Sec. 202. Standard form credit risk-sharing mechanisms, products, structures, contracts, or other security agreements
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Pursuant to section 201(a)(2), the Corporation shall develop standard form credit-risk sharing mechanisms, products, structures, contracts, or other security agreements which shall require that the first loss position of private market holders of a covered security insured under this Act— is adequate to cover losses that might be incurred as a result of adverse economic conditions, wherein such conditions are generally consistent with the economic conditions, including national home price declines, observed in the United States during moderate to severe recessions experienced during the last 100 years; and is not less than 10 percent of the principal or face value of the covered security.
The Corporation shall complete the development and implementation of the mechanisms, products, structures, contracts, or other security agreements required under subsection
(a)not later than 5 years after the date of enactment of this Act. In developing the mechanisms, products, structures, contracts, or other security agreements required under subsection (a), the Corporation shall— examine proposals that include a senior-subordinated deal structure, credit-linked structures, and the use of regulated guarantors with sufficient equity capital to absorb losses associated with moderate or severe economic downturns; consider any risk-sharing mechanisms, products, structures, contracts, or other security agreements undertaken by the business entity announced by the Federal Housing Finance Agency and established by the enterprises to provide a common securitization platform for issuers in the secondary mortgage market; consider how each proposed mechanism, product, structure, contract, or other security agreement— minimizes any potential long-term negative cost to the taxpayer; impacts the availability of mortgage credit for— small financial institutions, such as credit unions and community and mid-size banks; and consumers; influences mortgage affordability; allows for loan modifications and foreclosure prevention alternatives; interacts with the To-Be-Announced market; and facilitates market liquidity and resiliency; and ensure that lenders of all sizes and from all geographic locations, including rural locations, have equitable access to secondary mortgage market financing. Not later than 1 year after the date of enactment of this Act, and annually thereafter until the end of the 5-year period provided in paragraph (1), the Corporation shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives that— details the benefits and drawbacks of each mechanism, product, structure, contract, or other security agreement that the Director considered in carrying out the requirement of this section; describes the operation and execution of any mechanisms, products, structures, contracts, or other security agreements that the Director determines best fulfills the requirements of this section; and explains how the Corporation arrived at the determination made under clause (ii). After the expiration of the 5-year period provided in paragraph
(1)and the submission of the report required under subparagraph (A), each time the Corporation develops an additional standard form credit risk-sharing mechanism, product, structure, contract, or other security agreement that fulfills the requirements of this section, the Corporation shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives addressing the identical concerns set forth under clauses
(i)through
(iii)of subparagraph (A).