About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (August 1, 2008)

handle is hein.crs/crsajws0001 and id is 1 raw text is: Order Code RS22925 Updated August 1, 2008 Covered Bonds: An Alternative to Securitization for Funding Mortgages Edward Vincent Murphy Analyst in Financial Economics Government and Finance Summary Covered bonds are a relatively common method of funding mortgages in Europe, but uncommon in the United States. A covered bond is a recourse debt obligation that is secured by a pool of assets, in this case mortgages. The holders of the bond are given additional protection in the event of the bankruptcy or insolvency of the issuing lender. They have some features, such as pooled mortgages, that resemble securitization, but the original lenders maintain a continuing interest in the performance of the loans. Because some believe that the subprime mortgage turmoil may have been influenced by poor incentives for lenders using the securitization process, some policymakers have recommended covered bonds as an alternative for U.S. mortgage markets. Treasury Secretary Paulson has said that covered bonds could bring more certainty and more competition to mortgage markets. Because issuing banks do not sell mortgage assets to securitization trusts, accounting features of covered bonds may provide more readily accessible information to potential purchasers of the covered bonds and to the shareholders of the banks issuing the covered bonds. Some features of American banking regulations may have to be clarified to facilitate covered bonds. The Federal Deposit Insurance Corporation (FDIC), for example, issued a new rule clarifying its obligations to the holders of covered bonds if an FDIC-insured institution is placed in FDIC receivership or conservatorship. This report will be updated as conditions warrant. The Equal Treatment for Covered Bonds Act of 2008, H.R. 6659, would define a covered bond as a nondeposit recourse debt with a term to maturity of at least one year and secured by specifically identified assets. H.R. 6659 also calls for rulemaking regarding covered bonds to be conducted jointly by financial regulators. In response to recent mortgage market turmoil, the Treasury Department and the Federal Deposit Insurance Corporation (FDIC) have considered rulemaking to encourage the use of covered bonds as an alternative to mortgage securitization. The volume of private-label mortgage securitizations, in which mortgages are pooled into trusts and then divided into securities for sale to investors, declined significantly following the subprime

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most