§ 1719. — Secondary market operations.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1719]
TITLE 12--BANKS AND BANKING
CHAPTER 13--NATIONAL HOUSING
SUBCHAPTER III--NATIONAL MORTGAGE ASSOCIATIONS
Sec. 1719. Secondary market operations
(a) Purchase and sale of mortgages; secondary market operations; advance
of funds or origination of loans; settlement or extinguishment
of borrower's rights
(1) To carry out the purposes set forth in paragraph (a) \1\ of
section 1716 of this title, the operations of the corporation under this
section shall be confined, so far as practicable, to 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. In the interest of assuring sound operation, the
prices to be paid by the corporation for mortgages purchased in its
secondary market operations under this section, should be established,
from time to time, within the range of market prices for the particular
class of mortgages involved, as determined by the corporation. The
volume of the corporation's purchases and sales, and the establishment
of the purchase prices, sale prices, and charges or fees, in its
secondary market operations under this section, should be determined by
the corporation from time to time, and such determinations should be
consistent with the objectives that such purchases and sales should be
effected only at such prices and on such terms as will reasonably
prevent excessive use of the corporation's facilities, and that the
operations of the corporation under this section should be within its
income derived from such operations and that such operations should be
fully self-supporting. Nothing in this subchapter shall prohibit the
corporation from purchasing, and making commitments to purchase, any
mortgage with respect to which the Secretary of Housing and Urban
Development has entered into a contract with the corporation to make
interest subsidy payments under section 1715z-8 of this title.
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\1\ See References in Text note below.
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(2) 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 section,
should be determined by the corporation from time to time; and such
determinations, in conjunction with determinations made under paragraph
(1), should be consistent with the objectives that the lending
activities should 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 section should be within its income
derived from such operations and that such operations should be fully
self-supporting. The corporation shall not be permitted to use its
lending authority (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 empowered, in connection with any loan under this
section, 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) Obligations of the Corporation
For the purposes of this section, the corporation 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
corporation with the approval of the Secretary of the Treasury, to be
redeemable at the option of the corporation before maturity in such
manner as may be stipulated in such obligations. The corporation 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 any agency or
instrumentality thereof other than the corporation. The corporation is
authorized to purchase in the open market any of its obligations
outstanding under this subsection at any time and at any price.
(c) Purchase of obligations by Treasury; conditions and restrictions
The Secretary of the Treasury is authorized in the Secretary's
discretion to purchase any obligations issued pursuant to subsection (b)
of this section, as now or hereafter in force, and for such purpose the
Secretary of the Treasury is authorized to use as a public debt
transaction the proceeds of the sale of any securities hereafter 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 such
purchases. The Secretary of the Treasury shall not at any time purchase
any obligations under this subsection if such purchase would increase
the aggregate principal amount of the Secretary's then outstanding
holdings of such obligations under this subsection to an amount greater
than $2,250,000,000. Each purchase of obligations by the Secretary of
the Treasury under this subsection shall be upon such terms and
conditions as to yield a return 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 making of such purchase. The Secretary of
the Treasury may, at any time, sell, upon such terms and conditions and
at such price or prices as the Secretary shall determine, any of the
obligations acquired by the Secretary under this subsection. All
redemptions, purchases, and sales by the Secretary of the Treasury of
such obligations under this subsection shall be treated as public debt
transactions of the United States.
(d) Mortgage-backed securities; issuance; maturities; rates of interest;
exempt securities; adequacy of mortgages to permit principal and
interest payments; statement in securities
To provide a greater degree of liquidity to the mortgage investment
market and an additional means of financing its operations under this
section, the corporation is authorized to set aside any mortgages held
by it under this section, and, upon approval of the Secretary of the
Treasury, to issue and sell securities based upon the mortgages so set
aside. Securities issued under this subsection may be in the form of
debt obligations or trust certificates of beneficial interest, or both.
Securities issued under this subsection shall have such maturities and
bear such rate or rates of interest as may be determined by the
corporation with the approval of the Secretary of the Treasury.
