,i #aaeth ,,congress #ast ,session ,h4 ,r4 #ceef ,,in ,,the ,,house ,,of ,,representatives ,july #bh1 #bjag,mr4 ,royce of ,california 7for himself and ,ms4 ,moore7 introduced the following bill2 which was referred to the ,committee on ,financial ,services1 and in addition to the ,committees on ,ways and ,means1 and ,agriculture1 for a period to be subsequently determined by the ,speaker1 in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned ,a ,,bill ,to require ,fannie ,mae and ,freddie ,mac to engage in credit risk transfer transactions1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,taxpayer ,protections and ,market ,access for ,mortgage ,finance ,act of #bjag4 #b4 ,credit risk-transfer transactions 7a7 ,requirement for enterprises ,subpart ,a of part #b of subtitle ,a of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib 7#ab ,u4,s4,c4 #deda et seq47 is amended by adding at the end the following new section3 #acbh4 ,enterprise credit risk-transfer transactions 7a7 ,requirement ,not later than #ab months after the date of enactment of this ,act1 the ,director shall1 after taking into consideration market conditions and the safety and soundness of the enterprises1 establish guidelines requiring that each enterprise engage in significant1 increasing1 and varied credit risk-transfer transactions1 with an emphasis on front-end transactions4 7b7 ,considerations ,in establishing the guidelines under subsection 7a71 the ,director shall-- 7#a7 seek to promote a deep1 broad market for a variety of structures that together insulate the taxpayer from losses1 minimize ongoing risks to the enterprises1 remain stable through the economic cycle1 maintain adequate access to the secondary market for lenders of all sizes1 and promote credit for borrowers in all communities2 7#b7 continue and seek to increase the amount of credit risk transferred to the private sector and the types of risk-transfer transactions that the enterprises engaged in each year with the goal that the risk transferred by an enterprise by all credit risk-transfer transactions shall be at least #djj basis points of risk in total1 starting from the first dollar of credit loss among all the different credit risk-transfer structures2 7#c7 continue and seek to increase front-end risk transfer transactions1 including those done at the time of origination2 and 7#d7 continue and seek to increase transactions in which the first loss position is transferred or shared and through structures that are scalable and transparent4 7c7 ,guarantee fees ,the enterprises shall set and publish guarantee fees1 including up-front delivery fees and loan level price adjustments1 commensurate with the enterprises' reduced credit risk resulting from any new risk-transfer transaction4 7d7 ,,apa compliance ,the guidelines required under subsection 7a7 shall be issued and made available to the public pursuant to section #eec of title #e1 ,united ,states ,code4 7e7 ,compensation ,the ,director shall adjust individual and corporate scorecards used in determining compensation for relevant enterprise employees to align with the considerations of subsection 7b74 7f7 ,exemption from certain ,commodity ,exchange ,act provisions ,a swap 7as such term is defined in section #a;a of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #a;a77 entered into for the purpose of transferring or sharing credit risk in connection with a risk-transfer transaction shall not be deemed to be a commodity interest 7as such term is defined in section #a4c7yy7 of the regulations of the ,commodity ,futures ,trading ,commission 7#ag ,c4,f4,r4 #a4c7yy7771 and no swap counterparty or other person sponsoring or arranging a risk-transfer transaction shall be deemed to be a commodity pool operator 7as such term is defined in section #a4c7;cc7 of such regulations71 solely by virtue of entering into or sponsoring or arranging such a swap in connection with such transaction4 7g7 ,report ,the ,director shall submit a report1 not later than ,october #cj of each year1 to the ,committee on ,financial ,services of the ,house of ,representatives and the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate1 on the activities of each enterprise in meeting the guidelines established under subsection 7a7 and any obstacles the ,director has determined have impeded the ability of the enterprises to meet such guidelines4 7h7 ,definitions ,for purposes of this section1 the following definitions shall apply3 7#a7 ,credit risk ,the term credit risk means1 with respect to a mortgage loan on a one- to four-family residential property that is held or guaranteed1 or intended to be held or guaranteed1 by an enterprise or any security backed by such residential mortgage loans held or guaranteed by the enterprise1 the risk of loss to the enterprise that could result from a mortgagor's failure to repay any such loan in accordance with its terms4 7#b7 ,first loss ,the term first-loss means the risk of loss for an enterprise on a