12 U.S.C. § 1721 : US Code - Section 1721: Management and liquidation functions of Government National Mortgage Association

Search 12 U.S.C. § 1721 : US Code - Section 1721: Management and liquidation functions of Government National Mortgage Association

(a) Separate accountability of assets and liabilities
To carry out the purposes set forth in paragraph (c) (!1) of
section 1716 of this title, the Association is authorized and
directed, as of the close of the cutoff date determined by the
Association pursuant to section 1718(d) (!1) of this title, to
establish separate accountability for all of its assets and
liabilities (exclusive of capital, surplus, surplus reserves, and
undistributed earnings to be evidenced by preferred stock as
provided in section 1718(d) (!1) of this title, but inclusive of
all rights and obligations under any outstanding contracts), and to
maintain such separate accountability for the management and
orderly liquidation of such assets and liabilities as provided in
this section.
(b) Issuance of obligations to expedite substitution of private
financing
For the purposes of this section and to assure that, to the
maximum extent, and as rapidly as possible, private financing will
be substituted for Treasury borrowings otherwise required to carry
mortgages held under the aforesaid separate accountability, the
Association 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 Association with the
approval of the Secretary of the Treasury, to be redeemable at the
option of the Association before maturity in such manner as may be
stipulated in such obligations; but in no event shall any such
obligations be issued if, at the time of such proposed issuance,
and as a consequence thereof, the resulting aggregate amount of its
outstanding obligations under this subsection would exceed the
amount of the Association's ownership under the aforesaid separate
accountability, free from any liens or encumbrances, of cash,
mortgages, and obligations of the United States or guaranteed
thereby, or obligations, participations, or other instruments which
are lawful investments for fiduciary, trust or public funds. The
proceeds of any private financing effected under this subsection
shall be paid to the Secretary of the Treasury in reduction of the
indebtedness of the Association to the Secretary of the Treasury
under the aforesaid separate accountability. The Association 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
Association. The Association is authorized to purchase in the open
market any of its obligations outstanding under this subsection at
any time and at any price.
(c) Cutoff date as controlling purchases; total amount of mortgages
and commitments
No mortgage shall be purchased by the Association in its
operations under this section except pursuant to and in accordance
with the terms of a contract or commitment to purchase the same
made prior to the cutoff date provided for in section 1718(d) (!1)
of this title, which contract or commitment became a part of the
aforesaid separate accountability, and the total amount of
mortgages and commitments held by the Association under this
section shall not, in any event, exceed $3,350,000,000: Provided,
That such maximum amount shall be progressively reduced by the
amount of cash realizations on account of principal of mortgages
held under the aforesaid separate accountability and by
cancellation of any commitments to purchase mortgages thereunder,
as reflected by the books of the Association, with the objective
that the entire aforesaid maximum amount shall be eliminated with
the orderly liquidation of all mortgages held under the aforesaid
separate accountability: And provided further, That nothing in this
subsection shall preclude the Association from granting such usual
and customary increases in the amounts of outstanding commitments
(resulting from increased costs or otherwise) as have theretofore
been covered by like increases in commitments granted by the
agencies of the Federal Government insuring or guaranteeing the
mortgages. There shall be excluded from the total amounts set forth
in this subsection the amounts of any mortgages which, subsequent
to May 31, 1954, are transferred by law to the Association and held
under the aforesaid separate accountability.
(d) Issuance of obligations sufficient to carry out functions;
character; purchase
The Association may issue to the Secretary of the Treasury its
obligations in an amount outstanding at any one time sufficient to
enable the Association to carry out its functions under this
section, such obligations to mature not more than five years from
their respective dates of issue, to be redeemable at the option of
the Association before maturity in such manner as may be stipulated
in such obligations. Each such obligation shall bear interest 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 issuance of the obligation of the Association. The
Secretary of the Treasury is authorized to purchase any obligations
of the Association to be issued under this section, and for such
purpose the Secretary of the Treasury is authorized to use as a
public debt transaction the proceeds from 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 any purchases of the Association's obligations
hereunder.
(e) Acquisition of mortgages offered by Secretary of Housing and
Urban Development
Notwithstanding any other provision of law, the Association is
authorized, under the aforesaid separate accountability, to make
commitments to purchase, and to purchase, service, or sell any
obligations offered to it by the Secretary of Housing and Urban
Development, or any mortgages covering residential property offered
to it by any Federal instrumentality, or the head thereof. These
shall be excluded from the total amounts set forth in subsection
(c) of this section the amounts of any obligations or mortgages
purchased by the Association pursuant to this subsection.
(f) Transfer of funds
Notwithstanding any of the provisions of this chapter or of any
other law, an amount equal to the net decrease for the preceding
fiscal year in the aggregate principal amount of all mortgages
owned by the Association under this section shall, as of July 1 of
each of the years 1961 through 1964, be transferred to and merged
with the authority provided under section 1720(a) (!2) of this
title, and the amount of such authority as specified in section
1720(c) (!2) of this title shall be increased by any amounts so
transferred.