Securities issued by the corporation under this subsection shall, to the
same extent as securities which are direct obligations of or obligations
guaranteed as to principal and interest by the United States, be deemed
to be exempt securities within the meaning of laws administered by the
Securities and Exchange Commission. Mortgages set aside pursuant to this
subsection shall at all times be adequate to enable the corporation to
make timely principal and interest payments on the securities issued and
sold pursuant to this subsection. The corporation shall insert
appropriate language in all of the securities issued under this
subsection clearly indicating that such securities, 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 any agency or
instrumentality thereof other than the corporation.
(e) Subordinated or convertible obligations; issuance; maturities; rate
of interest; redemption; exempt securities; debt or obligation
of United States; purchases in open market
For the purposes of this section, the corporation is authorized to
issue, upon the approval of the Secretary of the Treasury, obligations
which are subordinated to any or all other obligations of the
corporation, including subsequent obligations. The obligations issued
under this subsection shall have such maturities and bear such rate or
rates of interest as may be determined by the corporation with the
approval of the Secretary of the Treasury and may be made redeemable at
the option of the corporation before maturity in such manner as may be
stipulated in such obligations. Any of such obligations may be made
convertible into shares of common stock in such manner, at such price or
prices, and at such time or times as may be stipulated therein.
Obligations issued by the corporation under this subsection shall, to
the same extent as securities which are direct obligations of or
obligations guaranteed as to principal or interest by the United States,
be deemed to be exempt securities within the meaning of laws
administered by the Securities and Exchange Commission. The corporation
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 corporation. The corporation is
authorized to purchase in the open market any of its obligations
outstanding under this subsection at any time and at any price.
(f) Prohibition on assessment or collection of fee or charge by United
States
Except for fees paid pursuant to section 1723a(g) of this title and
assessments pursuant to section 4516 of this title, no fee or charge 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 the purchase, acquisition, sale, pledge, issuance,
guarantee, or redemption of any mortgage, asset, obligation, trust
certificate of beneficial interest, or other security by the
corporation. No provision of this subsection shall affect the purchase
of any obligation by the Secretary of the Treasury pursuant to
subsection (c) of this section.
(June 27, 1934, ch. 847, title III, Sec. 304, 48 Stat. 1254; July 1,
1948, ch. 784, Sec. 1, 62 Stat. 1206; Aug. 2, 1954, ch. 649, title II,
Sec. 201, 68 Stat. 615; Aug. 7, 1956, ch. 1029, title II, Secs. 203,
204, 70 Stat. 1096; Pub. L. 85-10, Sec. 1(c), Mar. 27, 1957, 71 Stat. 7;
Pub. L. 85-104, title II, Sec. 203, July 12, 1957, 71 Stat. 298; Pub. L.
86-372, title III, Secs. 302, 305(a), Sept. 23, 1959, 73 Stat. 669, 670;
Pub. L. 87-70, title VI, Sec. 603(d), (e), June 30, 1961, 75 Stat. 176,
177; Pub. L. 88-560, title VII, Secs. 701(b)(2), 703, 704, Sept. 2,
1964, 78 Stat. 800, 802; Pub. L. 89-566, Sec. 1, Sept. 10, 1966, 80
Stat. 738; Pub. L. 89-754, title X, Sec. 1007, Nov. 3, 1966, 80 Stat.
1285; Pub. L. 90-448, title VIII, Secs. 802(p)-(s), 804(a), 805, Aug. 1,
1968, 82 Stat. 538, 542, 543; Pub. L. 91-351, title V, Sec. 504, July
24, 1970, 84 Stat. 461; Pub. L. 93-383, title VIII, Sec. 806(j), Aug.
22, 1974, 88 Stat. 728; Pub. L. 97-320, title VII, Sec. 707(b), Oct. 15,
1982, 96 Stat. 1540; Pub. L. 98-479, title II, Sec. 203(a)(1), Oct. 17,
1984, 98 Stat. 2229; Pub. L. 100-242, title IV, Sec. 441(a), Feb. 5,
1988, 101 Stat. 1921; Pub. L. 101-73, title VII, Sec. 731(m)(2), Aug. 9,
1989, 103 Stat. 436; Pub. L. 102-550, title XIII, Sec. 1381(e)-(g),
(s)(2), Oct. 28, 1992, 106 Stat. 3996, 4001.)
References in Text
Paragraph (a) of section 1716 of this title, referred to in subsec.
