Sec. 4. Pilot program for mortgage insurance risk transfer
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Not later than one year after the date of the enactment of this Act, the Director shall require each enterprise to establish a pilot program to increase the amount of risk that is shared by the enterprise using private mortgage insurance. Each pilot program established pursuant to subsection
(a)shall meet the following requirements: The pilot program shall have a duration of 5 years. Except as provided in subparagraph (B), in each year each enterprise shall purchase under its pilot program sufficient qualifying loans or pools of qualifying loans such that the aggregate unpaid principal balance of all qualifying loans or loan pools purchased by the enterprise is not less than $25,000,000,000. The amount of qualifying loans that each enterprise is required to purchase each year under paragraph
(1)may be reduced if the Director and the Secretary of the Treasury jointly— make a determination that such a reduction is necessary to prevent an adverse impact to the housing market; and submit to the Congress a report describing the justification for the determination referred to in clause (i). For each transaction under the pilot program involving a qualifying loan, the loan originator shall select an eligible mortgage insurance provider or providers, consistent with existing market practice. Mortgage insurance premiums applicable to qualifying loans purchased by an enterprise under the pilot program shall be subject to requirements and limitations under applicable State laws. Each enterprise shall set and publish guarantee fees, including up-front delivery fees and loan level price adjustments, commensurate with the enterprise’s reduced credit risk resulting from any new risk-transfer transaction under the pilot program. Not later than the conclusion of the fifth year of the pilot program, the Director shall submit a report to the Congress that assesses the extent to which the pilot program under this section has— transferred credit risk from the enterprises to the private sector; resulted in reduced guarantee fees for mortgage originators; and produced benefits or costs for borrowers under qualifying loans under the program. Based on the assessments in the report required under subsection (c), the Director may extend the program beyond its fifth year of operation if the Director determines that such extension would be in the public interest. Nothing in this section shall prevent the Director from establishing additional requirements on participants in the pilot program necessary to mitigate counterparty risk to the enterprises comparable to other credit risk-transfer structures. For purposes of this section, the following definitions shall apply: The term Director means the Director of the Federal Housing Finance Agency. The term eligible mortgage insurance provider means a company that— is regulated as a mortgage guaranty insurance company by its State of domicile; provides qualifying mortgage insurance; and satisfies— minimum requirements established or recognized by the Director, pursuant to public notice and comment, with respect to capital, leverage, and reserve requirements; or Private Mortgage Insurer Eligibility Requirements published by the enterprises on April 17, 2015; and any additional requirements added by subsection
(e)of this section. The term enterprise has the meaning given such term in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4502 ). The term qualifying loan means a first mortgage loan that— is secured by a one- to four-family residence; and is subject to qualifying mortgage insurance. The term qualifying mortgage insurance means, with respect to a qualifying loan, primary mortgage guaranty insurance for such qualifying loan that— is placed at the time the qualifying loan is originated; guarantees or insures that portion of the unpaid principal balance of the qualifying loan that is in excess of 50 percent of the value of the property securing the mortgage; and is provided by an eligible mortgage insurance provider.
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Sec. 4
Pilot program for mortgage insurance risk transfer
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