§ 1718. — Capitalization of Federal National Mortgage Association.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1718]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER III--NATIONAL MORTGAGE ASSOCIATIONS
Sec. 1718. Capitalization of Federal National Mortgage
Association
(a) Common stock; preferred stock; transferability of shares
The corporation shall have common stock, without par value, which
shall be vested with all voting rights, each share being entitled to one
vote with rights of cumulative voting at all elections of directors. The
corporation may eliminate such rights of cumulative voting by a
resolution adopted by its board of directors and approved by the holders
of a majority of the shares of common stock voting in person or by proxy
at the annual meeting, or other special meeting, at which such
resolution is considered. The corporation may have preferred stock on
such terms and conditions as the board of directors shall prescribe. The
free transferability of the stock at all times to any person, firm,
corporation, or other entity shall not be restricted except that, as to
the corporation, it shall be transferable only on the books of the
corporation. The corporation may issue shares of common stock in return
for appropriate payments into capital or capital and surplus.
(b) Fees and charges; annual transfer of earnings to general surplus
account
(1) The corporation may impose charges or fees, which may be
regarded as elements of pricing, with the objective that all costs and
expenses of the operations of the corporation should be within its
income derived from such operations and that such operations should be
fully self-supporting.
(2) All earnings from the operations of the corporation shall
annually be transferred to the general surplus account of the
corporation. At any time, funds of the general surplus account may, in
the discretion of the board of directors, be transferred to reserves.
(c) Capital distributions from general surplus account; minimum
capitalization levels
(1) Except as provided in paragraph (2), the corporation may make
such capital distributions (as such term is defined in section 4502 of
this title) as may be declared by the board of directors. All capital
distributions shall be charged against the general surplus account of
the corporation.
(2) The corporation may not make any capital distribution that would
decrease the total capital of the corporation (as such term is defined
in section 4502 of this title) to an amount less than the risk-based
capital level for the corporation established under section 4611 of this
title or that would decrease the core capital of the corporation (as
such term is defined in section 4502 of this title) to an amount less
than the minimum capital level for the corporation established under
section 4612 of this title, without prior written approval of the
distribution by the Director of the Office of Federal Housing Enterprise
Oversight of the Department of Housing and Urban Development.
(d) Institutions eligible to purchase stock
Notwithstanding any other provision of law, any institution,
including a national bank or State member bank of the Federal Reserve
System or any member of the Federal Deposit Insurance Corporation, trust
company, or other banking organization, organized under any law of the
United States, including the laws relating to the District of Columbia,
shall be authorized to purchase shares of common stock of the
corporation and to hold or dispose of such stock, subject to the
provisions of this subchapter.
(June 27, 1934, ch. 847, title III, Sec. 303, 48 Stat. 1254; Feb. 3,
1938, ch. 13, Sec. 7, 52 Stat. 24; July 1, 1948, ch. 784, Sec. 1, 62
Stat. 1206; Aug. 2, 1954, ch. 649, title II, Sec. 201, 68 Stat. 613;
Aug. 7, 1956, ch. 1029, title II, Sec. 202, 70 Stat. 1096; Pub. L. 85-
10, Sec. 1(a), (b), Mar. 27, 1957, 71 Stat. 7; Pub. L. 85-104, title II,
Secs. 201, 202, July 12, 1957, 71 Stat. 298; Pub. L. 87-70, title VI,
Sec. 603(b), (c), June 30, 1961, 75 Stat. 176; Pub. L. 89-117, title X,
Sec. 1004(b), Aug. 10, 1965, 79 Stat. 501; Pub. L. 89-566, Sec. 2, Sept.
10, 1966, 80 Stat. 738; Pub. L. 90-19, Sec. 1(j)(2), (l), May 25, 1967,
81 Stat. 18; Pub. L. 90-448, title VIII, Sec. 802 (i)-(n), (s), Aug. 1,
1968, 82 Stat. 537, 538; Pub. L. 91-609, title IX, Sec. 902, Dec. 31,
1970, 84 Stat. 1808; Pub. L. 93-383, title VIII, Sec. 806(g)-(i), Aug.
22, 1974, 88 Stat. 727, 728; Pub. L. 97-320, title VII, Sec. 707(a),
Oct. 15, 1982, 96 Stat. 1540; Pub. L. 100-242, title IV, Sec. 442, Feb.
5, 1988, 101 Stat. 1921; Pub. L. 102-550, title XIII, Sec. 1381(d), Oct.
28, 1992, 106 Stat. 3995.)
Amendments
1992--Subsec. (a). Pub. L. 102-550, Sec. 1381(d)(1), inserted at end
``The corporation may issue shares of common stock in return for
appropriate payments into capital or capital and surplus.''
Subsecs. (b), (c). Pub. L. 102-550, Sec. 1381(d)(2), added subsecs.
(b) and (c) and struck out former subsec. (b) which related to
accumulation of surplus, fees and charges, and transfer of surplus funds
to reserves and former subsec. (c) which related to issuance of common
stock for capital contributions and payment of dividends.