(a)(1), was repealed by Pub. L. 101-73, title VII, Sec. 731(m)(1)(A),
Aug. 9, 1989, 103 Stat. 435. See section 1716(3) of this title.
Amendments
1992--Subsec. (b). Pub. L. 102-550, Sec. 1381(e)(1), substituted a
period for ``; but the aggregate amount of obligations of the
corporation under this subsection outstanding at any one time shall not
exceed fifteen times the sum of its capital, capital surplus, general
surplus, reserves, and undistributed earnings unless a greater ratio
shall be fixed at any time or from time to time by the Secretary of
Housing and Urban Development. 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 corporation's
ownership pursuant to this section, free from any liens or encumbrances,
of cash, mortgages or other security holdings, 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.'' after ``in such obligations''.
Subsec. (c). Pub. L. 102-550, Sec. 1381(s)(2), substituted ``the
Secretary's'' for ``his'' in two places, ``the Secretary'' for ``he''
after ``such price or prices as'', and ``the Secretary'' for ``him''
after ``the obligations acquired by''.
Subsec. (d). Pub. L. 102-550, Sec. 1381(f), inserted at end ``The
corporation shall insert appropriate language in all of the securities
issued under this subsection clearly indicating that such securities,
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 any agency or instrumentality thereof other than the corporation.''
Subsec. (e). Pub. L. 102-550, Sec. 1381(e)(2), struck out after
third sentence ``The outstanding total principal amount of such
obligations, which are entirely subordinated to the obligations of the
corporation issued or to be issued under subsection (b) of this section,
shall be deemed to be capital of the corporation for the purpose of
determining the aggregate amount of obligations issued under subsection
(b) of this section which may be outstanding at any one time.''
Subsec. (f). Pub. L. 102-550, Sec. 1381(g), inserted ``of this title
and assessments pursuant to section 4516 of this title'' in first
sentence.
1989--Subsec. (a)(2). Pub. L. 101-73 inserted after third sentence
``The corporation shall not be permitted to use its lending authority
(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.'' and struck out
first two sentences which read as follows: ``In the further interest of
assuring sound operation, any loan made by the corporation in its
secondary market operations under this section, and any extension or
renewal thereof, shall not exceed 90 per centum of the unpaid principal
balances of the mortgages securing the loan, and shall bear interest at
a rate consistent with general loan policies established from time to
time by the corporation's board of directors. Any such loan shall mature
in not more than twelve months and the term of any extension or renewal
shall not exceed twelve months.''
1988--Subsec. (f). Pub. L. 100-242 added subsec. (f).
1984--Subsec. (c). Pub. L. 98-479 substituted ``chapter 31 of title
31'' for ``the Second Liberty Bond Act, as now or hereafter in force''
in two places.
1982--Subsec. (e). Pub. L. 97-320 struck out provision that the
total principal amount of subordinated obligations which could be
outstanding at any one time could not exceed two times the sum of (1)
the capital of the corporation represented by its outstanding common
stock and (2) its surplus and undistributed earnings at such time.
1974--Subsec. (a)(1). Pub. L. 93-383 substituted ``section 243 of
the National Housing Act'', classified to section 1715z-8 of this title,
for ``section 502 of the Emergency Home Finance Act of 1970'', which
enacted such section 1715z-8. For purposes of amendment of subsec.
(a)(1) of this section no change in text was required.
1970--Subsec. (a)(1). Pub. L. 91-351 inserted provision that nothing
in this subchapter shall prohibit the corporation from purchasing, and
making commitments to purchase, any mortgage with respect to which the
Secretary of Housing and Urban Development has entered into a contract
with the corporation to make interest subsidy payments pursuant to
section 1715z-8 of this title.
1968--Subsec. (a)(1). Pub. L. 90-448, Sec. 802(p), (s), substituted
``corporation'' for ``Association'' in six places, and ``corporation's''
for ``Association's'' in two places, and struck out provisions which
prohibited the Association from purchasing any mortgage insured or
guaranteed prior to Aug. 2, 1954.
Subsec. (a)(2). Pub. L. 90-448, Sec. 802(s), substituted
``corporation'' for ``Association'' in five places, and
``corporation's'' for ``Association's'', in three places.
