as currently defined are revised to include No comparable provision.
httpmicropolitan areas and tribal trust lands. (Sec. 337)
Duty to Serve The enterprises shall (1) purchase mortgages on housing for very low-, low-, Similar provisions. (Sec. 1129)
Underserved Markets 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. 338)
Underserved Markets Each enterprise shall lead the industry in developing loan products and Similar, except adds subprime, and Community Development Financial
flexible underwriting guidelines for: (1) manufactured housing purchased by Institutions loans. The enterprises shall assist lenders to meet their
very low-, low-, and moderate-income families; (2) affordable housing Community Reinvestment Act (CRA) obligations. (Sec. 1129)

preservation; (3) 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 Director identifies as lacking
adequate credit through conventional lending sources. Such underserved
markets may be identified by borrower type, market segment, or geographic
area. (Sec. 338)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Evaluation and Reporting ofNot later than six months after the effective date, the Director shall Similar provisions, but the Director may determine additional factors.
Compliance establish a manner for evaluating whether, and the extent to which, the (Sec. 1129)
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.
Enforcement of Duty to The duty to serve underserved markets shall be enforceable to the same Similar provisions. (Sec. 1129)
Provide Mortgage Credit extent and under the same provisions that the housing goals are
to Underserved Markets enforceable. (Sec. 338)
Housing Goal Enforcement If the Director preliminarily determines that an enterprise has failed, or is Similar provisions. (Sec. 1130)
likely to fail to meet any housing goal, the Director shall provide written
notice including the reasons for such determination. (Sec. 339)
Cease and Desist Orders, If the Director finds that there is a substantial probability that an enterprise Similar provisions, except greater civil money penalties. (Sec. 1130)
Civil Money Penalties, and will fail, or has actually failed, to meet any housing goal and that the
Remedies Including achievement of the housing goal was or is feasible, the Director may require
Housing Plans that the enterprise submit a housing plan. If the Director makes such a
iki/CRS-RL33940finding and the enterprise refuses to submit such a plan, submits an
g/wunacceptable plan, fails to comply with the plan or the Director finds that
s.orthe enterprise has failed to meet any housing goal, in addition to requiring
leakan 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
://wikiforth in this subsection. (Sec. 339)
httpReview of Housing Plan The Director shall review any submission by an enterprise, including a housing plan, and not later than 30 days after submission, approve or Similar provisions. (Sec. 1130)
disapprove the plan or other action. The Director may extend the period
for approval or disapproval for a single additional 30-day period. (Sec. 339)
Additional Remedies for The Director also may seek other actions when an enterprise fails to meet aSimilar provisions. (Sec. 1130)
Failure to Meet Goals goal, and exercise appropriate enforcement authority available to the
Director under this act to prohibit the enterprise from initially offering any
product or engaging in any new activities, services, undertakings, and
offerings and to order the enterprise to suspend products and activities,
services, undertakings, and offerings pending its achievement of the goal.
(Sec. 339)
Establishment of an The Director of the Federal Housing Finance Agency (in consultation with Similar provisions. (Sec. 1131)

Affordable Housing Fund HUD Secretary) shall establish and manage an affordable housing fund. (Sec.

