§ 1454. — Purchase and sale of mortgages; residential mortgages; conventional mortgages; terms and conditions of sale or other disposition; authority to enter into, perform, and carry out transactions.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1454]
TITLE 12--BANKS AND BANKING
CHAPTER 11A--FEDERAL HOME LOAN MORTGAGE CORPORATION
Sec. 1454. Purchase and sale of mortgages; residential
mortgages; conventional mortgages; terms and conditions of sale
or other disposition; authority to enter into, perform, and
carry out transactions
(a) Authority for purchase and sale; residential mortgages; conventional
mortgages; terms and conditions of sale or other disposition;
lending activities
(1) The Corporation is authorized to purchase, and make commitments
to purchase, residential mortgages. The Corporation may hold and deal
with, and sell or otherwise dispose of, pursuant to commitments or
otherwise, any such mortgage or interest therein. The operations of the
Corporation under this section shall be confined so far as practicable
to residential 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. The
Corporation may establish requirements, and impose charges or fees,
which may be regarded as elements of pricing, for different classes of
sellers or servicers, and for such purposes the Corporation is
authorized to classify sellers or servicers according to type, size,
location, assets, or, without limitation on the generality of the
foregoing, on such other basis or bases of differentiation as the
Corporation may consider necessary or appropriate to effectuate the
purposes or provisions of this chapter. The Corporation may specify
requirements concerning among other things, (A) minimum net worth; (B)
supervisory mechanisms; (C) warranty compensation mechanisms; (D) prior
approval of facilities; (E) prior origination and servicing experience
with respect to different types of mortgages; (F) capital contributions
and substitutes; (G) mortgage purchase volume limits; and (H) reduction
of mortgage purchases during periods of borrowing. With respect to any
particular type of seller, the Corporation shall not be required to make
available programs involving prior approval of mortgages, optional
delivery of mortgages, and purchase of other than conventional mortgages
to an extent greater than the Corporation elects to make such programs
available to other types of eligible sellers. Any requirements specified
by the Corporation pursuant to the preceding three sentences must bear a
rational relationship to the purposes or provisions of this chapter, but
will not be considered discriminatory solely on the grounds of
differential effects on types of eligible sellers. Insofar as is
practicable, the Corporation shall make reasonable efforts to encourage
participation in its programs by each type of eligible seller. Nothing
in this section authorizes the Corporation to impose any charge or fee
upon any mortgagee approved by the Secretary of Housing and Urban
Development for participation in any mortgage insurance program under
the National Housing Act [12 U.S.C. 1701 et seq.] solely because of such
status.
(2) No conventional mortgage secured by a property comprising one-
to four-family dwelling units shall be purchased under this section if
the outstanding principal balance of the mortgage at the time of
purchase exceeds 80 per centum of the value of the property securing the
mortgage, unless (A) the seller retains a participation of not less than
10 per centum in the mortgage; (B) for such period and under such
circumstances as the Corporation may require, the seller agrees to
repurchase or replace the mortgage upon demand of the Corporation in the
event that the mortgage is in default; or (C) that portion of the unpaid
principal balance of the mortgage which is in excess of such 80 per
centum is guaranteed or insured by a qualified insurer as determined by
the Corporation. The Corporation shall not issue a commitment to
purchase a conventional mortgage prior to the date the mortgage is
originated, if such mortgage is eligible for purchase under the
preceding sentence only by reason of compliance with the requirements of
clause (A) of such sentence. The Corporation may purchase a conventional
mortgage which was originated more than one year prior to the purchase
date only if the seller is the Federal Deposit Insurance Corporation,
the Resolution Trust Corporation, the National Credit Union
Administration, or any other seller currently engaged in mortgage
lending or investing activities. With respect to any transaction in
