Establishment of debt guarantee program

(a) Authority of Secretary The Secretary of the Treasury is authorized and shall have the powers and authorities necessary to guarantee, and to enter into commitments to guarantee, holders of debt against loss of principal or interest, or both, on any such debt issued by eligible State programs for purposes of this title, provided that the total principal amount of debt obligations guaranteed by the Secretary— (1) for eligible State programs that cover earthquake peril shall not exceed $3,500,000,000; and (2) for eligible State programs that cover all other perils shall not exceed $17,000,000,000. (b) Conditions for guarantee eligibility A debt guarantee under this section may be made only if the Secretary has issued a commitment to guarantee to an eligible State program. The commitment to guarantee shall be for a period of 3 years and may be extended by the Secretary for a period of 1 year on each annual anniversary of the issuance of the commitment to guarantee. The commitment to guarantee and each extension of such commitment may be issued by the Secretary only if the following requirements are satisfied: (1) The eligible State program submits to the Secretary a report setting forth, in such form and including such information as the Secretary shall require, how the eligible State program plans to repay the debt. (2) Based upon the eligible State program's report submitted pursuant to paragraph (1), the Secretary determines there is reasonable assurance that the eligible State program can meet its repayment obligation under the debt. (3) The eligible State program enters into an agreement with the Secretary, as the Secretary shall require, that the eligible State program will not use Federal funds of any kind or from any Federal source (including any disaster or other financial assistance, loan proceeds, and any other assistance or subsidy) to repay the debt. (4) The commitment to guarantee shall specify the fees for debt guarantee coverage. (5) The maximum term of the debt that shall be specified in a commitment issued under this section may not exceed 30 years. (6) The Secretary determines that the eligible State program does not cover losses arising from floods to properties that are required to be covered by flood insurance, covered by flood insurance, or located in areas having special flood hazards (as such term is defined for purposes of the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973). (c) Mandatory assistance for eligible State programs The Secretary shall upon the request of an eligible State program and pursuant to a commitment to guarantee issued under subsection (b), provide a guarantee under subsection (d) for such eligible State program in the amount requested by such eligible State program, subject to the limitation under subsection (d)(2). (d) Catastrophic debt guarantee A debt guarantee under this subsection for an eligible State program shall be subject to the following requirements: (1) Preconditions The eligible State program shows to the satisfaction of the Secretary that insured losses in the State to the eligible State program arising from the event or events covered by the commitment to guarantee are likely to exceed the eligible State program’s available cash resources, as of immediately before the date of the event. (2) Amount The aggregate principal amount of the debt guaranteed following an event or events referred to in paragraph (1) may not exceed the amount by which the insured losses expected to be sustained by the State program as a result of such event or events exceed 80 percent of the qualifying assets of the eligible State program as stated in the most recent quarterly financial statement filed with the domiciliary regulator of the program prior to the event or events, except that, for eligible State programs that are not required to file such quarterly financial statements, the aggregate principal amount of the debt guaranteed may not exceed the amount by which insured losses sustained by the State program as a result of such event or events exceed 80 percent of the unrestricted net assets as stated in the annual financial statement for the program’s fiscal year ending immediately prior to the event or events. (3) Use of funds Amounts of debt guaranteed under this section shall be used only to pay the costs of issuing debt and to pay the insured losses and loss adjustment expenses incurred by an eligible State program. Such amounts shall not be used for any other purpose. (e) Funding There are authorized to be appropriated such sums as may be necessary to carry out this section.