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Replies to post #44130 on Freddie Mac (FMCC)
SEC. 304. SECONDARY MARKET OPERATIONS
(a) PURCHASE AND SALE OF MORTGAGES; SECONDARY MARKET
OPERATIONS; ADVANCE OF FUNDS OR ORIGINATION OF LOANS;
SETTLEMENT OR EXTINGUISHMENT OF BORROWERS RIGHTS.—
12 U.S.C. 1719
(1) To carry out the purposes set forth in paragraph (a) of section 301, the
operations of the corporation under this section shall be confined so far as
practicable, to mortgages which are deemed by the corporation to be of such
quality, type, and class as to meet, generally, the purchase standards
imposed by private institutional mortgage investors. In the interest of
assuring sound operation, the prices to be paid by the corporation for mort-
gages purchased in its secondary market operations under this section,
should be established, from time to time, within the range of market prices
for the particular class of mortgages involved, as determined by the corpo-
ration. The volume of the corporation’s purchases and sales, and the estab-
lishment of the purchase prices, sale prices, and charges or fees, in its
secondary market operations under this section, should be determined by the
corporation from time to time, and such determinations should be consistent
with the objectives that such purchases and sales should be effected only at
such prices and on such terms as will reasonably prevent excessive use of
the corporation’s facilities, and that the operations of the corporation under
this section should be within its income derived from such operations and
that such operations should be fully self supporting. Nothing in this title
shall prohibit the corporation from purchasing, and making commitments to
purchase, any mortgage with respect to which the Secretary of Housing and
Urban Development has entered into a contract with the corporation to
make interest subsidy payments under section 243 of the National Housing
Act.
Institutional
Investor Purchase
Standard
Operations to be
Self-Supporting
(2) The volume of the corporation’s lending activities and the establishment
of its loan ratios, interest rates, maturities, and charges or fees, in its
secondary market operations under this section, should be determined by the
corporation from time to time; and such determinations, in conjunction with
determinations made under paragraph (1), should be consistent with the
objectives that the lending activities should be conducted on such terms as
will reasonably prevent excessive use of the corporation’s facilities, and that
the operations of the corporation under this section should be within its
income derived from such operations and that such operations should be
fully self-supporting. The corporation shall not be permitted to use its
lending authority (A) to advance funds to a mortgage seller on an interim
basis, using mortgage loans as collateral, pending the sale of the mortgages
in the secondary market; or (B) to originate mortgage loans. Notwithstand-
ing any Federal, State, or other law to the contrary, the corporation is
empowered, in connection with any loan under this section, whether before
or after any default, to provide by contract with the borrower for the
settlement or extinguishment, upon default, of any redemption, equitable, legal, or other right, title, or interest of the borrower in any mortgage or
mortgages that constitute the security for the loan; and with respect to any
such loan, in the event of default and pursuant otherwise to the terms of the
contract, the mortgages that constitute such security shall become the
absolute property of the corporation.
(b) OBLIGATIONS OF THE CORPORATION.—For the purposes of this
section, the corporation is authorized to issue, upon the approval of the
Secretary of the Treasury, and have outstanding at any one time obligations
having such maturities and bearing such rate or rates of interest as may be
determined by the corporation with the approval of the Secretary of the
Treasury, to be redeemable at the option of the corporation before maturity in
such manner as may be stipulated in such obligations. The corporation shall
insert appropriate language in all of its obligations issued under this subsection
clearly indicating that such obligations, together with the interest thereon, are
not guaranteed by the United States and do not constitute a debt or obligation of
the United States or of any agency or instrumentality thereof other than the
corporation. The corporation is authorized to purchase in the open market any
of its obligations outstanding under this subsection at any time and at any price.
General
Obligations
Not Guaranteed by
the United States
(c) PURCHASE OF OBLIGATIONS BY TREASURY; CONDITIONS AND
RESTRICTIONS.—The Secretary of the Treasury is authorized in the
Secretary’s discretion to purchase any obligations issued pursuant to subsection
(b) of this section, as now or hereafter in force, and for such purpose the
Secretary of the Treasury is authorized to use as a public debt transaction the
proceeds of the sale of any securities hereafter issued under chapter 31 of title
31, United States Code, and the purposes for which securities may be issued
under chapter 31 of title 31, United States Code, are extended to include such
purchases. The Secretary of the Treasury shall not at any time purchase any
obligations under this subsection if such purchase would increase the aggregate
principal amount of the Secretary’s then outstanding holdings of such obliga-
tions under this subsection to an amount greater than $2,250,000,000. Each
purchase of obligations by the Secretary of the Treasury under this subsection
shall be upon such terms and conditions as to yield a return at a rate determined
by the Secretary of the Treasury, taking into consideration the current average
rate on outstanding marketable obligations of the United States as of the last
day of the month preceding the making of such purchase. The Secretary of the
Treasury may, at any time, sell, upon such terms and conditions and at such
price or prices as the Secretary shall determine, any of the obligations acquired
by the Secretary under this subsection. All redemptions, purchases, and sales
by the Secretary of the Treasury of such obligations under this subsection shall
be treated as public debt transactions of the United States.