which a seller contemporaneously sells mortgages originated more than
one year old prior to the date of sale to the Corporation and receives
in payment for such mortgages securities representing undivided
interests only in those mortgages, the Corporation shall not impose any
fee or charge upon an eligible seller which is not a member of a Federal
Home Loan Bank which differs from that imposed upon an eligible seller
which is such a member. The Corporation shall establish limitations
governing the maximum original principal obligation of conventional
mortgages that are purchased by it; in any case in which the Corporation
purchases a participation interest in such a mortgage, the limitation
shall be calculated with respect to the total original principal
obligation of the mortgage and not merely with respect to the interest
purchased by the Corporation. Such limitations shall not exceed $93,750
for a mortgage secured by a single-family residence, $120,000 for a
mortgage secured by a two-family residence, $145,000 for a mortgage
secured by a three-family residence, and $180,000 for a mortgage secured
by a four-family residence, except that such maximum limitations shall
be adjusted effective January 1 of each year beginning with 1981. Each
such adjustment shall be made by adding to each such amount (as it may
have been previously adjusted) a percentage thereof equal to the
percentage increase during the twelve-month period ending with the
previous October in the national average one-family house price in the
monthly survey of all major lenders conducted by the Federal Housing
Finance Board. The foregoing limitations may be increased by not to
exceed 50 per centum with respect to properties located in Alaska, Guam,
Hawaii, and the Virgin Islands.
(3) The sale or other disposition by the Corporation of a mortgage
under this section may be with or without recourse, and shall be upon
such terms and conditions relating to resale, repurchase, guaranty,
substitution, replacement, or otherwise as the Corporation may
prescribe.
(4)(A) The Corporation is authorized to purchase, service, sell,
lend on the security of, and otherwise deal in (i) residential mortgages
that are secured by a subordinate lien against a one- to four-family
residence that is the principal residence of the mortgagor; and (ii)
residential mortgages that are secured by a subordinate lien against a
property comprising five or more family dwelling units. If the
Corporation shall have purchased, serviced, sold, or otherwise dealt
with any other outstanding mortgage secured by the same residence, the
aggregate original amount of such other mortgage and the mortgage
authorized to be purchased, serviced, sold, or otherwise dealt with
under this paragraph shall not exceed the applicable limitation
determined under paragraph (2).
(B) The Corporation shall establish limitations governing the
maximum original principal obligation of such mortgages. In any case in
which the Corporation purchases a participation interest in such a
mortgage, the limitation shall be calculated with respect to the total
original principal obligation of such mortgage secured by a subordinate
lien and not merely with respect to the interest purchased by the
Corporation. Such limitations shall not exceed (i) with respect to
mortgages described in subparagraph (A)(i), 50 per centum of the single-
family residence mortgage limitation determined under paragraph (2); and
(ii) with respect to mortgages described in subparagraph (A)(ii), the
applicable limitation determined under paragraph (2).
(C) No subordinate mortgage against a one- to four-family residence
shall be purchased by the Corporation if the total outstanding
indebtedness secured by the property as a result of such mortgage
exceeds 80 per centum of the value of such property unless (i) that
portion of such total outstanding indebtedness that exceeds such 80 per
centum is guaranteed or insured by a qualified insurer as determined by
the Corporation; (ii) the seller retains a participation of not less
than 10 per centum in the mortgage; or (iii) for such period and under
such circumstances as the Corporation may require, the seller agrees to
repurchase or replace the mortgage upon demand of the Corporation in the
event that the mortgage is in default. The Corporation shall not issue a
commitment to purchase a subordinate mortgage prior to the date the
mortgage is originated, if such mortgage is eligible for purchase under
the preceding sentence only by reason of compliance with the
requirements of clause (iii) of such sentence.