Subsec. (b). Pub. L. 90-448, Sec. 802(q), (s), substituted
``corporation'' for ``Association'' in seven places, and
``corporation's'' for ``Association's'', and inserted provisions
permitting the Secretary to establish a greater ratio than fifteen times
for the aggregate amount of obligations outstanding.
Subsec. (c). Pub. L. 90-448, Sec. 802(r), struck out provisions
which prohibited the Secretary of the Treasury from purchasing
obligations under this subsection if all of the preferred stock of the
Association held by him has been retired.
Subsec. (d). Pub. L. 90-448, Sec. 804(a), added subsec. (d). A prior
subsec. (d) was repealed by Pub. L. 88-560.
Subsec. (e). Pub. L. 90-448, Sec. 805, added subsec. (e).
1966--Subsec. (a)(1). Pub. L. 89-754 struck out requirement that
Association's advance commitments to purchase mortgages in its secondary
market operations be issued at prices which are sufficient to facilitate
home financing, but which are sufficiently below the price then offered
by the Association for immediate purchase to prevent excessive sales to
the Association pursuant to such commitments.
Subsec. (b). Pub. L. 89-566 raised limit on maximum amount of
obligations outstanding under the subsection from ten times the sum of
capital, capital surplus, general surplus, reserves, and undistributed
earnings to fifteen times that sum.
1964--Subsec. (a)(2). Pub. L. 88-560, Sec. 703, substituted ``90 per
centum'' for ``80 per centum''.
Subsec. (b). Pub. L. 88-560, Sec. 701(b)(2), substituted ``or
obligations, participations, or other instruments which are lawful
investments'' for ``or obligations which are lawful investments''.
Subsec. (d). Pub. L. 88-560, Sec. 704, repealed provisions which
prohibited the Association from purchasing participations in its
operations under this section.
1961--Subsec. (a). Pub. L. 87-70, Sec. 603(d), designated existing
provisions as par. (1) and added par. (2).
Subsec. (b). Pub. L. 87-70, Sec. 603(e), inserted ``or other
security holdings'' after ``mortgages''.
1959--Subsec. (a). Pub. L. 86-372, Sec. 302, substituted ``home
financing'' for ``advance planning of home construction'' after
``sufficient to facilitate''.
Subsec. (b). Pub. L. 86-372, Sec. 305(a), substituted ``and
obligations of the United States or guaranteed thereby, or obligations
which are lawful investments for fiduciary, trust, or public funds'' for
``and bonds or other obligations of, or bonds or other obligations
guaranteed as to principal and interest by, the United States''.
1957--Subsec. (c). Pub. L. 85-104 substituted ``$2,250,000,000'' for
``$1,350,000,000''.
Pub. L. 85-10 substituted ``$1,350,000,000'' for ``$500,000,000''
plus an amount equal to the total of such reductions in the maximum
dollar amount prescribed by section 1721(c) of this title as have
theretofore been effected pursuant to that section: Provided, That such
aggregate principal amount under this subsection shall in no event
exceed $1,000,000,000''.
1956--Subsec. (a). Act Aug. 7, 1956, Secs. 203, 204(a), substituted
in second sentence ``within the range of market prices'' for ``at the
market prices''; and inserted sentence that advance commitments to
purchase mortgages in secondary market operations shall be issued only
at prices which are sufficient to facilitate advance planning of home
construction but sufficiently below price then offered by Association
for immediate purchase to prevent excessive sales to the Association
pursuant to such commitments.
Subsec. (d). Act Aug. 7, 1956, Sec. 204(b), struck out provisions
prohibiting Association from making advance contracts or commitments to
purchase mortgages but allowed Association to issue a purchase contract
in an amount not exceeding the amount of the sale of mortgages purchased
from the Association, entitling the holder to sell to the Association
mortgages in the amount of the contract, upon terms prescribed by the
Association.
1954--Act Aug. 2, 1954, amended section generally to substitute new
provisions (formerly covered in sections 1716 and 1717 of this title)
for provisions which related to exemption from taxation. See section
1723a(c) of this title.
1948--Act July 1, 1948, amended section generally to provide for
exemption from taxation for the Association.
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.
Section Referred to in Other Sections
This section is referred to in sections 1716b, 1717, 1721, 4542 of
this title.
