H.R. 3644 (112th): Private Mortgage Market Investment Act

HR 3644 IH

To increase standardization, transparency, and to ensure the rule of law in the mortgage-backed security system, and for other purposes.

December 13, 2011

Mr. GARRETT (for himself, Mr. BACHUS, Mr. HENSARLING, Mr. SCHWEIKERT, Mr. NEUGEBAUER, Mrs. BIGGERT, and Mrs. CAPITO) introduced the following bill; which was referred to the Committee on Financial Services

To increase standardization, transparency, and to ensure the rule of law in the mortgage-backed security system, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the ‘Private Mortgage Market Investment Act’.

(b) Table of Contents- The table of contents for this Act is as follows:

Sec. 1. Short title; Table of contents.

TITLE I--STANDARDIZATION AND UNIFORMITY

Sec. 101. Facilitating continued standardization and uniformity.

Sec. 102. Repeal of credit risk retention provisions.

Sec. 103. Exemption from registration of certain securities conforming to standard securitization agreements.

Sec. 104. Judicial review.

Sec. 105. Liability for misleading statements.

Sec. 106. Unlawful representation.

Sec. 107. Penalties.

Sec. 108. Contrary stipulations void.

TITLE II--TRANSPARENCY

Sec. 201. Requirements for the disclosure of loan-level information to investors, rating agencies, and regulators.

Sec. 202. Mandatory period for review of loan-level information prior to investment.

Sec. 203. Dissemination of pricing information of asset-backed securities.

Sec. 204. Alphanumeric identification of residential mortgage loans in asset-backed securities.

TITLE III--ENSURING THE RULE OF LAW

Sec. 301. Ensure rule of law and legal certainty.

Sec. 302. Limitation on mortgages held by loan servicers.

Sec. 303. Clarification of qualified mortgage exception.

Sec. 304. FDIC safe harbor.

Sec. 305. Effective date.

TITLE I--STANDARDIZATION AND UNIFORMITY

SEC. 101. FACILITATING CONTINUED STANDARDIZATION AND UNIFORMITY.

(a) Establishment of Standard Mortgage Classifications-

(1) ESTABLISHMENT- The Director of the Federal Housing Finance Agency (hereinafter in this Act referred to as the ‘Director’) shall, for purposes of this section, prescribe classifications for mortgages having various degrees of credit risk, ranging from a classification of mortgages having little to no credit risk to a classification of mortgages having higher credit risk, with the goals of maximizing the pricing of credit risk, allowing for the trading of securities collateralized by the classifications of mortgages established pursuant to this section in a forward market, and maintaining well functioning liquid markets in securities collateralized by each of the classifications of mortgages established pursuant to this section.

(2) UNDERWRITING CRITERIA STANDARDS-

(A) UNDERWRITING CRITERIA- For each of the classifications of mortgages established under paragraph (1), the Director shall establish standards for each of the following underwriting criteria:

(i) DEBT-TO-INCOME RATIO- The ratio of the amount of the total monthly debt of the mortgagor to the amount of the monthly income of the mortgagor.

(ii) LOAN-TO-VALUE RATIO- The ratio of the original principal obligation under the mortgage to the original value of the residence subject to the mortgage.

(iii) CREDIT HISTORY- Information on the credit history of the mortgagor, including the credit score of the mortgagor.

(iv) LOAN DOCUMENTATION- The extent of loan documentation and verification of the financial resources of the mortgagor used to qualify the mortgagor for the mortgage.

(v) OCCUPANCY- Whether the residence subject to the mortgage is occupied by the mortgagor.

(vi) CREDIT ENHANCEMENT- Whether any mortgage insurance or other type of insurance or credit enhancement was obtained at the time of origination.

(vii) LOAN PAYMENT TERMS-

(I) IN GENERAL- The terms of the mortgage that determine the magnitude and timing of payments due from the mortgagor, including the term to maturity of the mortgage, the frequency of payment, the type of amortization, any prepayment penalties, and whether the interest rate is fixed or may vary.

(II) INCLUSION OF 30-YEAR FIXED INTEREST RATE- Terms established under subclause (I) shall include a 30-year fixed interest rate mortgage.

(viii) OTHER- Such other underwriting criteria as the Director may establish consistent with the goals of this title.

(B) OBJECTIVE- In developing the underwriting criteria standards under subparagraph (A), the Director shall seek to ensure that such standards are readily identifiable to sponsors of, and investors in, securities collateralized by mortgages so that such sponsors and investors can clearly determine the classification to which a mortgage belongs.