Subsecs. (d), (f). Pub. L. 102-550, Sec. 1381(d)(3), (4),
redesignated subsec. (f) as (d), struck out ``to make payments to the
corporation of the nonrefundable capital contributions referred to in
subsection (b) of this section, to receive stock of the corporation
evidencing such capital contributions,'' after ``shall be authorized'',
and substituted ``shares of common stock of the corporation'' for
``additional shares of such stock,''.
1988--Subsec. (a). Pub. L. 100-242 inserted after first sentence
``The corporation may eliminate such rights of cumulative voting by a
resolution adopted by its board of directors and approved by the holders
of a majority of the shares of common stock voting in person or by proxy
at the annual meeting, or other special meeting, at which such
resolution is considered.''
1982--Subsec. (a). Pub. L. 97-320, Sec. 707(a)(1), inserted
provision that the corporation may have preferred stock on such terms
and conditions as the board of directors shall prescribe.
Pub. L. 97-320, Sec. 707(a)(2), struck out ``common'' before ``stock
at all times''.
1974--Subsec. (a). Pub. L. 93-383, Sec. 806(g), struck out
provisions relating to issuance, par value, retirement, etc., of
nonvoting preferred stock.
Subsec. (c). Pub. L. 93-383, Sec. 806(h), substituted provisions
relating to purchases subsequent to Sept. 1, 1968, for provisions
relating to purchases subsequent to the effective date established under
section 808 of the Housing and Urban Development Act of 1968, and struck
out provisions relating to retirement of all outstanding preferred
stock.
Subsec. (d). Pub. L. 93-383, Sec. 806(i), struck out subsec. (d)
authorizing issuance of preferred stock to Secretary of the Treasury.
Subsec. (e). Pub. L. 93-383, Sec. 806(i), struck out subsec. (e)
relating to exchange of preferred stock delivered to Secretary of the
Treasury pursuant to subsec. (d) of this section.
1970--Subsec. (b). Pub. L. 91-609 substituted ``may accumulate'' and
``private sources'' for ``shall accumulate'' and ``private and other
sources'', respectively, struck out ``nor less than 1 per centum'' after
``2 per centum'', and inserted ``with the approval of the Secretary of
Housing and Urban Development'' after ``as determined from time to time
by the corporation''.
1968--Subsec. (a). Pub. L. 90-448, Sec. 802(i), (s)(1), changed
common stock of the Association from nonvoting common stock with a par
value of $100 to common stock, without par value, vested with all voting
rights and each share entitled to one vote with rights of cumulative
voting at all elections of directors, provided that the free
transferability of the common stock shall not be restricted except that,
as to the corporation, it shall be transferable only on the books of the
corporation, struck out provisions which permitted retirement of the
preferred stock only out of funds of the capital surplus and the general
surplus accounts of the Association, and which prohibited retirements of
common stock if, as a consequence, the amount thereof remaining
outstanding would be less than $100,000,000, and substituted provisions
requiring retirement of preferred stock to be made as rapidly as
possible subsequent to the effective date of section 808 of the Housing
and Urban Development Act of 1968, for provisions which required
retirement as rapidly as the Association shall deem feasible, and
``corporation'' for ``Association'' in six places.
Subsec. (b). Pub. L. 90-448, Sec. 802(j), (s)(1), substituted
``corporation'' for ``Association'' in six places, and ``fees, which may
be regarded as elements of pricing, with'' for ``fees for its services
with'', and struck out sentence which stated this subsection shall be
subject to the exceptions set forth in section 1722 of this title.
Subsec. (c). Pub. L. 90-448, Sec. 802(k), (s)(1), substituted
``corporation'' for ``Association'' in five places, and ``the aggregate
amount of cash dividends paid on account of any share of such stock
shall not exceed any rate which may be determined from time to time by
the Secretary of Housing and Urban Development to be a fair rate of
return after consideration of the current earnings and capital condition
of the corporation'' for ``the general surplus account of the
Association shall not be reduced through the payment of dividends
applicable to such common stock which exceed in the aggregate 5 per
centum of the par value of the outstanding common stock of the
Association'', inserted provisions authorizing the corporation to issue
additional shares in return for appropriate payments into capital or
capital and surplus, directing the corporation to require each services
of its mortgages to own a minimum amount of common stock of the
corporation, and prescribing the minimum amount, and struck out
provisions which related to issuance of common stock only in
denominations of $100 or multiples thereof.
Subsec. (d). Pub. L. 90-448, Sec. 802(l), (s), substituted
``corporation'' for ``Association'' in six places, and ``corporation's''
for ``Association's'', and inserted provisions prohibiting issuance of
preferred stock subsequent to the effective date established pursuant to
section 808 of the Housing and Urban Development Act of 1968.
Subsec. (e). Pub. L. 90-448, Sec. 802(s), substituted
``corporation'' for ``Association'' in four places, and
``corporation's'' for ``Association's''.
Subsec. (f). Pub. L. 90-448, Sec. 802(m), (s)(1), substituted
``corporation'' for ``Association'' in two places and inserted
provisions authorizing purchase of additional shares of stock of the
corporation.
