Freddie Mac Debt Reduction Act of 2011 - Amends the Housing and Community Development Act of 1992 with respect to the exercise of options on mortgage-backed securities by the Federal Home Loan Mortgage Corporation (Freddie Mac) or, during the term of any conservatorship or receivership of Freddie Mac, the Director of the Federal Housing Finance Agency (FHFA).
Directs Freddie Mac (or FHFA as its conservator or receiver) to exercise any option on a mortgage-backed security with a clean-up call option Freddie Mac has issued if the residual holder of the security is willing to share at least 50% of any excess proceeds from the exercise of the option with FHFA as conservator or receiver, which would thereby reduce the liability of taxpayers.
(A clean-up call option allows a transferor of assets, in this case mortgage assets, to buy them back after the outstanding asset values have been reduced substantially.)
Defines mortgage-backed security with a clean-up call option as any mortgage-backed security under which there is an option or right to redeem all remaining classes of the security whenever the aggregate remaining principal of the mortgage would be less than the optional redemption or clean-up call percentage.
Directs the Director to prohibit Freddie Mac and the Federal National Mortgage Association (Fannie Mae) from issuing any mortgage-backed security with a clean-up call option.
Directs the Director to ensure that any excess proceeds received as a result of the exercise of any clean-up call options be used only to reduce the budget deficit of the federal government.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3530 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 3530
To require the exercise of clean-up call options under securities
issued by the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation and to prohibit any new mortgage-backed
securities issued by such enterprises to contain provisions for a
clean-up call option.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 30, 2011
Mr. Perlmutter (for himself and Mr. Schweikert) introduced the
following bill; which was referred to the Committee on Financial
Services
_______________________________________________________________________
A BILL
To require the exercise of clean-up call options under securities
issued by the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation and to prohibit any new mortgage-backed
securities issued by such enterprises to contain provisions for a
clean-up call option.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Freddie Mac Debt Reduction Act of
2011''.
SEC. 2. EXERCISE OF CLEAN-UP CALL OPTIONS.
Subtitle B of title XIII of the Housing and Community Development
Act of 1992 (12 U.S.C. 4611 et seq.) is amended by adding at the end
the following new section:
``SEC. 1369F. EXERCISE OF CLEAN-UP CALL OPTIONS.
``(a) Requirement.--In complying with any restriction under law,
regulation, order, or agreement with the Director or the Secretary of
the Treasury on the mortgage assets issued by the Federal Home Loan
Mortgage Corporation, such Corporation or, during the term of any
conservatorship or receivership of such enterprise pursuant to section
1367, the Director, shall in the case of any mortgage-backed security
with a clean-up call option (as such term is defined in subsection (c)
of this section) that is issued by such Corporation, exercise any
option under which the residual holder is willing to share not less
than 50 percent of any excess proceeds resulting from exercise of such
option or right with the Agency as conservator or receiver of such
Corporation, which thereby reduces the liability of the taxpayers of
the United States.
``(b) Prohibition Regarding Issuance of New Securities.--The
Director shall prohibit the Federal Home Loan Mortgage Corporation and
the Federal National Mortgage Association from issuing, after the date
of the enactment of this section, any mortgage-backed security with a
clean-up call option.
``(c) Use of Proceeds To Reduce Deficit.--The Director shall ensure
that any excess proceeds received as result of the exercise of any
clean-up call option shall be used only to reduce the budget deficit of
the Federal Government.
``(d) Definitions.--
``(1) Mortgage assets.--The term `mortgage assets' means,
with respect to the Federal Home Loan Mortgage Corporation,
assets of such Corporation consisting of mortgages, mortgage
loans, mortgage-related securities, participation certificates,
mortgage-backed commercial paper, obligations of real estate
mortgage investment conduits and similar assets, in each case
to the extent such assets would appear on the balance sheet of
such Corporation in accordance with generally accepted
accounting principles in effect in the United States as of
September 7, 2008 (as set forth in the opinions and
pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board from time to time; and without giving any
effect to any change that may be made after September 7, 2008,
in respect of Statement of Financial Accounting Standards No.
140 or any similar accounting standard).
``(2) Mortgage-backed security with a clean-up call
option.--The term `mortgage-backed security with a clean-up
call option' means any mortgage-backed security under which
there is an option or right to redeem all remaining classes of
such security at such time when the amount of the aggregate
remaining principal would be less than the amount of the
optional redemption or clean-up call percentage, as defined in
the applicable circular offering or offering circular
supplement.
``(3) Excess proceeds.--The term `excess proceeds' means,
with respect to exercise of any clean-up call option, the
excess of the net proceeds from the sale of the collateral
underlying the mortgage-backed security with such option, and
the redemption price as defined in the applicable offering
circular or offering circular supplement.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Capital Markets and Government Sponsored Enterprises.
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