(5) The Corporation is authorized to lend on the security of, and to
make commitments to lend on the security of, any mortgage that the
Corporation is authorized to purchase under this section. 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 paragraph, shall be determined by the
Corporation from time to time; and such determinations shall be
consistent with the objectives that the lending activities shall 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 paragraph shall be within its income derived from such
operations and that such operations shall be fully self-supporting. The
Corporation shall not be permitted to use its lending authority under
this paragraph (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 hereby empowered, in connection with any loan under this
paragraph, 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) Authority of other institutions to enter into, perform, and carry
out transactions
Notwithstanding any other law, authority to enter into and to
perform and carry out any transactions or matter referred to in this
section is conferred on any Federal home loan bank, the Resolution Trust
Corporation, the Federal Deposit Insurance Corporation, the National
Credit Union Administration, any Federal savings and loan association,
any Federal home loan bank member, and any other financial institution
the deposits or accounts of which are insured by an agency of the United
States to the extent that Congress has the power to confer such
authority.
(c) Prior approval of Secretary for new programs
The Corporation may not implement any new program (as such term is
defined in section 4502 of this title) before obtaining the approval of
the Secretary under section 4542 of this title.
(Pub. L. 91-351, title III, Sec. 305, July 24, 1970, 84 Stat. 454; Pub.
L. 93-383, title VIII, Sec. 805(a), (b), Aug. 22, 1974, 88 Stat. 726;
Pub. L. 93-495, title I, Sec. 113, Oct. 28, 1974, 88 Stat. 1506; Pub. L.
95-128, title IV, Sec. 408(b), Oct. 12, 1977, 91 Stat. 1138; Pub. L. 95-
557, title III, Sec. 321(a), (b), Oct. 31, 1978, 92 Stat. 2101; Pub. L.
96-294, title V, Sec. 534(a)(1), June 30, 1980, 94 Stat. 740; Pub. L.
96-399, title III, Sec. 313(b), Oct. 8, 1980, 94 Stat. 1644; Pub. L. 97-
110, title II, Secs. 202(a), (b)(1), 203, Dec. 26, 1981, 95 Stat. 1514,
1515; Pub. L. 98-440, title II, Secs. 201(b), 203(b)(2), 205(b), 206(b),
Oct. 3, 1984, 98 Stat. 1693-1696; Pub. L. 100-122, Sec. 2(b)(2), Sept.
30, 1987, 101 Stat. 793; Pub. L. 100-154, Nov. 5, 1987, 101 Stat. 890;
Pub. L. 100-170, Nov. 17, 1987, 101 Stat. 914; Pub. L. 100-179, Dec. 3,
1987, 101 Stat. 1018; Pub. L. 100-200, Dec. 21, 1987, 101 Stat. 1327;
Pub. L. 100-242, title IV, Secs. 443(b), 445, Feb. 5, 1988, 101 Stat.
1922; Pub. L. 100-628, title X, Sec. 1068(b), Nov. 7, 1988, 102 Stat.
3726; Pub. L. 101-73, title VII, Sec. 731(e), (f)(2), Aug. 9, 1989, 103
Stat. 433; Pub. L. 102-550, title XIII, Sec. 1382(j)-(m), Oct. 28, 1992,
106 Stat. 4004; Pub. L. 105-276, title II, Sec. 202(a), title V,
Sec. 582(a)(14), Oct. 21, 1998, 112 Stat. 2483, 2644; Pub. L. 105-277,
div. A, Sec. 122, Oct. 21, 1998, 112 Stat. 2681-546.)
References in Text
The National Housing Act, referred to in subsec. (a)(1), is act June
27, 1934, ch. 847, 48 Stat. 1246, as amended, which is classified
principally to chapter 13 (Sec. 1701 et seq.) of this title. For
complete classification of this Act to the Code, see section 1701 of
this title and Tables.
This chapter, referred to in subsec. (a)(1), was in the original
``this Act'' and has been translated as reading ``this title'', meaning
title III of Pub. L. 91-351, to reflect the probable intent of Congress.
Amendments
1998--Subsec. (a)(2). Pub. L. 105-276, Sec. 582(a)(14), struck out
penultimate sentence which read as follows: ``With respect to mortgages
secured by property comprising five or more family dwelling units, such
limitations shall not exceed 125 per centum of the dollar amounts set
forth in section 207(c)(3) of the National Housing Act, except that such
limitations may be increased by the Corporation (taking into account
construction costs) to not to exceed 240 per centum of such dollar
amounts in any geographical area for which the Secretary of Housing and
Urban Development determines under such section that cost levels require
any increase in the dollar amount limitations under such section.''