mortgage loan on a one- to four-family residential property or a security backed by such residential mortgage loans1 beginning with the first dollar of loss4 7#c7 ,front-end risk transfer ,the term front-end risk transfer means1 with respect to a mortgage loan on a one- to four-family residential property or any security backed by such residential mortgage loans1 a risk transfer or risk share that occurs before or simultaneous with the acquisition of such loan or security by an enterprise4 7#d7 ,guarantee fee ,the term guarantee fee has the meaning given such term in section #acbg7;a7 7#ab ,u4,s4,c4 #dedg7;a774 7#e7 ,risk-transfer transaction ,the term risk-transfer transaction means any transaction that provides for-- 7,a7 the sale1 disposition1 retention1 or transfer within the private sector of credit risk on any residential mortgage loan on a one- to four-family residential property or a pool of such residential mortgage loans that back securities on which the enterprise guarantees the timely payment of principal and interest2 or 7,b7 the retention by the private sector of any such credit risk in connection with the sale of any such loan or security to an enterprise4 4 7b7 ,conforming amendment to ,commodity ,exchange ,act ,paragraph 7#aj7 of section #a;a of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #a;a7#aj77 is amended by adding at the end the following new subparagraph3 7,c7 ,rule of construction ,a swap 7as such term is defined in section #a;a7 entered into for the purpose of transferring or sharing credit risk in connection with a risk-transfer transaction shall not be considered to be a commodity interest 7as such term is defined in section #a4c7yy7 of title #ag1 ,code of ,federal ,regulations71 and no swap counterparty or other person sponsoring or arranging a risk-transfer transaction shall be considered to be a commodity pool operator 7as such term is defined in section #a4c7;cc7 of such title71 solely by virtue of entering into or sponsoring or arranging such a swap in connection with such transaction4 4 7c7 ,conforming amendments to existing laws 7#a7 ,investment ,company ,act of #aidj ,section #c7;c77#e7 of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#c7;c77#e77 is amended by inserting before the period the following3 1 including notes1 bonds1 other evidences of indebtedness1 certificates1 securities1 and other interests1 issued in connection with or otherwise related to a risk-transfer transaction 7as such term is defined in section #acbh7;h7 of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib74 7#b7 ,asset and income test clarification for enterprise risk-transfer transactions ,the ,internal ,revenue ,code of #aihf is amended-- 7,a7 in each of paragraphs 7#b77;,b7 and 7#c77;,b7 of section #hef7;c7 7#bf ,u4,s4,c4 #hef7;c771 by inserting before the semicolon at the end the following 1 and gross income resulting from participation in any transaction1 including notes1 bonds1 other evidences of indebtedness1 certificates1 securities1 and other interests1 that are risk-transfer transactions 7as such term is defined in section #acbh7;h7 of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib72 and 7,b7 in subparagraph 7,b7 of section #hef7;c77#e7 7#bf ,u4,s4,c4 #hef7;c77#e77;,b771 by inserting before the period at the end of the first sentence the following3 1 and participation in any transaction1 including notes1 bonds1 other evidences of indebtedness1 certificates1 securities1 and other interests1 that are risk-transfer transactions 7as such term is defined in section #acbh7;h7 of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib74 #c4 ,pilot program for small lender risk transfer 7a7 ,in general ,not later than one year after the date of the enactment of this ,act1 the ,director of the ,federal ,housing ,finance ,agency shall require each enterprise 7as such term is defined in section #acjc of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib 7#ab ,u4,s4,c4 #dejb77 to establish a pilot program under which the enterprise shall annually engage1 for each of the next #e consecutive years1 in at least one front-end risk-transfer transaction for which at least #ge percent of the credit risk transferred is transferred to bank or non-bank mortgage originators having under #aj1jjj1jjj1jjj in assets4 7b7 ,report ,not later than the conclusion of the fifth year of the pilot program1 the ,director shall submit a report to the ,congress that assesses the extent to which the pilot program under this section has-- 7#a7 transferred credit risk from the ,federal ,government to mortgage originators2 and 7#b7 resulted in increased participation in credit risk-transfer transactions by bank or non-bank mortgage originators having under #aj1jjj1jjj1jjj in assets4 7c7 ,extension of program ,based on the assessments in the report required under subsection 7b71 the ,director may extend the program beyond its fifth year of operation if the ,director determines that such extension would be in