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Purpose of the Fund To increase homeownership and the supply of rental housing among very Similar provisions. (Sec. 1131)
low-income families, to increase investment in public infrastructure, to
increase investment in low-income areas. (Sec. 340)
Allocation of Amounts by For fiscal years 2007 through 2011, each enterprise shall allocate to the fund Each enterprise shall contribute 4.2 basis points (0.042%) of the unpaid
Enterprises 1.2 basis points (0.012%) of its average total mortgage portfolio during the principal balances of its total new business purchases. (Sec. 1131)
preceding year. (Sec. 340)
Definition of “Total The term “total mortgage portfolio” means, with respect to a year, the sum “Unpaid principal balances of its total new business purchases” not
Mortgage Portfolio” of the dollar amount of the unpaid outstanding principal balances on all defined.
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. 340)
Limitation on No comparable provision. Cannot be used in conjunction with property taken by eminent domain,
iki/CRS-RL33940Contributions unless that property is taken for public use. (Sec. 1131)
g/wSuspension of The Director shall temporarily suspend the allocation by an enterprise to Similar provision. (Sec. 1131)
s.orContributions the affordable housing fund upon a finding by the Director that such
leakallocations would contribute to the financial instability of the enterprise,
would cause the enterprise to be classified as undercapitalized, or would
://wikiprevent the enterprise from successfully completing a capital restoration
httpplan under Section 1369C. (Sec. 340)
Five-Year Sunset and The enterprises shall not be required to make allocations to the affordable No sunset provision. (Sec. 1131)
Report housing fund in 2012 or in any year thereafter. 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. 340)
Affordable Housing Needs For 2008, 75% of allocations shall go to the Louisiana Housing Finance In the initial year (2009), the fund would support the HOPE for
Formulas: Allocations for Agency; 25% to the Mississippi Development Authority. (Sec. 340) Homeowners Program. (Sec. 1131)
Affordable Housing Needs HUD Secretary shall establish a formula to allocate funds to states and In all years, 25% of the fund would go to support a reserve fund for
Formulas: Allocations for Indian tribes based on specified factors, including population, housing HOPE for Homeowners bonds. During the first three years, a
Later Years affordability, percentage of extremely low- and very low-income families, decreasing percentage (100%, 50%, 25%) of the other 75% would go for
and the extent of substandard housing. If such a formula is not established the HOPE program. Of the 75% (as adjusted), 65% would go to a
by the time the Director is to make allocations, the allocations will be housing fund similar to the House’s affordable housing fund; 35% would
distributed to states based on HOME allocations to states and participant go to a Capital Magnet Fund to provide competitively awarded grants
jurisdictions. (Sec. 340) to support affordable housing for primarily extremely low-, very low-,
and low-income families. (Sec. 1131)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Allocation of Formula The Director shall determine the formula amount for each grantee (states Similar provisions. (Sec. 1131)
Amounts and Indian tribes) and publish in the Federal Register the available amounts.
(Sec. 340)
Recipients of Allocations Each grantee may designate a state housing finance agency, housing and Similar provisions. (Sec. 1131)
community development entity, tribally designated housing entity, or other
qualified instrumentality of the grantee to receive grants. (Sec. 340)
Grantee Allocation Plans Each grantee shall establish and publish a plan for distribution of grant Similar provisions. (Sec. 1131)
amounts each year. The plan shall set forth requirements for applications to
receive assistance. (Sec. 340)
Eligible Activities Grant amounts shall be used only for (1) the production, preservation, and Similar provisions. (Sec. 1131)
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-
iki/CRS-RL33940income first-time home buyers; and (3) public infrastructure development
g/wactivities in connection with housing activities funded under paragraph (1) or
s.or(2). (Sec. 340)
leakEligible Recipients Funds may be provided only to organizations, agencies, or entities (including Similar provisions. (Sec. 1131)
for-profit, non-profit, or faith-based entities) (1) with a demonstrated
://wikicapacity for carrying out eligible housing activities, and (2) that make
httpassurances to the grantee (as required by the Director) that they will comply with the requirements of the program. (Sec. 340)
Identification Requirements Any assistance provided with any affordable housing grant amounts may not No comparable provision.
for Occupancy or be made available to any individual or household unless the individual or, in
Assistance the case of a household, all adult members of the household provide,
personal identification in specified forms. (Sec. 340)
Required Minimum Of aggregate amounts allocated each year, 25% shall be used by Refcorp, as No reference to Refcorp. The minimum state allocation would be $3
Allocations provided in Section 21B(f)(2)(E) of the Federal Home Loan Bank Act (12 million. (Sec. 1131)

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. 340)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Prohibited Uses The Director shall by regulation, set forth prohibited uses of grant amounts, Similar provisions. (Sec. 1131)
which shall include use for (1) political 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. 340)
Effect on Housing Goals Amounts contributed by the enterprises to the affordable housing fund shall Similar provisions. (Sec. 1131)
not count toward meeting housing goals or duty to serve. (Sec. 340)
Accountability of The Director shall require each grantee to develop and maintain a system toSimilar provisions. (Sec. 1131)
Recipients and Grantees 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
iki/CRS-RL33940audit requirements. (Sec. 340)
g/wMisuse of Funds by If the Director or a grantee (subject to the Director’s review) determines Similar provisions. (Sec. 1131)
s.orRecipients that any recipient of assistance has used any amounts in a manner that is
leakmaterially in violation of this section, the regulations issued under this section, or any requirements or conditions under which such amounts were
://wikiprovided, the grantee shall require that, within 12 months after the determination of such misuse, the recipient shall reimburse the grantee for
httpmisused amounts and return to the grantee any amounts that remain
unused or uncommitted for use. The remedies under this clause are in
addition to any other remedies that may be available under law. (Sec. 340)
Reports by Grantees The Director shall require each grantee receiving affordable housing fund Similar provisions. (Sec. 1131)