Pub. L. 105-276, Sec. 202(a), which directed the amendment of the
first sentence of par. (2) by striking out ``or'' at end of cl. (B) and
substituting ``; or (D) the mortgage is subject to default loss
protection that the Corporation determines is financially equal or
superior, on an individual or pooled basis, to the protection provided
by clause (C) of this sentence: Provided, That if the Director of the
Office of Federal Housing Enterprise Oversight subsequently finds that
such default loss protection determined by the Corporation does not
provide such equal or superior protection, the Corporation shall provide
such additional default loss protection for such mortgage, as approved
by the Director of the Office of Federal Housing Enterprise Oversight,
necessary to provide such equal or superior protection.'' for the period
at end, was repealed by Pub. L. 105-277, effective upon enactment of
Pub. L. 105-276.
1992--Subsec. (a)(1). Pub. L. 102-550, Sec. 1382(j), in first
sentence, substituted a period for ``from any Federal home loan bank,
the Resolution Trust Corporation, the Federal Deposit Insurance
Corporation, the National Credit Union Administration, any member of a
Federal home loan bank, or any other financial institution the deposits
or accounts of which are insured by an agency of the United States, or
from any financial institution the deposits or accounts of which are
insured under the laws of any State if the total amount of time and
savings deposits held in all such institutions in that State is more
than 20 per centum of the total amount of such deposits in all banks,
building and loan, savings and loan, and homestead associations
(including cooperative banks) in that State or from any mortgagee
approved by the Secretary of Housing and Urban Development for
participation in any mortgage insurance program under the National
Housing Act or from any public utility carrying out activities in
accordance with the requirements of title II of the National Energy
Conservation Policy Act if the residential mortgage to be purchased is a
loan or advance of credit the original proceeds of which are applied for
in order to finance the purchase and installation of residential energy
conservation measures (as defined in section 210(11) of the National
Energy Conservation Policy Act) in residential real estate.'' and in
second sentence, substituted a period for ``, and the servicing on any
such mortgage may be performed by the seller or by a financial
institution qualified as a seller under the provisions of the preceding
sentence, or by a mortgagee approved by the Secretary of Housing and
Urban Development for participation in any mortgage insurance program
under the National Housing Act, with which institution or mortgagee the
seller may contract.''
Subsec. (a)(2). Pub. L. 102-550, Sec. 1382(k), substituted ``Hawaii,
and the Virgin Islands'' for ``and Hawaii'' in last sentence.
Subsec. (c). Pub. L. 102-550, Sec. 1382(l), (m), added subsec. (c)
and struck out former subsec. (c) which read as follows: ``The Board of
Directors may not impose any annual limitation on the maximum aggregate
principal amount of mortgages purchased by the Corporation.''
1989--Subsec. (a)(1). Pub. L. 101-73, Sec. 731(e)(1), (f)(2)(A),
substituted ``Resolution Trust Corporation'' for ``Federal Savings and
Loan Insurance Corporation'' and inserted at end ``Nothing in this
section authorizes the Corporation to impose any charge or fee upon any
mortgagee approved by the Secretary of Housing and Urban Development for
participation in any mortgage insurance program under the National
Housing Act solely because of such status.''
Subsec. (a)(2). Pub. L. 101-73, Sec. 731(f)(2), substituted
``Resolution Trust Corporation'' for ``Federal Savings and Loan
Insurance Corporation'' and ``Federal Housing Finance Board'' for
``Federal Home Loan Bank Board''.
Subsec. (a)(5). Pub. L. 101-73, Sec. 731(e)(2), added par. (5).
Subsec. (b). Pub. L. 101-73, Sec. 731(f)(2)(A), substituted
``Resolution Trust Corporation'' for ``Federal Savings and Loan
Insurance Corporation''.