Authority of
Treasury to
Purchase
Obligations
Limitations
Terms and Rates
(d) MORTGAGE-BACKED SECURITIES; ISSUANCE; MATURITIES;
RATES OF INTEREST; EXEMPT SECURITIES; ADEQUACY OF
MORTGAGES TO PERMIT PRINCIPAL AND INTEREST PAYMENTS;
STATEMENT IN SECURITIES.—To provide a greater degree of liquidity to the mortgage investment market and an additional means of financing its
operations under this section, the corporation is authorized to set aside any
mortgages held by it under this section, and, upon approval of the Secretary of
the Treasury, to issue and sell securities based upon the mortgages so set aside.
Securities issued under this subsection may be in the form of debt obligations or
trust certificates of beneficial interest, or both. Securities issued under this
subsection shall have such maturities and bear such rate or rates of interest as
may be determined by the corporation with the approval of the Secretary of the
Treasury. Securities issued by the corporation under this subsection shall, to the
same extent as securities which are direct obligations of or obligations
guaranteed as to principal and interest by the United States, be deemed to be
exempt securities within the meaning of laws administered by the Securities and
Exchange Commission. Mortgages set aside pursuant to this subsection shall at
all times be adequate to enable the corporation to make timely principal and
interest payments on the securities issued and sold pursuant to this subsection.
The corporation shall insert appropriate language in all of the securities issued
under this subsection clearly indicating that such securities, together with the
interest thereon, are not guaranteed by the United States and do not constitute a
debt or obligation of the United States or any agency or instrumentality thereof
other than the corporation.
SEC Exemption
(e) SUBORDINATED OR CONVERTIBLE OBLIGATIONS; ISSUANCE;
MATURITIES; RATE OF INTEREST; REDEMPTION; EXEMPT
SECURITIES; DEBT OR OBLIGATION OF UNITED STATES;
PURCHASES IN OPEN MARKET.—For the purposes of this section, the
corporation is authorized to issue, upon the approval of the Secretary of the
Treasury, obligations which are subordinated to any or all other obligations of
the corporation, including subsequent obligations. The obligations issued under
this subsection shall have such maturities and bear such rate or rates of interest
as may be determined by the corporation with the approval of the Secretary of
the Treasury and may be made redeemable at the option of the corporation
before maturity in such manner as may be stipulated in such obligations. Any
of such obligations may be made convertible into shares of common stock in
such manner, at such price or prices, and at such time or times as may be
stipulated therein. Obligations issued by the corporation under this subsection
shall, to the same extent as securities which are direct obligations of or obliga-
tions guaranteed as to principal or interest by the United States, be deemed to be
exempt securities within the meaning of laws administered by the Securities and
Exchange Commission. The corporation shall insert appropriate language in all
of its obligations issued under this subsection clearly indicating that such obli-
gations, together with the interest thereon, are not guaranteed by the United
States and do not constitute a debt or obligation of the United States or of any
agency or instrumentality thereof other than the corporation. The corporation is
authorized to purchase in the open market any of its obligations outstanding
under this subsection at any time and at any price.
(f) PROHIBITION ON ASSESSMENT OR COLLECTION OF FEE OR
CHARGE BY UNITED STATES.—Except for fees paid pursuant to section
309(g) of this Act and assessments pursuant to section 1316 of the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992, no fee or
charge may be assessed or collected by the United States (including any
executive department, agency, or independent establishment of the United
States) on or with regard to the purchase, acquisition, sale, pledge, issuance,
guarantee, or redemption of any mortgage, asset, obligation, trust certificate of
beneficial interest, or other security by the corporation. No provision of this
subsection shall affect the purchase of any obligation by the Secretary of the
Treasury pursuant to subsection (c) of this section.