grant amounts for a year to submit an annual report to the Director that
describes the activities funded under this section and the manner in which
the grantee complied with the allocation plan established for the grantee.
The Director shall make these reports publicly available. (Sec. 340)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Misuse of Funds by If the Director determines, after reasonable notice and opportunity for Similar provisions. (Sec. 1131)
Grantees 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. 340)
Capital Requirements The utilization or commitment of amounts from the affordable housing fund No comparable provision.
shall not be subject to the risk-based capital requirements established
pursuant to Section 1361(a). (Sec. 340)
GAO Study of Affordable Directs the GAO to report on the affordable housing fund’s impact on the Similar provisions. (Sec. 1131)
iki/CRS-RL33940Housing Fund affordability and availability of credit for home buyers. (Sec. 340)
g/w Chapter 3—Prompt Corrective Action Subtitle C—Prompt Corrective Action
s.orCapital Classifications The Director shall establish capital classifications for the FHLBs, reflecting Similar provisions regarding the Director’s authority to reclassify a
leakdifferences in operations between the banks and the enterprises. (Sec. regulated entity. (Sec. 1142)
151(a)) These regulations are to be issued within 180 days of the effective
://wikidate of this legislation. (Sec. 151(b)). The Director may reclassify a regulated
httpentity (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. 345(a))
Restriction on Capital A regulated entity shall make no capital distribution that would cause it to Similar provision. (Sec. 1142)

Distributions become undercapitalized, except that certain capital restructuring
transactions may be permitted by the Director if they improve the financial
condition of the entity. (Sec. 345(a))

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Supervisory Actions The Director must monitor an undercapitalized entity’s condition, its Provisions similar, except that an undercapitalized GSE may not grow
Applicable to compliance with its capital restoration plan, and the efficacy of the plan. No unless the ratio of its “tangible assets” to equity is increasing. (House
Undercapitalized Regulated growth in total assets is permitted for an undercapitalized GSE, unless (1) bill has “total capital” to assets.) (Sec. 1143)
Entities the Director has accepted the GSE’s capital restoration plan, (2) an increase Agency must reclassify GSE as significantly undercapitalized for failure
in assets is consistent with the plan, and (3) the ratio of total capital to to comply with capital restoration plan. (Sec. 1143)
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. 346)
Supervisory Actions Of the supervisory actions that the regulator may take under current law, Identical provisions. (Sec. 1144)
Applicable to Significantly one or more of the following must be taken: new election of Directors,
Undercapitalized Regulated dismissal of Directors and/or executives, and hiring of qualified executive
Entities officers, or other actions.
iki/CRS-RL33940Without prior written approval of the Director, executives of a significantly
g/wundercapitalized regulated entity may not receive bonuses or pay raises.
s.or(Sec. 347)
leakAuthority over Critically The Director may appoint (or the Agency may serve as) a receiver or Similar provisions, but mandatory receivership occurs after 60 days,
://wikiUndercapitalized Enterprises (Liquidation conservator for several specified causes related to financial difficulty and/or violations of law or regulation. Sets out powers of conservators or instead of 30 days. The Director would have discretionary authority to force receivership during days 30 to 60. Also, once receivership is
httpAuthority) receivers, and procedures for settlement of claims, disposal of assets, and started, liquidation is mandatory. (Sec. 1145)

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. 348)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Chapter 4—Enforcement Actions Subtitle D—Enforcement Actions
Cease-and-Desist The Director may issue cease-and-desist orders against a regulated entity, a Similar provisions. (Sec. 1151)
Proceedings 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. 352)
Temporary Cease-and-If a violation (or threatened violation) or an unsafe or unsound practice is Similar provisions. (Sec. 1152)
Desist Proceedings 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
iki/CRS-RL33940Court for an injunction to enforce such temporary order. (Sec. 352)
g/wPrejudgment Attachment Permits the courts to freeze assets, funds, or other property of persons No comparable provision.
s.orsubject to civil or administrative actions for violations. (Sec. 353)
leakEnforcement and The Director may apply to the U.S. District Court for the District of Similar provisions, but removes federal court jurisdiction over actions
://wikiJurisdiction 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 brought prudential management and operation standards in Section 1313B. (Sec. 1154)
httpeffective 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. 354)
Civil Money Penalties Establishes three tiers of fines: (1) $10,000 per day for violations of orders, Same tiers of penalties and adds “any conduct that the Director
(2) $50,000 per day for recklessly engaging in an unsafe or unsound practice, determines to be an unsafe or unsound practice” to tier 1. (Sec. 1155)
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. 355)
Indemnification Extends current prohibition on indemnification for tier 3 penalties to all No similar provision.