1988--Subsec. (a)(4)(A)(i). Pub. L. 100-242, Sec. 443(b), struck out
``through March 15, 1988,'' before ``residential mortgages''.
Subsec. (a)(4)(A)(ii). Pub. L. 100-628 struck out ``until October 1,
1985,'' before ``residential mortgages''.
Subsec. (c). Pub. L. 100-242, Sec. 445, added subsec. (c).
1987--Subsec. (a)(4)(A)(i). Pub. L. 100-200 substituted ``March 15,
1988'' for ``December 16, 1987''.
Pub. L. 100-179 substituted ``December 16, 1987'' for ``December 2,
1987''.
Pub. L. 100-170 substituted ``December 2, 1987'' for ``November 15,
1987''.
Pub. L. 100-154 substituted ``November 15, 1987'' for ``October 31,
1987''.
Pub. L. 100-122 substituted ``through October 31, 1987'' for ``until
October 1, 1987''.
1984--Subsec. (a)(2). Pub. L. 98-440, Sec. 205(b), which directed
insertion of ``secured by a property comprising one- to four-family
dwelling units'' after ``mortgages'' where first appearing in first
sentence was executed by inserting that phrase after ``No conventional
mortgage'' as the probable intent of Congress.
Pub. L. 98-440, Sec. 201(b), substituted ``The Corporation shall
establish limitations governing the maximum original principal
obligation of conventional mortgages that are purchased by it; in any
case in which the Corporation purchases a participation interest in such
a mortgage, the limitation shall be calculated with respect to the total
original principal obligation of the mortgage and not merely with
respect to the interest purchased by the Corporation'' for ``The
Corporation shall establish limitations governing the maximum principal
obligation of conventional mortgages purchased by it''.
Pub. L. 98-440, Sec. 206(b), inserted provision that the limitations
set forth in section 1713(c)(3) of this title may be increased by the
Corporation (taking into account construction costs) to not to exceed
240 per centum of such dollar amounts in any geographical area for which
the Secretary of Housing and Urban Development determines under such
section that cost levels required any increase in the dollar amount
limitations under such section.
Subsec. (a)(4). Pub. L. 98-440, Sec. 203(b)(2), added par. (4).
1981--Subsec. (a)(1). Pub. L. 97-110, Sec. 203, added the Federal
Deposit Insurance Corporation and the National Credit Union
Administration to the enumeration of agencies from which the Federal
Home Loan Mortgage Corporation is authorized to purchase residential
mortgages.
Subsec. (a)(2). Pub. L. 97-110, Sec. 202(a), substituted provisions
authorizing the Corporation to purchase a conventional mortgage which
was originated more than one year prior to the purchase date only if the
seller is the Federal Deposit Insurance Corporation, the Federal Savings
and Loan Insurance Corporation, the National Credit Union
Administration, or any other seller currently engaged in mortgage
lending or investing activities for provisions which had authorized the
Corporation to purchase a conventional mortgage which was originated
more than one year prior to the purchase date only if the seller was
currently engaged in mortgage lending or investing activities and if, as
a result thereof, the cumulative aggregate of the principal balances of
all conventional mortgages purchased by the Corporation which were
originated more than one year prior to the date of purchases did not
exceed 20 per centum of the cumulative aggregate of the principal
balances of all conventional mortgages purchased by the Corporation.
Pub. L. 97-110, Sec. 202(b)(1), inserted provision that, with
respect to any transaction in which a seller contemporaneously sells
mortgages originated more than one year old prior to the date of sale to
the Corporation and receives in payment for such mortgages securities
representing undivided interests only in those mortgages, the
Corporation shall not impose any fee or charge upon an eligible seller
which is not a member of a Federal Home Loan Bank which differs from
that imposed upon an eligible seller which is such a member.