(3) DEFINITIONS- The Director shall, for purposes of this subsection, prescribe definitions for each of the following terms:

(A) MORTGAGE- The term ‘mortgage’, which definition shall include only mortgages on residential properties.

(B) DEFAULT- The term ‘default’, with respect to a mortgage.

(C) DELINQUENCY- The term ‘delinquency’, with respect to a mortgage.

(D) LOAN DOCUMENTATION- The term ‘loan documentation’, with respect to a mortgage.

(E) ADDITIONAL TERMS- Such other terms as the Director may establish.

(b) Standard Form Securitization Agreements-

(1) IN GENERAL- The Director shall develop, adopt, and publish standard form securitization agreements for mortgages established under subsection (a).

(2) REQUIRED CONTENT- The standard form securitization agreements to be developed under paragraph (1) shall only include terms relating to--

(A) pooling and servicing;

(B) purchase and sale;

(C) representations and warranties, including representations and warranties as to compliance or conformity with standards established by the Director pursuant to subsections (c), (d), (e), and (f), as appropriate;

(D) indemnification and remedies, including principles of a repurchase program that will ensure an appropriate amount of risk retention under the representations and warranties set forth under subparagraph (C); and

(E) the qualification, responsibilities, and duties of trustees.

(3) PUBLIC INVOLVEMENT- In issuing rules and regulations under this section, the Director shall allow appropriate notice and comment in accordance with the chapter 5 of title 5, United States Code (commonly referred to as the ‘Administrative Procedures Act’). The Director shall work with industry groups, including servicers, originators, and mortgage investors to develop the standards under this title.

(4) QUALIFIED SECURITY- For purposes of this title, the term ‘qualified security’ means a security that--

(A) is issued in accordance with a standard form securitization agreement;

(B) is issued by a qualified sponsor;

(C) is collateralized by a class, or multiple classes, of mortgages established under this title; and

(D) is not guaranteed, in whole or in part, by the United States Government.

(c) Standards for Servicer Reporting- The Director shall develop, adopt, and publish standards for the reporting obligations of servicers of any mortgage that serves as collateral for a qualified security.

(d) Standards for Servicing- The Director shall develop, adopt, and publish--

(1) servicing standards, including for the modification, restructuring, or work-out of any mortgage that serves as collateral for a qualified security; and

(2) a servicer succession plan which may include provisions for--

(A) a specialty servicer that can replace the existing servicer if the performance of the mortgage pool deteriorates to specified levels; and

(B) a plan to achieve consistency in servicing systems related to systematic note-taking, consistent mailing addresses, and other points of contact for borrowers to use, among other items.

(e) Standards for Documentation- The Director shall develop, adopt and publish standards for documentation used to verify the financial resources of a mortgagor and to qualify the mortgagor for any mortgage that may become collateral for any qualified security, including the form, content, and method of documentation of any such mortgage. Such standards shall also address any custodial or delivery obligations related to such documents.

(f) Standards for Qualified Sponsors-

(1) IN GENERAL- The Director shall develop, adopt, and publish standards for a sponsor to qualify as a qualified sponsor. Such standards shall only include--

(A) the experience and integrity of the sponsor and its principals, including compliance history with Federal and State laws;

(B) the adequacy of insurance and fidelity coverage of the sponsor with respect to errors and omissions; and

(C) a requirement that the sponsor submit audited financial statements to the Director, who shall make such statements publicly available through the Federal Housing Finance Agency’s website.

(2) APPLICATION PROCESS-

(A) IN GENERAL- The Director shall establish an application process for the qualification of sponsors, in such form and manner and requiring such information as the Director may require, in accordance with standards adopted under paragraph (1).

(B) APPROVAL- The Director shall approve any application made pursuant to subparagraph (A) unless the sponsor does not meet the standards adopted under paragraph (1).

(C) PUBLICATION- The Director shall publish a list of newly qualified sponsors in the Federal Register and maintain an updated list of qualified sponsors on the Federal Housing Finance Agency’s website.

(3) REVIEW AND REVOCATION OF QUALIFIED STATUS-

(A) IN GENERAL- The Director may only review the status of a qualified sponsor if the Director is notified that a claim has been made against the sponsor by a trustee with respect to a violation of a contractual term in a securitization document of the sponsor.