tiers. (Sec. 355)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Removal and Prohibition After written notice and opportunity for a hearing, the Director may Similar provisions. (Sec. 1153)
Authority 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. 356)
Criminal Penalty Anyone who participates, directly or indirectly, in the affairs of a regulated Identical provisions. (Sec. 1156)
entity while under suspension or order of removal shall be liable for a fine
of up to $1 million, or five years’ imprisonment. (Sec. 357)
Subpoena Authority Authorizes the Director to issue subpoenas. (Sec. 358) Similar provisions, but expands grounds for issuing a subpoena and adds
criminal penalties for failure to answer a subpoena. (Sec. 1158)
iki/CRS-RL33940 Chapter 5—General Provisions Subtitle E—General Provisions
g/wEnterprise Boards of Eliminates the requirement that five Directors on the boards of Fannie Mae Similar provisions. (Sec. 1162)
s.orDirectors and Freddie Mac be appointed by the President. Reduces the size of enterprise boards from 18 to 13, unless the Director determines that
leakanother number is appropriate. (Sec. 361)
://wikiStudy on Public Use No provision Requires data reported by GSEs to the public to be at the census tract
httpDatabase and Data Disclosure level. (Sec. 1126)
GSEs must disclose certain single family data under HMDA. (Sec. 1127)
Study on Mortgage Default No provision. Requires the Director to perform a study on default risk evaluation.
Risk Evaluation (Sec. 1502)
Report on Enterprise The Director shall report to Congress, within 12 months of enactment, on No provision.

Portfolios 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. 362)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Study of Alternative The Director, in consultation with the Federal Reserve, the Treasury, and No provision.
Secondary Market Systems 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. 364)
Study of Guarantee Fees No provision Director shall conduct an ongoing study of guarantee fees and annually
report to Congress regarding amount and criteria used to determine
fees. (Sec. 1501)
Subtitle B—Federal Home Loan Banks TITLE II—Federal Home Loan Banks
No provision. Orders the Director to take into account differences between the
enterprises and the Home Loan Banks in taking supervisory or
enforcement actions. (Sec. 1201)
Directors, Number Each FHLB will be managed by a board of 13 directors, or other number as Similar provisions. (Sec. 1202)
iki/CRS-RL33940the Director of FHFA determines. (Sec. 372)
g/wDirectors, Citizenship Board directors must be U.S. citizens. (Sec. 372) Same provision (Sec. 1202)
s.orDirectors, Members Majority of directors of each FHLB must be officers of member banks of Identical provision.
leakthat FHLB. Member directors shall be elected by the members. Election
does not include independent directors. (Sec. 372) Member directors and independent directors to be elected by the members. (Sec. 1202)
httpDirectors, Independent At least 2/5 of each Bank’s directors must be independent. Independent Not less than two-fifths of board members must be independent
directors shall be appointed by the Director of the FHFA. Independent directors. (Sec. 1202)
directors will residents of the District of the Bank. (Sec. 272) No similar provision.
The Director shall take into consideration the demographic makeup of the
community most served by the Affordable Housing Program of the Bank in
appointing independent directors. (Sec. 272)
Directors, Independent, At least two of the independent directors for each Bank shall be chosen Similar provisions, except that the two directors must have more than
Public Interest from consumer/community organizations with more than a two year four years experience representing community or consumer interests.
history. (Sec. 372) (Sec. 1202)
Directors, Independent, Independent directors who are not public interest directors shall have No provision.
Other financial expertise. (Sec. 372)
Directors, Independent, An independent director may not serve as an officer of a FHLB or member No provision.

