12 USC 1719 - Secondary market operations

View all text of Subchapter III [§ 1716 - § 1723i]

§ 1719. Secondary market operations

(a) Purchase and sale of mortgages; secondary market operations; advance of funds or origination of loans; settlement or extinguishment of borrower’s rights

(1) To carry out the purposes set forth in paragraph (a) 1

1 See References in Text note below.

of section 1716 of this title, 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 mortgages 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 corporation. The volume of the corporation’s purchases and sales, and the establishment 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 subchapter 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 1715z–8 of this title.

(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. Notwithstanding 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

(d) Mortgage-backed securities; issuance; maturities; rates of interest; exempt securities; adequacy of mortgages to permit principal and interest payments; statement in securities

(e) Subordinated or convertible obligations; issuance; maturities; rate of interest; redemption; exempt securities; debt or obligation of United States; purchases in open market

(f) Prohibition on assessment or collection of fee or charge by United States

(g) Temporary authority of Treasury to purchase obligations and securities; conditions

(1) Authority to purchase

(A) General authority

(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.

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

(2) Rights; sale of obligations and securities

(A) Exercise of rights

(B) Sale of obligation and securities

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 reduction; and

(ii) prohibited from use as an offset for other spending increases or revenue reductions.

(D) Application of sunset to purchased obligations or securities

(3) Funding

(4) Termination of authority

(5) Authority of the Director with respect to executive compensation

(June 27, 1934, ch. 847, title III, § 304, 48 Stat. 1254; July 1, 1948, ch. 784, § 1, 62 Stat. 1206; Aug. 2, 1954, ch. 649, title II, § 201, 68 Stat. 615; Aug. 7, 1956, ch. 1029, title II, §§ 203, 204, 70 Stat. 1096; Pub. L. 85–10, § 1(c), Mar. 27, 1957, 71 Stat. 7; Pub. L. 85–104, title II, § 203, July 12, 1957, 71 Stat. 298; Pub. L. 86–372, title III, §§ 302, 305(a), Sept. 23, 1959, 73 Stat. 669, 670; Pub. L. 87–70, title VI, § 603(d), (e), June 30, 1961, 75 Stat. 176, 177; Pub. L. 88–560, title VII, §§ 701(b)(2), 703, 704, Sept. 2, 1964, 78 Stat. 800, 802; Pub. L. 89–566, § 1, Sept. 10, 1966, 80 Stat. 738; Pub. L. 89–754, title X, § 1007, Nov. 3, 1966, 80 Stat. 1285; Pub. L. 90–448, title VIII, §§ 802(p)–(s), 804(a), 805, Aug. 1, 1968, 82 Stat. 538, 542, 543; Pub. L. 91–351, title V, § 504, July 24, 1970, 84 Stat. 461; Pub. L. 93–383, title VIII, § 806(j), Aug. 22, 1974, 88 Stat. 728; Pub. L. 97–320, title VII, § 707(b), Oct. 15, 1982, 96 Stat. 1540; Pub. L. 98–479, title II, § 203(a)(1), Oct. 17, 1984, 98 Stat. 2229; Pub. L. 100–242, title IV, § 441(a), Feb. 5, 1988, 101 Stat. 1921; Pub. L. 101–73, title VII, § 731(m)(2), Aug. 9, 1989, 103 Stat. 436; Pub. L. 102–550, title XIII, § 1381(e)–(g), (s)(2), Oct. 28, 1992, 106 Stat. 3996, 4001; Pub. L. 110–289, div. A, title I, § 1117(a), July 30, 2008, 122 Stat. 2683; Pub. L. 111–203, title XIII, § 1304(a), July 21, 2010, 124 Stat. 2134.)