(B) REVOCATION-

(i) IN GENERAL- Subject to subparagraph (C), if the Director determines, in a review pursuant to subparagraph (A), that a sponsor no longer meets the standards for qualification, the Director shall revoke the sponsor’s qualified status.

(ii) CONSTRUCTION- The revocation of a sponsor’s qualified status under this subparagraph shall--

(I) have no effect on the qualified status of any security; and

(II) not relieve the sponsor of any representations, warranties, or repurchase obligations related to any qualified security issued before such revocation.

(C) GRACE PERIOD- The Director shall issue regulations that permit a qualified sponsor who no longer meets the standards for qualification to have a grace period during which the sponsor can work to meet such standards without losing the sponsor’s qualified status.

(D) PUBLICATION- The Director shall publish a list of sponsors who lost their qualified status in the Federal Register and maintain an updated list of such sponsors on the Federal Housing Finance Agency’s website.

(g) Standards for Trustees-

(1) IN GENERAL- There shall at all times be one or more trustee for each pool of mortgages that acts as collateral for a qualified security.

(2) RULEMAKING- The Director shall issue regulations regarding the qualifications of trustees under paragraph (1) that shall, to the extent practicable, be the same as the qualification provisions applicable to trustees under section 310(a) of the Trust Indenture Act of 1934 (15 U.S.C. 77jjj(a)).

(3) CONFLICTS OF INTEREST- The Director shall issue conflict of interest regulations that apply to a qualified trustee. Such regulations shall, to the extent practicable, be the same as those conflict of interest provisions applicable to an indenture trustee under section 310(b) of the Trust Indenture Act of 1934 (15 U.S.C. 77jjj(b)).

(4) REPORTING OF CLAIMS- Any time a trustee brings a claim against a qualified sponsor on behalf of investors with respect to a standard form securitization agreement, the trustee shall notify the Director of such claim.

(5) PROTECTION OF INVESTOR RIGHTS- For the purpose of protecting investor rights, each trustee shall--

(A) maintain a list of all investors (beneficial owners) in a qualified security;

(B) update such list from time to time;

(C) not make such list available to investors (beneficial owners); and

(D) act as a means to communicate information about the qualified security to investors (beneficial owners) and act as a means for investors (beneficial owners) to communicate with each other.

(6) NO LIABILITY FOR CERTAIN COMMUNICATIONS- A trustee shall not be liable for the content of any information provided to the trustee by an investor (beneficial owner) that the trustee communicates to another investor (beneficial owner).

(7) INVESTOR (BENEFICIAL OWNER) NOTIFICATION OF TRUSTEE- A person who becomes an investor (beneficial owner) in a qualified security shall promptly notify the trustee of such security of the change in ownership.

(h) Independent Third Party- If the majority of investors in a pool of qualified securities choose to hire an independent third party to act on behalf of the best interests of the investors (beneficial owners), such party shall--

(1) be granted access to the loan documents for the mortgage loans backing such security and all servicing reports the servicer provides to investors (beneficial owners) or the trustee;

(2) be granted access to the list of investors (beneficial owners) maintained by the trustee, on the condition that the independent third party will not make the list available to the investors (beneficial owners); and

(3) have the right, on behalf of the investors (beneficial owners), to inform the trustee of such securities of any breach of the securitization agreement identified by the third party.

(i) Timing; Authority To Revise Standards-

(1) TIMING- The Director shall develop, adopt, and publish the standards required under this title, not later than the expiration of the 12-month period beginning upon the date of the enactment of this title.

(2) AUTHORITY TO REVISE-

(A) IN GENERAL- The Director may review, revise and, if revised, re-publish any standard form securitization agreement or other standard required to be developed under this section if the Director determines review or revision to be necessary or appropriate to satisfy the goals of this title.

(B) APPLICATION OF REVISIONS- Any revision made pursuant to subparagraph (A) shall only apply to securitizations made after the date of such revision.

(j) Mandatory Arbitration-

(1) IN GENERAL- All disputes between an owner of a qualified security and the qualified sponsor of such security relating to representations and warranties shall be subject to mandatory arbitration procedures established by the Director, in accordance with current market practices.

(2) SELECTION OF ARBITRATOR- Investors (beneficial owners) and sponsors subject to a dispute described under paragraph (1) shall have the right to agree on an independent arbitrator. If the parties cannot agree on an independent arbitrator, the Director shall select an independent arbitrator for the parties.

