S. 1217The Housing Finance Reform and Taxpayer Protection Act of 2013
Sec. 1. Short title; table of contents.Sec. 2. Definitions.TITLE I
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FEDERAL MORTGAGE INSURANCE CORPORATIONSec.101. Establishment.
The Federal Mortgage Insurance Corporation (FMIC) is anindependent federal agency whose purpose is to provide liquidity, transparency and access tomortgage credit by supporting a robust secondary mortgage market and the production of residential mortgage-backed securities; and to protect the taxpayer from having to absorb lossesincurred in the secondary mortgage market during periods of economic stress.
Sec.102. Director.
The FMIC director will have technical, academic, or professionalunderstanding of, and experience in, housing finance and will serve a five-year term. He or shewill be appointed by the President and confirmed by the Senate. No individual may serveconcurrently as Acting Director of FMIC and as Director of the Federal Housing FinanceAgency (FHFA) and no individual that has served as the Director of the FHFA may serve asDirector of FMIC. The Director will serve as a member of the Financial Stability OversightCouncil.
 Sec.103. Board of Directors.
FMIC will be managed by a Board of Directors comprised of fivemembers, chaired by the Director with four other Directors who are appointed by the Presidentand confirmed by the Senate. The Directors will have a demonstrated technical, academic or experience working in the fields of asset management, mortgage insurance markets, multifamilyhousing development, and working with lenders under $15 billion in consolidated assets. BoardMembers will be appointed for a 5-year term, will serve on a full-time basis, and will have afiduciary relationship to FMIC. The Director of the FHFA will also serve as a non-votingmember of the Board.
Sec.104. Office of the Inspector General.
 
An Office of the Inspector General (OIG) will beestablished within FMIC to conduct, supervise and coordinate audits and investigations relatingto the programs and operations of the Corporation and to ensure that first loss position of FMIC- backed securities is adequate to cover home price declines experienced during moderate tosevere recessions experienced during the last 100 years. OIG will report annually on theadequacy of fees associated with securitization and the adequacy of the Mortgage InsuranceFund.
Sec.105. Staff, experts, and consultants.
The Board of Directors may appoint and set thecompensation of the employees necessary to carry out the functions of the Corporation.
Sec.106. Reports; testimony; audits.
FMIC will provide annual written reports to the SenateBanking and House Financial Services Committees. The Chairperson of FMIC will provide biannual testimony to the Banking Committee and House Financial Services. The Comptroller General will perform an annual audit.
 
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Sec.107. Initial funding.
FMIC will establish an annual assessment from the enterprises to provide amounts sufficient for the reasonable costs of the FMIC from the date of enactmentthrough the certification date.
TITLE II
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DUTIES, RESPONSIBILITIES, AND STRUCTURE OF THEFMICSubtitle A
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Duties and AuthoritiesSec.201. Duties and responsibilities of the FMIC.
The principal duties of the FMIC will be to:minimize any potential long-term negative cost on the taxpayer; ensure to the maximum extent possible a liquid and resilient housing financial market and the availability of credit; developstandard form credit-risk sharing agreements with private capital in a first loss position; provideinsurance on those covered securities; provide leadership to the housing finance market to helpensure that all geographic locations have access to mortgage credit; charge and collect fees inexchange for providing insurance that are sufficient to protect the taxpayer and fund the FMIC;establish and maintain a Mortgage Insurance Fund; facilitate the securitization of eligiblemortgages originated by credit unions and community and mid-size banks without securitizationcapabilities; set standards for the approval of private mortgage insurers, servicers, issuers, and bond guarantors; establish and maintain a database of uniform loan level information and aregistry system for eligible mortgages; develop standard securitization agreements for coveredsecurities; oversee the common securitization platform and ensure non-discriminatory access for small lenders without volume discounts.
Sec.202. Standard form credit risk-sharing mechanisms, products, structures, contracts, orother security agreements.
Within 5 years of enactment, FMIC will examine various credit-risk sharing structures and will develop a standard form credit-risk sharing mechanism that requires private market holders to take a first loss position that is not less than 10% of the principal or face value of the security. FMIC will report to Congress within a year and upon relevant policychanges about these findings and how it made its determination for a standard form credit-risk sharing mechanism.
Sec.203. Mortgage Insurance Fund.
The Mortgage Insurance Fund, administered by FMIC,will be used to cover losses on covered securities when those losses exceed the first positionlosses absorbed by private market holders. The Mortgage Insurance Fund will be funded byguarantee fees and will endeavor to achieve a reserve balance of 1.25% of the sum of theoutstanding principal balance of covered securities within 5 years of the certification date, and2.5% within 10 year of the certification date.
Sec.204. Insurance.
FMIC will insure the payment of principal and interest on a coveredsecurity against losses in exchange for the guarantee fee. The full faith and credit of the UnitedStates is pledged to the payment of all amounts which may be require to be paid under anyinsurance provided under this section.
Sec.205. Authority to protect taxpayers in unusual and exigent market conditions.
Inunusual and exigent market conditions, the FMIC Director, Federal Reserve Chairman, and theTreasury Secretary in consultation with the HUD Secretary may provide insurance regardless of 
 
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whether there is adequate first loss private capital for up to six months. This authority may not beexercised more than once in any given 3-year period.
Sec.206. General powers.
FMIC will have the general powers of a corporation.
Sec.207. Exemptions.
All FMIC covered securities will be exempt securities under the SECinsofar as securities that are a direct obligation of or guaranteed by the U.S. are consideredexempt. Covered securities insured by FMIC are exempt from Qualified Residential Mortgagerequirements.
Subtitle B
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Oversight of Market ParticipantsSec.211. Approval of private mortgage insurers.
FMIC will establish standards for approving private mortgage insurers to provide private mortgage insurance on eligible mortgages.
Sec.212. Approval of servicers.
FMIC will establish standards approving servicers to administer eligible mortgages.
Sec.213. Approval of issuers.
FMIC will establish standards for approving issuers to issueFMIC-covered securities. FMIC will limit issuers to 15% of the total market as measured by thetotal outstanding principal balance at origination, with the exception of issuers which onlysecuritize loans originated by the issuer or an affiliate.
Sec.214. Approval of bond guarantors.
FMIC will establish standards for approving bondguarantors, who guarantee the timely payment of principal and interest on securities that arecollateralized by eligible mortgages and insured by FMIC.
Sec.215. Authority to establish FMIC Mutual Securitization Company.
The FMIC MutualSecuritization Company is created to meet the needs of credit unions, community and mid-size banks, and non-depository mortgage originators up to $15 billion in total consolidated assetswith respect to issuing covered securities. The Mutual will purchase eligible mortgage loansfrom member participants to securitize in a covered security.
Sec.216. Additional authority relating to oversight of market participants.
FMIC may alsodevelop, publish, and adopt additional standards or requirements to ensure competition,competitive pricing, and liquidity, transparency, and access to mortgage credit in the secondarymarket.
Sec.217. Civil money penalties.
FMIC may impose a civil money penalty on any approved private mortgage insurer, servicer, issuer, or bond guarantor that violates any standard adopted pursuant to this Act.
Sec.218. Protection of privilege and other matters relating to disclosures by marketparticipants.
FMIC may share information with the Federal banking agencies in a consultative process.
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