Sec. 303. Guarantee fees; catastrophic fund; supplemental insurance
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The MFA shall charge a guarantee fee under this section in connection with any guarantee issued by the MFA of timely payment of principal and interest on the qualified mortgage-backed securities. At all times, the guarantee fee shall be set at an equal amount for all qualified issuers. The amount of the guarantee fee shall be adjusted periodically, as necessary to fulfill the purposes described in paragraph (2). The purposes of the guarantee fees are— to fund the operations of the MFA; to capitalize the Catastrophic Fund; to cover any losses; and to purchase supplemental insurance coverage, as provided in subsection (d).
The Board of Directors shall approve the amount of guarantee fees and any adjustments thereto, and shall determine the percentage of the guarantee fees, if any, that will be allocated to the Catastrophic Fund in accordance with subsection (b). Such percentage may be adjusted by the Board of Directors semiannually, as necessary to ensure that the Catastrophic Fund is adequately capitalized. There is established in the Treasury of the United States a fund to be known as the Catastrophic Fund , which the MFA shall— maintain and administer; use to carry out its insurance and guarantee functions, in the manner provided by this Act; and invest in accordance with subsection (c).
The Catastrophic Fund shall be credited with— the amount of guarantee fees, if any, that the Board of Directors determines should be allocated to the Catastrophic Fund to protect against catastrophic losses; any amounts earned on investments of the Catastrophic Fund, other than as needed in connection with the routine operation of the guarantee business; and such other amounts as may otherwise be credited to the Catastrophic Fund by the Board of Directors. The Catastrophic Fund shall be solely available to the MFA for use by the MFA to satisfy obligations under its guarantee in accordance with this Act.
Amounts remaining in the Catastrophic Fund following the repayment of all qualified mortgage-backed securities shall be distributed to the United States Treasury in accordance with section 102(c). Beginning 1 year after the date on which the MFA becomes fully operational, and each year thereafter, the Board of Directors shall commission an independent actuarial study to determine the adequacy of the guarantee fees and of the capitalization of the Catastrophic Fund, the results of which study shall be made available to the public by the Board of Directors.
The Board of Directors shall rely on such study to determine the amount of the guarantee fee that shall be charged and the percentage of the guarantee fees that shall be allocated to the Catastrophic Fund. Amounts in the Catastrophic Fund that are not otherwise employed shall be invested in obligations of the United States or in obligations guaranteed as to principal and interest by the United States. The MFA may not sell or purchase any obligations described in paragraph
(1)for its own account, at any one time aggregating in excess of $1,000,000, without the approval of the Secretary. The Secretary may approve a transaction or class of transactions subject to the provisions of this paragraph under such conditions as the Secretary may determine. The MFA may use a portion of the guarantee fee to purchase supplemental insurance coverage on offerings of qualified mortgage-backed securities. The guarantee fee shall be set in an amount that is sufficient to cover the cost of such supplemental insurance, in addition to the other purposes set forth in subsection (a)(2). The supplemental insurance shall insure against losses, if any, after giving effect to the primary, first loss mortgage insurance coverage on mortgages collateralizing the mortgage-backed securities. The supplemental insurance shall be structured to further reduce the exposure of the United States Government to losses arising under its guarantee on qualified mortgage-backed securities that are covered by supplemental insurance. Separate insurance coverage shall be provided for each new offering of qualified mortgage-backed securities. Not later than 1 year after the MFA certification date, the Board of Directors shall issue guidelines to determine whether supplemental coverage— is being offered on commercially reasonable terms; and is reasonably likely to mitigate the risk that the MFA will have to make any payment pursuant to its guarantee. Beginning not later than 3 years after the MFA certification date, the MFA shall purchase supplemental coverage for each offering of qualified mortgage-backed securities if the MFA determines that the supplemental coverage meets the guidelines issued by the Board of Directors under subparagraph (A). The MFA may purchase supplemental coverage from any mortgage insurance company authorized to provide mortgage insurance on a qualified residential mortgage, or from any other licensed insurance company with comparable regulatory oversight, capital, and reserve requirements.