(3) REPORTING DUTY OF ARBITRATOR-

(A) UPON COMMENCEMENT- The arbitrator shall provide the Federal Housing Finance Agency with notice upon the commencement of any arbitration under this subsection.

(B) UPON CONCLUSION- Upon the conclusion of any arbitration under this subsection, the arbitrator shall provide the Federal Housing Finance Agency with--

(i) the decision reached by the arbitrator; and

(ii) the basis for the arbitrator’s decision, including any evidence or testimony received during the arbitration process.

(k) Disclosure of Information-

(1) IN GENERAL-

(A) IN GENERAL- Not later than 6 months after the date of the enactment of this Act, the Director shall, by rule--

(i) require sponsors of qualified securities to disclose all pertinent information relating to the residential mortgage loans that comprise such securities, including information set forth in the underwriting standards established under subsection (a); and

(ii) allow for the trading of qualified securities under this title in a forward market.

(B) PRIVACY PROTECTIONS- In prescribing the rules required under this paragraph, the Director shall take into consideration issues of consumer privacy and all statutes, rules, and regulations related to privacy of consumer credit information and personally identifiable information. Such rules shall expressly prohibit the identification of specific borrowers.

(2) CONSULTATION- In issuing any rules or regulations under this subsection, the Director shall consult with the Securities and Exchange Commission.

SEC. 102. REPEAL OF CREDIT RISK RETENTION PROVISIONS.

(a) In General- Section 15G of the Securities Exchange Act of 1934 (15 U.S.C. 78o-11) is repealed and any regulations promulgated under such section shall have no force or effect.

(b) Conforming Amendment- Section 27B of the Securities Act of 1933 is amended by striking subsection (d).

(c) Prohibition- The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Bureau of Consumer Financial Protection, and the Securities and Exchange Commission shall not issue any rule or regulation to require risk retention, any premium capture cash reserve account, or any similar mechanism, unless directly authorized by an Act of Congress.

SEC. 103. EXEMPTION FROM REGISTRATION OF CERTAIN SECURITIES CONFORMING TO STANDARD SECURITIZATION AGREEMENTS.

Section 3(a) of the Securities Act of 1933 (15 U.S.C. 77c(a)) is amended by adding at the end the following:

‘(14) Any qualified security, as such term is defined under section 101(b)(4) of the Private Mortgage Market Investment Act.’.

SEC. 104. JUDICIAL REVIEW.

(a) In General- Orders of the Federal Housing Finance Agency under this title shall be subject to review in the same manner, upon the same conditions, and to the same extent, as provided in section 9 of the Securities Act of 1933, with respect to orders of the Securities and Exchange Commission under such title.

(b) Jurisdiction- Jurisdiction of offenses and violations under, and jurisdiction and venue of suits and actions brought to enforce any liability or duty created by, this Act, or any rules or regulations or orders prescribed under the authority thereof, shall be as provided in section 22(a) of the Securities Act of 1933.

SEC. 105. LIABILITY FOR MISLEADING STATEMENTS.

(a) In General- Any person who shall make or cause to be made any statement in any application, report, or document filed with the Federal Housing Finance Agency pursuant to any provisions of this title, or any rule, regulation, or order thereunder, which statement was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or who shall omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall be liable to any person (not knowing that such statement was false or misleading or of such omission) who, in reliance upon such statement or omission, shall have purchased or sold a security issued under the indenture to which such application, report, or document relates, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading or of such omission. A person seeking to enforce such liability may sue at law or in equity in any court of competent jurisdiction. In any such suit the court may, in its discretion, require an undertaking for the payment of the costs of such suit and assess reasonable costs, including reasonable attorneys’ fees, against either party litigant, having due regard to the merits and good faith of the suit or defense. No action shall be maintained to enforce any liability created under this section unless brought within one year after the discovery of the facts constituting the cause of action and within three years after such cause of action accrued.

(b) Rights and Remedies Under Other Law- The rights and remedies provided by this title shall be in addition to any and all other rights and remedies that may exist under the Securities Act of 1933 or the Securities Exchange Act of 1934 or otherwise at law or in equity; but no person permitted to maintain a suit for damages under the provisions of this title shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of.

SEC. 106. UNLAWFUL REPRESENTATION.