the public interest4 #d4 ,pilot program for mortgage insurance risk transfer 7a7 ,in ,general ,not later than one year after the date of the enactment of this ,act1 the ,director shall require each enterprise to establish a pilot program to increase the amount of risk that is shared by the enterprise using private mortgage insurance4 7b7 ,program requirements ,each pilot program established pursuant to subsection 7a7 shall meet the following requirements3 7#a7 ,duration ,the pilot program shall have a duration of #e years4 7#b7 ,amount of mortgage purchases 7,a7 ,in general ,except as provided in subparagraph 7,b71 in each year each enterprise shall purchase under its pilot program sufficient qualifying loans or pools of qualifying loans such that the aggregate unpaid principal balance of all qualifying loans or loan pools purchased by the enterprise is not less than #be1jjj1jjj1jjj4 7,b7 ,exception ,the amount of qualifying loans that each enterprise is required to purchase each year under paragraph 7#a7 may be reduced if the ,director and the ,secretary of the ,treasury jointly-- 7i7 make a determination that such a reduction is necessary to prevent an adverse impact to the housing market2 and 7ii7 submit to the ,congress a report describing the justification for the determination referred to in clause 7i74 7#c7 ,selection of mortgage insurance ,for each transaction under the pilot program involving a qualifying loan1 the loan originator shall select an eligible mortgage insurance provider or providers1 consistent with existing market practice4 7#d7 ,mortgage insurance premiums ,mortgage insurance premiums applicable to qualifying loans purchased by an enterprise under the pilot program shall be subject to requirements and limitations under applicable ,state laws4 7#e7 ,guarantee fees ,each enterprise shall set and publish guarantee fees1 including up-front delivery fees and loan level price adjustments1 commensurate with the enterprise's reduced credit risk resulting from any new risk-transfer transaction under the pilot program4 7c7 ,report ,not later than the conclusion of the fifth year of the pilot program1 the ,director shall submit a report to the ,congress that assesses the extent to which the pilot program under this section has-- 7#a7 transferred credit risk from the enterprises to the private sector2 7#b7 resulted in reduced guarantee fees for mortgage originators2 and 7#c7 produced benefits or costs for borrowers under qualifying loans under the program4 7d7 ,extension of program ,based on the assessments in the report required under subsection 7c71 the ,director may extend the program beyond its fifth year of operation if the ,director determines that such extension would be in the public interest4 7e7 ,mitigating counterparty risk ,nothing in this section shall prevent the ,director from establishing additional requirements on participants in the pilot program necessary to mitigate counterparty risk to the enterprises comparable to other credit risk-transfer structures4 7f7 ,definitions ,for purposes of this section1 the following definitions shall apply3 7#a7 ,director ,the term ,director means the ,director of the ,federal ,housing ,finance ,agency4 7#b7 ,eligible mortgage insurance provider ,the term eligible mortgage insurance provider means a company that-- 7,a7 is regulated as a mortgage guaranty insurance company by its ,state of domicile2 7,b7 provides qualifying mortgage insurance2 and 7,c7 satisfies-- 7i7 7,i7 minimum requirements established or recognized by the ,director1 pursuant to public notice and comment1 with respect to capital1 leverage1 and reserve requirements2 or 7,,ii7 ,private ,mortgage ,insurer ,eligibility ,requirements published by the enterprises on ,april #ag1 #bjae2 and 7ii7 any additional requirements added by subsection 7e7 of this section4 7#c7 ,enterprise ,the term enterprise has the meaning given such term in section #acjc of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib 7#ab ,u4,s4,c4 #dejb74 7#d7 ,qualifying loan ,the term qualifying loan means a first mortgage loan that-- 7,a7 is secured by a one- to four-family residence2 and 7,b7 is subject to qualifying mortgage insurance4 7#e7 ,qualifying mortgage insurance ,the term qualifying mortgage insurance means1 with respect to a qualifying loan1 primary mortgage guaranty insurance for such qualifying loan that-- 7,a7 is placed at the time the qualifying loan is originated2 7,b7 guarantees or insures that portion of the unpaid principal balance of the qualifying loan that is in excess of #ej percent of the value of the property securing the mortgage2 and 7,c7 is provided by an eligible mortgage insurance provider4 #e4 ,rule of construction ,nothing in this ,act or the amendments made by this ,act shall be affected solely by termination of the conservatorship of an enterprise pursuant to section #acfg of the ,federal ,housing ,enterprises ,financial ,safety and ,soundness ,act of #aiib 7#ab ,u4,s4,c4 #dfag74