Capital framework and return regulation for government-sponsored enterprises

(a) Treasury line of credit and periodic commitment fee (1) Continuation of treasury support Notwithstanding section 8 of this Act, the lines of credit established under section 2.1 of the Senior Preferred Stock Purchase Agreements for each enterprise shall remain in effect. (2) Availability of unused credit facility Each enterprise shall retain access to any unused and outstanding balances of the lines of credit described in paragraph (1), which shall serve exclusively as a catastrophic risk backstop subordinate to any capital requirements made by the Director pursuant to section 1313B of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4513b). (3) Commitment fee structure To retain access to the line of credit described in paragraph (1), each enterprise shall pay an annual commitment fee, the cost of which shall be determined by the Secretary of the Treasury, in consultation with the Director, based on prevailing market risk indicators, including— (A) credit default swap spreads of comparable financial institutions; and (B) implied risk pricing in systemic risk assessments determined by the Board of Governors of the Federal Reserve System and the Director. (b) Establishment of allowable return on equity range (1) Purpose of return on equity range For the purposes of ensuring financial stability and preventing excessive risk-taking, the Director, in consultation with the Secretary of the Treasury, shall establish a return on equity range requirement for the enterprises. (2) Return on equity range determination The Director shall initially establish the return on equity range between 9 and 13 percent, as determined through an economic assessment of financial market conditions. (3) Review and adjustments on return on equity range Not later than 5 years after the date of the enactment of this section, and not later than every 5 years thereafter, the Director— (A) shall review and adjust as necessary the return on equity range established under this section; (B) may make adjustments to the range to a percentage that is outside the percentage range described in paragraph (2); and (C) shall make the adjustments through rulemaking. (c) Commitment fee adjustments and capital retention (1) Commitment fee in normal operating conditions In any fiscal year in which an enterprise reports a return on equity range within the established range, the enterprise shall pay the commitment fee as determined under subsection (a)(3). (2) Capital retention when return on equity falls below the lower bound In any fiscal year in which an enterprise reports a return on equity range below the lower bound of the established range, the enterprise shall— (A) be exempt from paying the commitment fee for such year; and (B) prioritize the retention of earnings to bolster capital reserves, unless the core capital levels of the enterprise meet or exceed the minimum requirements under any capital requirements made by the Director pursuant to section 1313B of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4513b). (3) Excess earnings remittance when roe exceeds upper bound In any fiscal year in which an enterprise reports a return on equity range above the upper bound of the established range, the enterprise shall— (A) pay the commitment fee as determined under subsection (a)(3); and (B) remit all net earnings exceeding the upper bound to the Secretary of the Treasury to compensate the Federal Government for its implicit risk-bearing role. (d) Dividend restrictions based on capital adequacy (1) Dividend restriction for capital deficiency An enterprise may not issue dividends in any fiscal year in which the core capital of the enterprise falls below the minimum levels required under any capital requirements made by the Director pursuant to section 1313B of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4513b). (2) Dividend Allowance in low return on equity years with Adequate Capital If an enterprise core capital meets or exceeds the minimum capital requirements made by the Director pursuant to section 1313B of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4513b), dividend payments may not be restricted, notwithstanding years in which the return on equity falls below the lower bound of the established range. (e) Implementation and Regulatory Oversight (1) Rulemaking and oversight The Director, in consultation with the Secretary of the Treasury, shall issue rules to implement this section, including— (A) the methodologies for calculating the commitment fee described in subsection (a)(3); (B) the procedures for setting and adjusting the return on equity range described in subsection (b); (C) the capital retention requirements described in subsection (c)(2); and (D) the mechanisms for remittances of excess earnings described in subsection (c)(3)(B). (2) Annual reporting to congress Not later than 1 year after the date of the enactment of this section, and annually thereafter, the Director shall submit to the Financial Services Committee of the House of Representatives and the Banking, Housing, and Urban Affairs Committee of the Senate a report that details— (A) the financial performance of each enterprise; (B) the status of the lines of credit described in subsection (a), including the amount of unused credit available; (C) the effect of the return on equity range on housing finance stability and affordability; and (D) any recommendation for legislative or regulatory adjustments to enhance the oversight and risk management of the enterprises. (f) Definitions In this section: (1) Director The term Director means the Director of the Federal Housing Finance Agency. (2) Enterprise 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). (3) Established range The term established range means the return on equity range established under subsection (b) and any adjustments made to such range under subsection (b)(3). (4) Return on equity The term return on equity means the annual net income of the enterprise divided by value of total shareholder equity of the enterprise, expressed as a percentage. (5) Senior Preferred Stock Purchase Agreement The term Senior Preferred Stock Purchase Agreement means, with respect to an enterprise, the Amended and Restated Senior Preferred Stock Purchase Agreements, dated September 26, 2008, amended May 6, 2009, further amended December 24, 2009, and further amended August 17, 2012, between the Secretary of the Treasury and such enterprise.