It shall be unlawful for any person in offering, selling, or issuing any security pursuant to this title to represent or imply in any manner whatsoever that any action or failure to act by the Federal Housing Finance Agency in the administration of this title means that the Federal Housing Finance Agency has in any way passed upon the merits of, or given approval to, any trustee, indenture, or security, or any transaction or transactions therein, or that any such action or failure to act with regard to any statement or report filed with or examined by the Federal Housing Finance Agency pursuant to this title or any rule, regulation, or order thereunder, has the effect of a finding by the Federal Housing Finance Agency that such statement or report is true and accurate on its face or that it is not false or misleading.

SEC. 107. PENALTIES.

Any person who willfully violates any provision of this title or any rule, regulation, or order thereunder, or any person who willfully, in any application, report, or document filed or required to be filed under the provisions of this title or any rule, regulation, or order thereunder, makes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall be subject to the penalties set forth under section 325 of the Trust Indenture Act of 1934 (15 U.S.C. 77yyy).

SEC. 108. CONTRARY STIPULATIONS VOID.

Any condition, stipulation, or provision binding any person to waive compliance with any provision of this title or with any rule, regulation, or order thereunder shall be void.

TITLE II--TRANSPARENCY

SEC. 201. REQUIREMENTS FOR THE DISCLOSURE OF LOAN-LEVEL INFORMATION TO INVESTORS, RATING AGENCIES, AND REGULATORS.

(a) Rules- Not later than 6 months after the date of the enactment of this title, the Securities and Exchange Commission shall, by rule, require sponsors of residential mortgage-backed securities to disclose all pertinent information relating to the residential mortgage loans that comprise such securities, including information regarding the income and credit score of borrowers, the loan to value ratios, the remaining term to maturity of the loans, and require loan-level data to be updated on a monthly basis. Such rules shall apply to residential mortgage-backed securities that--

(1) are registered pursuant to section 6 of the Securities Act of 1933 (15 U.S.C. 77f); and

(2) are offered or sold in reliance on Regulation D (17 CFR 230.506) and Rule 144A (17 CFR 230.144A) of the Commission.

(b) Privacy Protections- In prescribing the rules required under subsection (a), the Commission shall take into consideration issues of consumer privacy and all statutes, rules, and regulations related to privacy of consumer credit information and personally identifiable information. Such rules shall expressly prohibit the identification of specific borrowers.

(c) Rules Not Applicable to Qualified Securities- The rules prescribed under subsection (a) shall not apply to any qualified security, as such term is defined under section 101(b)(4).

SEC. 202. MANDATORY PERIOD FOR REVIEW OF LOAN-LEVEL INFORMATION PRIOR TO INVESTMENT.

Not later than 6 months after the date of the enactment of this title, the Securities and Exchange Commission shall revise its rules and regulations to require sponsors of asset-backed securities under section 5 of the Securities Act of 1933 (15 U.S.C. 77e) to file a preliminary prospectus containing all material terms of the transaction at least 5 days before investors make an investment decision.

SEC. 203. DISSEMINATION OF PRICING INFORMATION OF ASSET-BACKED SECURITIES.

Not later than 6 months after the date of the enactment of this title, the Securities and Exchange Commission shall, by rule, require the dissemination of transaction, volume, and pricing information of trades in asset-backed securities. Such rules shall require the dissemination of such information, with exceptions as may be prescribed by the Commission in the public interest, while taking into consideration the effect of such dissemination on market liquidity, through the Financial Industry Regulatory Authority’s fixed income transparency facility, referred to as Trade Reporting and Compliance Engine (TRACE), or through a similar vehicle.

SEC. 204. ALPHANUMERIC IDENTIFICATION OF RESIDENTIAL MORTGAGE LOANS IN ASSET-BACKED SECURITIES.

Not later than 6 months after the date of the enactment of this title, the Securities and Exchange Commission shall, by rule, require that each mortgage loan comprising a residential mortgage-backed security be assigned and carry with it a unique alphanumeric code that identifies the loan in order to facilitate ascertaining relevant information about the loan.

TITLE III--ENSURING THE RULE OF LAW

SEC. 301. ENSURE RULE OF LAW AND LEGAL CERTAINTY.

(a) Junior Mortgage or Lien- With respect to the dwelling of a borrower that serves as security for a securitized senior mortgage loan, if the borrower enters into any credit transaction that would result in the creation of a new mortgage or other lien on such dwelling where the loan-to-value ratio of such credit transaction amount is 80 percent or more, the servicer of the senior mortgage loan shall have the right to charge the borrower an additional monthly fee in an amount sufficient to offset the increased risk to repayment of such loan because of the creation of the new mortgage or other lien.

