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October 2008
and other available programs to assist borrowers in avoiding foreclosure, and it is authorized to use loan
guarantees and credit enhancements to facilitate loan modifications. Treasury is required to coordinate
with other Federal Government entities holding troubled assets to identify opportunities for acquisition of
classes of trouble assets for the purpose of facilitating loan modifications and restructurings. In addition,
Treasury must protect Federal, State and Local rental subsidies on residential rental properties it acquires,
and must consent to reasonable requests for loss mitigation.
Section 110 – Assistance to Homeowners and Localities
Requires other Federal entities owning or controlling assets secured by residential real estate (including
both single and multifamily and rental properties) to implement a plan to provide assistance to avoid
foreclosure and to assist renters in staying in their homes.
Specifically, the Federal Housing Finance Agency (in its capacity as conservator for Fannie Mae and
Freddie Mac), the FDIC (in its capacity as a bridge bank for any failed institution) or the Board of
Governors of the Federal Reserve (in its capacity on behalf of any Federal reserve bank), must provide
foreclosure avoidance assistance to homeowners living in properties securing assets held, owned or
controlled by those entities. They are also required to encourage servicers of such mortgages to use the
Hope for Homeowners program or other programs to minimize foreclosures. They must continue existing
Federal, State and local rental subsidies and ensure that modifications provide funds for safe conditions in
rental properties. They must implement these actions within 60 days of enactment and report to Congress
every 30 days thereafter on the number and type of loan modifications made, and the actual foreclosures
occurring during each reporting period. The agencies are also required to consult with one another in
developing their assistance plans to utilize consistent approaches, and to encourage similar assistance
efforts by loan servicers on loans which the entities do not control but do have an interest.
Section 111 – Executive Compensation and Corporate Governance
Requires any financial institution that sells troubled assets to Treasury to put in place certain limits on
executive compensation and restricts certain tax benefits. Where Treasury buys assets directly from an
individual financial institution, and it receives a meaningful equity or debt position, it must require the
institution to: limit incentives for taking unnecessary and excessive risks that threaten the value of the
institution; provide for the recovery of any bonus or incentive paid to a senior executive officer based on
materially inaccurate statements of earnings; and, prohibit golden parachute payments to senior
executives. A “senior executive” is defined as one of the top five executives in a public company subject
to SEC compensation disclosure. These provisions are effective for the period that Treasury holds the
equity or debt position in the financial institution.
When Treasury buys assets at auction, and where the purchase exceeds $300 million in the aggregate from
a financial institution, it must prohibit any new employment contract for that institution that provides a
golden parachute in the event of an involuntary termination, bankruptcy filing, insolvency or
receivership. These provisions apply only to the period during which Treasury’s authority to purchase
troubled loans is in effect (December 31, 2009 unless extended per Section 120). There are special tax
rules that also apply (see Section 302 below).
AMERICAN BANKERS ASSOCIATION 4