Subsec. (g). Pub. L. 90-448, Sec. 802(n), repealed subsec. (g) which
directed Secretary of Housing and Urban Development to transmit
recommendations for eventual transfer of operations to private
shareholders.
1967--Subsec. (a). Pub. L. 90-19, Sec. 1(j)(2), substituted
``Secretary of the Treasury's'' for ``Secretary's'' in last sentence.
Subsec. (g). Pub. L. 90-19, Sec. 1(l), substituted ``Secretary of
Housing and Urban Development'' for ``Housing and Home Finance
Administrator''.
1966--Subsec. (d). Pub. L. 89-566, Sec. 2(a), raised from
$115,000,000 to $225,000,000 the amount of the par value of the
preferred stock of the Association which the Secretary of the Treasury
is authorized and directed to accept in addition to the original
$21,000,000.
Subsec. (e). Pub. L. 89-566, Sec. 2(b), substituted ``$225,000,000''
for ``$115,000,000'' in second sentence.
1965--Subsec. (b). Pub. L. 89-117 inserted ``other'' sources to
private sources as the areas from which the Association shall accumulate
funds for its capital surplus account.
1961--Subsec. (b). Pub. L. 87-70, Sec. 603(b), directed the
Association to require each borrower to make payments, equal to not more
than one-half of one per centum of the amount lent to the borrower under
section 1719 of this title.
Subsec. (c). Pub. L. 87-70, Sec. 603(c), required issuance of stock
to borrowers and inserted ``(adjusted by reason of any payments into
surplus required by the Association)''.
1957--Subsec. (b). Pub. L. 85-104, Sec. 201, substituted provisions
which fixed capital contributions payments at maximum of 2 percent and
minimum of 1 percent of unpaid principal amounts of mortgages purchased
or to be purchased under section 1719 of this title, for former
provisions which provided for capital contributions payments equal to 2
percent of the unpaid principal amounts of mortgages purchased by the
Association or equal to such greater or lesser percentage but not less
than 1 percent, as the Association might determine.
Subsec. (d). Pub. L. 85-104, Sec. 202(a), substituted
``$115,000,000'' for ``$50,000,000'' in second sentence.
Pub. L. 85-10, Sec. 1(a), inserted sentence directing Secretary of
the Treasury to accept additional $50,000,000 of preferred stock issued
by Association.
Subsec. (e). Pub. L. 85-104, Sec. 202(b), substituted
``$115,000,000'' for ``$50,000,000'' in second sentence.
Pub. L. 85-10, Sec. 1(b), inserted ``the first sentence of'' before
``subsection (d)'' in first sentence, and inserted sentence providing
that Association stock delivered to Treasury pursuant to second sentence
of subsec. (d) of this section be in exchange for Association notes of
$50,000,000.
1956--Subsec. (b). Act Aug. 7, 1956, substituted provisions which
required mortgage sellers to make contributions equal to not more than 2
percent of the unpaid principal amount of mortgages or greater or lesser
percentage as the Association may determine, but not less than 1
percent, for former provisions that contributions equal 3 percent of the
unpaid amount of the mortgages or such greater percentage as from time
to time the Association may determine.
1954--Act Aug. 2, 1954, amended section generally to substitute
provisions relating to capitalization (formerly covered in section 1716
of this title) and to general financial arrangements and operations for
provisions relating merely to use and investment of moneys not invested
in mortgages or in operating facilities (such provisions now being
covered by section 1723b of this title), and the maintenance of
necessary reserves.
1948--Act July 1, 1948, made section applicable to the Association
instead of to any of the national mortgage associations.
1938--Act Feb. 3, 1938, inserted ``or in bonds or other
obligations'' and inserted ``and may purchase in the open market notes,
bonds, debentures, or such other obligations issued under section 1717
of this title''.
Effective Date of 1968 Amendment
For effective date of amendment by title VIII of Pub. L. 90-448, see
section 808 of Pub. L. 90-448, set out as an Effective Date note under
section 1716b of this title.
Special Assistance Funds of Association for Financing Low-Cost Homes
Section 1006 of Pub. L. 89-754, title X, Nov. 3, 1966, 80 Stat.
1285, provided that the Congress found that the sharp decline in new
home construction over the past year threatened to undercut the present
high level of prosperity and employment as such declines had in the
past; that the substantial reduction which had taken place had its
greatest impact on families of modest income who were seeking to achieve
the goal of homeownership; that this decline in homebuilding was due
primarily to the shortage of mortgage financing on terms which moderate
income families could afford; and that national policy objectives in the
field of housing and community development were thereby being thwarted.
The Congress therefore expressed its intent that the special assistance
funds made available to the Federal National Mortgage Association for
the financing of new low-cost homes by the Act of September 10, 1966
(Public Law 89-556) [amending sections 1718, 1719, and 1720 of this
title], should be released immediately to halt the continuing decline in
the construction of new homes for families of moderate incomes.
Section Referred to in Other Sections
This section is referred to in sections 1717, 1721, 4513 of this
title; title 26 sections 162, 1054.