Subsec. (b). Pub. L. 97-110, Sec. 203, added the Federal Deposit
Insurance Corporation and the National Credit Union Administration to
the enumeration of agencies having the authority to enter into and to
perform and carry out transactions and matters referred to in this
section.
1980--Subsec. (a)(1). Pub. L. 96-294 inserted provisions relating to
public utilities carrying out activities in accordance with the
requirements of title II of the National Energy Conservation Policy Act.
Subsec. (a)(2). Pub. L. 96-399 inserted provisions setting forth
limitations respecting mortgages secured by a single-family residence,
etc., and struck out provisions making the limitations set forth in
first proviso of first sentence of section 1464(c) of this title.
1978--Subsec. (a)(1). Pub. L. 95-557 inserted reference to any
mortgagee approved by the Secretary of Housing and Urban Development at
end of first sentence, and inserted last five sentences relating to
imposition of charges or fees for different classes of sellers or
servicers, etc.
1977--Subsec. (a)(2). Pub. L. 95-128 inserted ``by more than 25 per
centum'' after ``exceed'' in last sentence.
1974--Subsec. (a)(1). Pub. L. 93-495 inserted provisions relating to
State insurance of deposits or accounts in financial institutions.
Pub. L. 93-383, Sec. 805(a), substituted ``. The Corporation may
hold'' for ``, and to hold'' and inserted provisions relating to the
servicing of any such mortgage by the seller or qualified financial
institution.
Subsec. (a)(2). Pub. L. 93-383, Sec. 805(b), substituted ``80'' for
``75'' in two places and ``not exceed 20'' for ``not exceed 10'', struck
out ``private'' before ``insurer'' in cl. (C), and substituted
provisions relating to limitations contained in first proviso of first
sentence of section 1464(c) of this title, for provisions relating to
limitations applicable if the mortgage were insured by the Secretary
under section 1709(b) or 1713 of this title.
Effective Date of 1998 Amendments
Pub. L. 105-277, div. A, Sec. 122, Oct. 21, 1998, 112 Stat. 2681-
546, provided that the amendment made by section 122 is effective upon
enactment of Pub. L. 105-276 (Oct. 21, 1998).
Amendment by title V of Pub. L. 105-276 effective and applicable
beginning upon Oct. 1, 1999, except as otherwise provided, with
provision that Secretary may implement amendment before such date,
except to extent that such amendment provides otherwise, and with
savings provision, see section 503 of Pub. L. 105-276, set out as a note
under section 1437 of Title 42, The Public Health and Welfare.
Effective Date of 1981 Amendment
Section 202(b)(2) of Pub. L. 97-110 provided that: ``The amendment
made by paragraph (1) [amending this section] shall take effect on
January 1, 1982, and shall apply to commitments entered into on or after
such date.''
Effective Date of 1978 Amendment
Section 321(c) of Pub. L. 95-557 provided: ``The amendments made by
this section [amending this section] shall become effective at the end
of the two hundred and ten calendar days after enactment of this Act
[Oct. 31, 1978], but not before January 31, 1979, or on such earlier
date as the Federal Home Loan Mortgage Corporation may prescribe.''
Savings Provision
Pub. L. 105-276, title V, Sec. 582(b), Oct. 21, 1998, 112 Stat.
2644, provided that: ``Except to the extent otherwise provided in this
Act [see Tables for classification], the repeals made by subsection (a)
[amending this section and section 1717 of this title, repealing
sections 1437a-1, 1437j-1, 1438, and 11903a of Title 42, The Public
Health and Welfare, amending provisions set out as a note under section
1437f of Title 42, and repealing provisions set out as notes under
section 1701z-6 of this title and sections 1437f, 1437g, and 1437t of
Title 42] shall not affect any legally binding obligations entered into
before the effective date under section 503(a) of this Act [set out as a
note under section 1437 of Title 42].''
Section Referred to in Other Sections
This section is referred to in sections 24, 1431, 1436, 1441, 1452,
1455, 1464, 1709, 1757, 4542, 4902 of this title.