Fee Limitation
(g) TEMPORARY AUTHORITY OF TREASURY TO PURCHASE OBLIGA-
TIONS AND SECURITIES; CONDITIONS.—
(1) AUTHORITY TO PURCHASE.—
(A) GENERAL AUTHORITY.—In addition to the authority under
subsection (c) of this section, the Secretary of the Treasury is authorized
to purchase any obligations and other securities issued by the corpora-
tion under any section of this Act, on such terms and conditions as the
Secretary may determine and in such amounts as the Secretary may
determine. Nothing in this subsection requires the corporation to issue
obligations or securities to the Secretary without mutual agreement
between the Secretary and the corporation. Nothing in this subsection
permits or authorizes the Secretary, without the agreement of the corpo-
ration, to engage in open market purchases of the common securities of
the corporation.
Temporary
Authority of
Treasury to
Purchase
Obligations and
Other Securities
(B) EMERGENCY DETERMINATION REQUIRED.—In connection
with any use of this authority, the Secretary must determine that such
actions are necessary to—
(i) provide stability to the financial markets;
(ii) prevent disruptions in the availability of mortgage finance; and
(iii) protect the taxpayer.
(C) CONSIDERATIONS.—To protect the taxpayers, the Secretary of
the Treasury shall take into consideration the following in connection
with exercising the authority contained in this paragraph:
(i) The need for preferences or priorities regarding payments to the
Government.
(ii) Limits on maturity or disposition of obligations or securities to
be purchased.
(iii) The corporation’s plan for the orderly resumption of private
market funding or capital market access.
(iv) The probability of the corporation fulfilling the terms of any
such obligation or other security, including repayment.
(v) The need to maintain the corporation’s status as a private
shareholder-owned company.
(vi) Restrictions on the use of corporation resources, including
limitations on the payment of dividends and executive compensation
and any such other terms and conditions as appropriate for those
purposes.
(D) REPORTS TO CONGRESS.—Upon exercise of this authority, the
Secretary shall report to the Committees on the Budget, Financial
Services, and Ways and Means of the House of Representatives and the
Committees on the Budget, Finance, and Banking, Housing, and Urban
Affairs of the Senate as to the necessity for the purchase and the
determinations made by the Secretary under subparagraph (B) and with
respect to the considerations required under subparagraph (C), and the
size, terms, and probability of repayment or fulfillment of other terms of
such purchase.
(2) RIGHTS; SALE OF OBLIGATIONS AND SECURITIES.—
(A) EXERCISE OF RIGHTS.—The Secretary of the Treasury may, at
any time, exercise any rights received in connection with such
purchases.
(B) SALE OF OBLIGATION AND SECURITIES.—The Secretary of
the Treasury may, at any time, subject to the terms of the security or
otherwise upon terms and conditions and at prices determined by the
Secretary, sell any obligation or security acquired by the Secretary under
this subsection.
(C) DEFICIT REDUCTION.—The Secretary of the Treasury shall
deposit in the General Fund of the Treasury any amounts received by the
Secretary from the sale of any obligation acquired by the Secretary
under this subsection, where such amounts shall be—
(i) dedicated for the sole purpose of deficit reductions; and (ii) prohibited from use as an offset for other spending increases or
revenue reductions.
(D) APPLICATION OF SUNSET TO PURCHASED OBLIGATIONS
OR SECURITIES.—The authority of the Secretary of the Treasury to
hold, exercise any rights received in connection with, or sell, any
obligations or securities purchased is not subject to the provisions of
paragraph (4).
(3) FUNDING.—For the purpose of the authorities granted in this
subsection, the Secretary of the Treasury may use the proceeds of the sale of
any securities issued under chapter 31 of Title 31, and the purposes for
which securities may be issued under chapter 31 of Title 31 are extended to
include such purchases and the exercise of any rights in connection with
such purchases. Any funds expended for the purchase of, or modifications
to, obligations and securities, or the exercise of any rights received in
connection with such purchases under this subsection shall be deemed
appropriated at the time of such purchase, modification, or exercise.
(4) TERMINATION OF AUTHORITY.—The authority under this
subsection (g), with the exception of paragraphs (2) and (3) of this
subsection, shall expire December 31, 2009.
(5) AUTHORITY OF THE DIRECTOR WITH RESPECT TO
EXECUTIVE COMPENSATION.—The Director shall have the power to
approve, disapprove, or modify the executive compensation of the
corporation, as defined under Regulation S-K, 17 C.F.R. 229.
