This legislation, known as the "Sustainable Homeownership Act," significantly amends the operational and financial frameworks of the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), collectively referred to as the Enterprises. Its primary goal is to enhance the safety and soundness of these entities, reduce taxpayer exposure to mortgage risk, and facilitate their eventual exit from government conservatorship. The bill introduces stricter requirements for the purchase of high loan-to-value (LTV) mortgages by the Enterprises. It mandates specific percentages of private mortgage insurance or guarantee coverage for the first-loss portion of mortgages with LTVs exceeding 80%, with higher coverage required as the LTV increases. Exceptions are provided for certain refinancing scenarios, state agency programs, and low-income mortgagors, where reduced coverage may apply. Furthermore, the bill limits the value of "covered assets" that the Enterprises can hold to the greater of 8 percent of their total assets or an amount deemed necessary for securitization and liquidity by the Treasury and the Federal Housing Finance Agency (FHFA). It also prohibits the Enterprises from varying mortgage acquisition pricing based on seller size or volume and requires them to offer equivalent cash consideration for eligible single-family residential mortgages. The legislation revises the annual adjustment mechanism for conventional mortgage limits, linking it to the lower percentage increase of either median household income or the housing price index. Similar adjustments are also applied to FHA loan limits, aiming to ensure these limits reflect current economic realities more accurately. A critical component of the bill is the mandate for the Enterprises to transfer the "vast majority of credit risk" on single-family residential mortgages to a diversified pool of investors and insurers within two years. This risk transfer must occur at all tranches of risk, starting after expected losses, using economically feasible mechanisms like existing Credit Risk Transfer (CRT) structures such as CIRT, ACIS, CAS, STACR, and Seller/Servicer Risk Share arrangements. The bill also establishes a new capital framework, continuing the Treasury line of credit as a catastrophic backstop, for which the Enterprises will pay an annual commitment fee based on market risk indicators. It directs the FHFA Director to establish an allowable Return on Equity (ROE) range for the Enterprises, initially set between 9 and 13 percent, to ensure financial stability and prevent excessive risk-taking. Under this framework, if an Enterprise's ROE falls below the lower bound, it is exempt from the commitment fee and must prioritize capital retention. Conversely, if the ROE exceeds the upper bound, the Enterprise must remit all net earnings above that threshold to the Treasury. Dividend payments are restricted only if core capital falls below minimum requirements, ensuring that capital adequacy remains paramount. Finally, the bill outlines a clear path for the Enterprises to exit conservatorship. It authorizes the Secretary of the Treasury to convert Senior Preferred Stock into common equity and exercise warrants for common stock. The FHFA Director is tasked with determining necessary capital standards for exit and defining intervention levels if capital is insufficient, with a commitment from Treasury and the Enterprises to restructure investments within one year to facilitate an orderly transition.