(b) Notice of Junior Mortgage or Lien- With respect to the dwelling of a borrower that serves as security for a securitized senior mortgage loan, if the borrower enters into any credit transaction that would result in the creation of a new mortgage or other lien on such dwelling, the creditor of such new mortgage or other lien shall notify the servicer of the senior mortgage loan of the existence of the new mortgage or other lien.

(c) Prevention of Forced Principal Write-Downs- With respect to a securitized mortgage loan, no Federal department or agency, including the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection, may require a reduction in the principal amount owed on such mortgage loan.

SEC. 302. LIMITATION ON MORTGAGES HELD BY LOAN SERVICERS.

(a) Limitation- Neither the servicer of a residential mortgage loan, nor any affiliate of such servicer, may own, or hold any interest in, any other residential mortgage loan that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on the same dwelling or residential real property that is subject to the mortgage, deed of trust, or other security interest that secures the residential mortgage loan serviced by the servicer.

(b) Definitions- For purposes of this section, the following definitions shall apply:

(1) AFFILIATE- The term ‘affiliate’ means, with respect to a servicer, any person or entity that controls, is controlled by, or is under common control with such servicer, as the Director shall prescribe by regulation.

(2) RESIDENTIAL MORTGAGE LOAN- The term ‘residential mortgage loan’ means any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit transaction under an open end credit plan or an extension of credit relating to a plan described in section 101(53D) of title 11, United States Code.

(3) SERVICER- The term ‘servicer’ has the meaning provided in section 129A of the Truth in Lending Act, except that such term includes a person who makes or holds a residential mortgage loan (including a pool of residential mortgage loans) if such person also services the loan.

(c) Interests- For purposes of subsection (a), ownership of, or holding an interest in a residential mortgage loan includes ownership of, or holding an interest in--

(1) a pool of residential mortgage loans that contains such residential mortgage loan; or

(2) any security based on or backed by a pool of residential mortgage loans that contains such residential mortgage loan.

(d) Effective Date- This section shall apply--

(1) with respect to the servicer (or affiliate of the servicer) of a residential mortgage loan that is originated after the date of the enactment of this Act, on such date of enactment; and

(2) with respect to the servicer (or affiliate of the servicer) of a residential mortgage loan that is originated on or before the date of the enactment of this Act, upon the expiration of the 12-month period beginning upon such date of enactment.

SEC. 303. CLARIFICATION OF QUALIFIED MORTGAGE EXCEPTION.

Subsection (b) of section 129C of the Truth in Lending Act is amended--

(1) in the heading of such subsection, by striking ‘Presumption of Ability To Repay’ and inserting ‘Exception for Qualified Mortgages’;

(2) by amending paragraph (1) to read as follows:

‘(1) IN GENERAL- Subsection (a) shall not apply to a residential mortgage loan that is a qualified mortgage.’; and

(3) in paragraph (3), by amending subparagraph (B) to read as follows:

‘(B) LOAN DEFINITION- The following agencies shall, in consultation with the Bureau, prescribe rules defining the types of loans they insure, guarantee, or administer, as the case may be, that are qualified mortgages for purposes of paragraph (2)(A):

‘(i) The Department of Housing and Urban Development, with regard to mortgages insured under the National Housing Act (12 U.S.C. 1707 et seq.).

‘(ii) The Department of Veterans Affairs, with regard to a loan made or guaranteed by the Secretary of Veterans Affairs.

‘(iii) The Department of Agriculture, with regards to loans guaranteed by the Secretary of Agriculture pursuant to section 502(h) of the Housing Act of 1949 (42 U.S.C. 1472(h)).

‘(iv) The Rural Housing Service, with regards to loans insured by the Rural Housing Service.’.

SEC. 304. FDIC SAFE HARBOR.

If a pool of mortgages meets the standards set forth by the Federal Housing Finance Agency pursuant to title I and is securitized in accordance with the standards set forth under title I, then the Federal Deposit Insurance Corporation safe harbor rule under section 360.6 of title 12, Code of Federal Regulations, shall apply to the pool of mortgages.

SEC. 305. EFFECTIVE DATE.

Except as otherwise specifically provided, this title and the amendments made by this title shall take effect on the date of the enactment of this Act.

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