Dodd-Frank: Title XIII - Pay It Back Act

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Introduction

Title XIII, commonly known as the “Pay It Back Act” (the Act), amends the Emergency Economic Stabilization Act of 2008 (EESA) by decreasing the Secretary of the Treasury’s (the Secretary) authority to purchase distressed assets under the Troubled Asset Relief Program (TARP) from $700 billion to $475 billion. Congress is also prohibited from funding new troubled asset relief programs after June 25, 2010. Additionally, Title XIII requires the Secretary to transfer certain funds to the Treasury’s general fund for the sole purpose of reducing the federal budget deficit, and to provide Congress with bi-annual reports detailing such transfers. 

Purpose

Congress has attempted to balance its goals of stimulating and supporting the economy and housing industry, aiding the federal budget deficit and preventing substantial tax increases.  The Act supports the housing industry while maintaining the deficit at a necessary minimum by ensuring that income derived from mortgage-related federal programs, such as the FNMA Charter Act, and unused funds from economic stimulus programs, such as the ARRA, are used solely to offset the federal deficit. 

Provisions

Limitation on TARP Funds

The Act amends the Emergency Economic Stabilization Act of 2008 (EESA) by decreasing the Secretary’s authority to purchase distressed assets under the Troubled Asset Relief Program (TARP) from $700 billion to $475 billion outstanding at any one time. See 12 U.S.C. §5225(a). The Act also prohibits Congress from funding new troubled asset relief programs after June 25, 2010. See id.

Deficit Reduction

The Act amends the Federal National Mortgage Association Charter Act (FNMA Charter Act), the Federal Home Loan Mortgage Corporation Act (FHLM Corporation Act), the Federal Home Loan Bank Act (FHLB Act) and the American Recovery and Reinvestment Act (ARRA), requiring the Secretary to transfer certain funds to the Treasury’s general fund for the exclusive purpose of reducing the federal government’s budget deficit, which is the excess of government spending over the income that the government receives. See 12 U.S.C. §1719(g)(2)(C); see also 12 U.S.C. §1455(l)(2)(C); see also 12 U.S.C. § 1431(l)(2)(C); see also 123 Stat. § 305(d). Such funds requiring transfer include income received from the sale of securities purchased from the Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal Home Loan Banks. See12 U.S.C. § 1719(g); see also 12 U.S.C. §1455(l); see also 12 U.S.C. § 1431(l). The Secretary must also transfer to the general fund any unobligated ARRA funds that are withdrawn or recaptured, ARRA funds that any state rejects and discretionary ARRA appropriations that that are unused on December 31, 2012, if any. See 123 Stat. § 305(d); see also 123 Stat. § 302.

Mandated Reports to Congress

The Secretary must provide Congress with bi-annual reports detailing all amounts received by the Treasury from the sale of troubled assets and transferred to the general fund. See 12 U.S.C. § 5216(f). Additionally, the Federal Housing Finance Agency (FHFA) must submit a report to Congress detailing its plans to support and maintain the housing industry in the future without subjecting taxpayers to any undue hardships. See Dodd Frank Wall Street Reform and Consumer Protection Act § 1305.

Implementation

Furthermore, in a June 13, 2012 report to Congress, the FHFA discussed the ways in which it has met its Dodd-Frank Act obligations and supported the housing industry, without unduly burdening taxpayers, by strengthening its regulations and guidelines, improving stability and liquidity for mortgage-related securities in the secondary market and increasing nationwide access to credit for homeowners.

[Last updated in October of 2022 by the Wex Definitions Team]