Conflicts of Interest bank during directorship. (Sec. 372)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Directors, Terms Terms increased from three to four years. Terms will be staggered so that Identical provision. (Sec. 1202)
1/4 are completing each year rather than 1/3. The change in term length
does not apply to current directors. (Sec. 372)
Voting Power of Member Member banks shall have votes in proportion to the amount of FHLB stock No provision.
Banks they hold. The provision that each state have at least the number of
directors it had in 1960 is repealed. (Sec. 372)
Oversight By New Agency The FHFA replaces the Finance Board. (Sec. 373) Similar provisions. (Sec. 1204)
Information Sharing A FHLB may have access to information needed to determine extent of its Director shall facilitate sharing of certain information among FHLBs,
joint and several liability. Information sharing pursuant to liability does not subject to limitations regarding proprietary data. (Sec. 1207)
waive any privilege. (Sec. 375)
FHLB Reorganization and FHLBs may merge with other FHLBs with the approval of the FHFA FHLBs may merge with other FHLBs with the approval of the Director,
Voluntary Merger Director. (Sec. 376) who shall issue regulations governing such transactions. (Sec. 1209)
The number of FHLB districts may be reduced to fewer than 8 as a
result of voluntary mergers or liquidation of a bank. (Sec. 1210)
iki/CRS-RL33940SEC Disclosures FHLBs are exempt from some SEC reporting regulations, including Similar provisions. (Sec. 1208)
g/wownership of capital stock in the FHLB, tender offers related to FHLB capital stock, and reporting related party transactions in the FHLB system.
leakShares of FHLB capital stock are defined as “exempted securities” for the
purposes of defining a government securities broker or a government
://wikisecurities dealer. (Sec. 377)
httpCommunity Financial Raises the Total Asset Requirement from $500 million to $1 billion. (Sec. Similar provision. (Sec. 1211)
Institution Members 378)
Refinancing Authority No provision. FHLBs are given authority to refinance mortgages on primary
residences of families at or below 80% of area median income. (Sec.
Studies The Comptroller of the Currency will conduct a study of the FHLB Director shall conduct a study of securitization of member bank home
affordable housing programs and submit the report within one year. (Sec. mortgage loans. (Sec. 1215)
380) Director shall conduct a study of FHLB advances related to
nontraditional mortgages. (Sec. 1217)
Effective Date Six months from enactment. (Sec. 381) The date of enactment, unless otherwise provided. (Sec. 1163)

Provision H.R. 3221 (House Approved May 8, 2008)/ H.R. 1427 H.R. 3221 (Senate Approved July 11, 2008)
Subtitle C—Transfer of Functions, Personnel, and Property of Title III—Transfer of Functions, Personnel, and Property Of
Office of Federal Housing Enterprise Oversight, Federal Housing OFHEO and the Federal Housing Finance Board
Finance Board, and Department of Housing and Urban
Chapter 1—Office of Federal Housing Enterprise Oversight Subtitle A—OFHEO
Abolishment of OFHEO Sets the abolishment of OFHEO six months after enactment. Provides for OFHEO is abolished one year after enactment. Provides for continuity
continuity of employee status, use of property, and agency services. Suits of employee status, use of property, and agency services. (Sec. 1301)
and other actions in progress against OFHEO will be transferred to the new
agency. (Sec. 385)
Continuation of All regulations, orders, resolutions, and determinations made by OFHEO or Similar provisions. (Sec. 1302)
Regulations and Orders a court will remain in force, and become enforceable by the new agency.
(Sec. 386)
Transfer of Employees Governs the transfer of OFHEO employees to FHFA employment and Governs the transfer of OFHEO employees to FHFA employment and
from OFHEO provides for continuity in benefit programs. (Sec. 387) provides for continuity in benefit programs. (Sec. 1303)
iki/CRS-RL33940Abolishment of the Federal Housing Finance Board Provides for the transition from FHFB to FHFA with provisions similar to Sections 301-303. (Sec. 388-394) Similar provisions. (Secs. 1311-1314)
s.orTermination of Enterprise-Directs the Secretary of HUD to determine, within three months of Provides for transfer of certain HUD employees to FHFA.
leakRelated Functions at HUD enactment, which employees to transfer to the FHFA to maintain oversight of the enterprises. Six months from enactment, all such oversight functions (Sec. 1133)
://wikiare to be transferred to the new agency. (Sec. 394)
httpProvides for continuity of employee status, regulations, use of property, and
agency services. Provides for transfer from HUD of related appropriations,
property, and facilities. (Sec. 396-398)
Source: Compiled by CRS.

Mark Jickling Edward V. Murphy
Specialist in Financial Economics Analyst in Financial Economics, 7-7784, 7-6201
N. Eric Weiss
Specialist in Financial Economics, 7-6209

Barbara Miles, former Specialist in Financial Institutions, contributed to this report.