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Committee Approves Bills to Fix Dodd-Frank Derivatives Title, Strengthen FHA

Washington, March 27, 2012 -

The Financial Services Committee, chaired by Rep. Spencer Bachus, approved two bills today to fix derivatives provisions of the Dodd-Frank Act.

“These bipartisan bills help bring more clarity and transparency to the marketplace, and the result is greater certainty for job creators at a time our economy is struggling,” said Chairman Bachus. 

In addition to the two derivatives bills, the Committee also approved bills to strengthen the fiscal health of the Federal Housing Administration (FHA) and to clarify existing law regarding home warranties.

The bills approved by the Subcommittee are:

H.R. 4235, the Swap Data Repository and Clearinghouse Indemnification Correction Act, introduced by Representatives Robert Dold (R-IL) and Gwen Moore (D-WI)
H.R. 4235 ensures that U.S. and foreign regulators can share necessary swaps data to increase market transparency and facilitate global regulatory cooperation.  The Dodd-Frank Act requires swap data repositories and clearing organizations to make data available to non-U.S. regulators. This data sharing cannot take place, however, unless the foreign regulator agrees to indemnify the U.S. entity and U.S. regulators for litigation expenses resulting from the data sharing.  To ensure that regulators have access to derivatives data, the bill eliminates the indemnification provisions that would otherwise impede data-sharing arrangements.

H.R. 3283, the Swap Jurisdiction Certainty Act, introduced by Rep. James Himes (D-CT)
The legislation fixes the extra-territorial reach of Dodd-Frank Act regulations on the over-the-counter derivatives market and provides the needed regulatory clarity. H.R. 3283 harmonizes the definition of “U.S. persons” and “non-U.S. persons” with current securities regulation in order to clarify foreign branches of U.S. institutions are excluded. The legislation also provides clarity to the capital requirement provisions and requires reporting on transactions between U.S. swap dealers and their affiliates as well as swap transactions between U.S. swap dealers and non- U.S. swap dealers.

H.R. 4264, the FHA Emergency Fiscal Solvency Act of 2012, offered by Rep. Judy Biggert (R-IL)
By statute, the Federal Housing Administration (FHA) is required to maintain a capital reserve ratio of 2 percent.  In the Fiscal Year 2011 independent actuarial review of the FHA, the FHA’s required capital reserve ratio had fallen to .24 percent, far below the statutorily mandated reserve ratio.  The FHA’s deteriorating financial condition has raised concerns that the FHA may soon become insolvent and expose taxpayers to further risk of loss, just as Fannie Mae and Freddie Mac did before they were placed in conservatorship.

This legislation gives the FHA the tools needed to shore up the health of its mortgage insurance fund. The legislation includes significant reforms that will strengthen the fiscal health of the program, including: establishing minimum annual premiums for mortgage insurance, barring unscrupulous lenders from participating, requiring repayment of losses to FHA by lenders who committed fraud, and improving the FHA’s internal financial controls, transparency, and disclosure requirements.

H.R. 2446, the RESPA Home Warranty Clarification Act of 2011, sponsored by Rep. Judy Biggert (R-IL)
H.R. 2446 provides clarity to existing law that home warranties are not subject to the Real Estate Settlement Procedures Act (RESPA). The bill also requires that homeowners receive a specific written notice about the payment arrangement for any individual selling, advertising or performing a homeowner warranty inspection for the repair or replacement of home system components or appliances.

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