(g) Guarantee of principal and interest on trust certificates and
other securities; fees and charges; subrogation; contract for
extinguishment of right, title, or interest in mortgages;
protection of interests; full faith and credit; commitments
limited; limitation on fees or charges
(1) The Association is authorized, upon such terms and conditions
as it may deem appropriate, to guarantee the timely payment of
principal of and interest on such trust certificates or other
securities as shall (i) be issued by the corporation under section
1719(d) of this title, or by any other issuer approved for the
purposes of this subsection by the Association, and (ii) be based
on and backed by a trust or pool composed of mortgages which are
insured under this chapter, or which are insured or guaranteed
under the Servicemen's Readjustment Act of 1944, title V of the
Housing Act of 1949 [42 U.S.C. 1471 et seq.], or chapter 37 of
title 38, or which are guaranteed under title XIII of the Public
Health Service Act [42 U.S.C. 300e et seq.]; (!3) or guaranteed
under section 1715z-13a of this title. The Association shall
collect from the issuer a reasonable fee for any guaranty under
this subsection and shall make such charges as it may determine to
be reasonable for the analysis of any trust or other security
arrangement proposed by the issuer. In the event the issuer is
unable to make any payment of principal of or interest on any
security guaranteed under this subsection, the Association shall
make such payment as and when due in cash, and thereupon shall be
subrogated fully to the rights satisfied by such payment. In any
case in which (I) Federal law requires the reduction of the
interest rate on any mortgage backing a security guaranteed under
this subsection, (II) the mortgagor under the mortgage is a person
in the military service, and (III) the issuer of such security
fails to receive from the mortgagor the full amount of interest
payment due, the Association may make payments of interest on the
security in amounts not exceeding the difference between the amount
payable under the interest rate on the mortgage and the amount of
interest actually paid by the mortgagor. The Association is hereby
empowered, in connection with any guaranty under this subsection,
whether before or after any default, to provide by contract with
the issuer for the extinguishment, upon default by the issuer, of
any redemption, equitable, legal, or other right, title, or
interest of the issuer in any mortgage or mortgages constituting
the trust or pool against which the guaranteed securities are
issued; and with respect to any issue of guaranteed securities, in
the event of default and pursuant otherwise to the terms of the
contract, the mortgages that constitute such trust or pool shall
become the absolute property of the Association subject only to the
unsatisfied rights of the holders of the securities based on and
backed by such trust or pool. No State or local law, and no Federal
law (except Federal law enacted expressly in limitation of this
subsection after October 8, 1980), shall preclude or limit the
exercise by the Association of (A) its power to contract with the
issuer on the terms stated in the preceding sentence, (B) its
rights to enforce any such contract with the issuer, or (C) its
ownership rights, as provided in the preceding sentence, in the
mortgages constituting the trust or pool against which the
guaranteed securities are issued. The full faith and credit of the
United States is pledged to the payment of all amounts which may be
required to be paid under any guaranty under this subsection. There
shall be excluded from the total amounts set forth in subsection
(c) of this section the amounts of any mortgages acquired by the
Association as a result of its operations under this subsection.
(2) Notwithstanding any other provision of law and subject only
to the absence of qualified requests for guarantees, to the
authority provided in this subsection, and to the extent of or in
such amounts as any funding limitation approved in appropriation
Acts, the Association shall enter into commitments to issue
guarantees under this subsection in an aggregate amount of
$110,000,000,000 during fiscal year 1996. There are authorized to
be appropriated to cover the costs (as such term is defined in
section 661a of title 2) of guarantees issued under this chapter by
the Association such sums as may be necessary for fiscal year 1996.
(3)(A) No fee or charge in excess of 6 basis points 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 any guaranty of the timely payment of
principal or interest on securities or notes based on or backed by
mortgages that are secured by 1- to 4-family dwellings and (i)
insured by the Federal Housing Administration under subchapter II
of this chapter; or (ii) insured or guaranteed under the
Serviceman's Readjustment Act of 1944, chapter 37 of title 38, or
title V of the Housing Act of 1949 [42 U.S.C. 1471 et seq.].
(B) The fees charged for the guaranty of securities or on notes
based on or backed by mortgages not referred to in subparagraph
(A), as authorized by other provisions of law, shall be set by the
Association at a level not more than necessary to create reserves
sufficient to meet anticipated claims based upon actuarial
analysis, and for no other purpose.
(C) Fees or charges for the issuance of commitments or
miscellaneous administrative fees of the Association shall not be
on a competitive auction basis and shall remain at the level set
for such fees or charges as of September 1, 1985, except that such
fees or charges may be increased if reasonably related to the cost
of administering the program, and for no other purpose.
(D) Not less than 90 days before increasing any fee or charge
under subparagraph (B) or (C), the Secretary shall submit to the
Congress a certification that such increase is solely for the
purpose specified in such subparagraph.
(E)(i) Notwithstanding subparagraphs (A) through (D), fees
charged for the guarantee of, or commitment to guarantee,
multiclass securities backed by a trust or pool of securities or
notes guaranteed by the Association under this subsection, and
other related fees shall be charged by the Association in an amount
the Association deems appropriate. The Association shall take such
action as may be necessary to reasonably assure that such portion
of the benefit, resulting from the Association's multiclass
securities program, as the Association determines is appropriate
accrues to mortgagors who execute eligible mortgages after August
10, 1993.
(ii) The Association shall provide for the initial implementation
of the program for which fees are charged under the first sentence
of clause (i) by notice published in the Federal Register. The
notice shall be effective upon publication and shall provide an
opportunity for public comment. Not later than 12 months after
publication of the notice, the Association shall issue regulations
for such program based on the notice, comments received, and the
experience of the Association in carrying out the program during
such period.
(iii) The Association shall consult with persons or entities in
such manner as the Association deems appropriate to ensure the
efficient commencement and operation of the multiclass securities
program.
(iv) No State or local law, and no Federal law (except Federal
law enacted expressly in limitation of this clause after August 10,
1993) shall preclude or limit the exercise by the Association of
its power to contract with persons or entities, and its rights to
enforce such contracts, for the purpose of ensuring the efficient
commencement and continued operation of the multiclass securities
program.