Author: Mercy

BREAKING NEWS – U.S. Rep. Scott Garrett Introduces “United States Covered Bond Act of 2010″

U.S. Rep. Scott Garrett (R-NJ) today (March 18) introduced comprehensive proposed federal covered bond legislation in the form of a standalone bill: the “United States Covered Bond Act of 2010.”

The bill draws extensively from (but is not identical to) the text of a legal framework for covered bonds that Rep. Garrett proposed last year as an amendment to the Financial Stability Improvement Act of 2009. At that time (Nov. 18), Rep. Garrett withdrew the amendment on the same day he offered it during a hearing of the House Financial Services Committee (HFSC) — after receiving assurances from Chairman Barney Frank (D-MA) that the committee would hold a hearing specifically to address the topic of covered bonds. READ MORE>>

http://www.coveredbondinvestor.com/news/rep-garrett-introduces-united-states-covered-bond-act

March 18, 2010
Canada Moves Toward Covered Bond Legislation

The Canadian government has officially announced its intention to introduce legislation governing covered bonds, “making it easier for Canadian financial institutions to access this low-cost source of funding.”

The announcement came in Ottawa as part of the latest Budget, tabled in Canada’s House of Commons by Finance Minister James M. Flaherty (March 4). The relevant portion reads:

“One of the lessons of the global financial crisis is that financial institutions  need to have access to a variety of funding sources. The Government will help federally regulated financial institutions diversify their funding sources  by introducing legislation setting out a framework for covered bonds.  Covered bonds are debt instruments that are secured by high quality assets,  such as residential mortgages. The legislation will increase legal certainty  for investors in these debt instruments, thereby making it easier for Canadian financial institutions to access this low-cost source of funding.” READ MORE>>

http://www.coveredbondinvestor.com/news/canada-moves-toward-covered-bond-legislation

March 5, 2010
Realtors® Recommend Covered Bonds for Revamped GSEs

The National Association of Realtors® (NAR) — a powerful voice in the U.S. housing arena — recommends moving toward a future where covered bonds could play a significant role in U.S. real estate financing.

This recommendation comes as part of a new NAR document on how best to restructure Fannie Mae and Freddie Mac, the giant “Government-Sponsored Enterprises” (GSEs) that continue to play a massive role in providing funding for home mortgages even while suffering huge losses. READ MORE>>

http://www.coveredbondinvestor.com/news/realtors%C2%AE-recommend-covered-bonds-revamped-gses

March 3, 2010
CIBC PRICES $2 BILLION COVERED BOND – Start of a Trend by Non-U.S. Banks?

Canadian Imperial Bank of Commerce (CIBC) has priced its landmark U.S. dollar-denominated covered bond with initial guidance at about 30-32 basis points over mid-swaps, according to a story Jan. 26 from Canada’s Financial Post. It is estimated that CIBC’s funding cost for the bond — which has a three-year maturity — will be about 2%.

This will be the first time in years that covered bonds have been issued in U.S. dollars from any source — foreign or domestic. READ MORE>>

http://www.coveredbondinvestor.com/news/cibc-prices-usd-2-billion-covered-bond

January 26, 2010
Canada’s CIBC Plans U.S. Dollar Covered Bond

By Mercy Jiménez

Foreign issuers of covered bonds are moving to develop a U.S. covered bond market while proposed legislation to help potential U.S. issuers lags.

Today, Canadian Imperial Bank of Commerce (CIBC) announced its intention to issue a U.S. dollar-denominated covered bond — perhaps later this week.

This announcement comes on the heels of last week’s statement from Germany’s Commerzbank regarding plans for their own U.S. dollar Pfandbrief-style covered bond issue.

One significant point is that issuance in U.S. dollars generally has stronger appeal for U.S. institutional investors than bonds issued in foreign currencies.

While this is a very positive development for exposing the U.S. market to covered bonds in general, it would be much better if U.S. issuers could also benefit from this efficient source of funding — as foreign issuers now appear positioned to do. For that, experts agree that Congressional enactment of a legislative framework for U.S. covered bonds would make a critical difference.

Here’s the story:

http://www.coveredbondinvestor.com/news/cibc-issue-us-dollar-covered-bond

January 25, 2010
FREE WEBCAST – “Why the U.S. Needs Covered Bonds” – In Cooperation with the Mortgage Bankers Association

By Mercy Jiménez

As many of you probably know, at Covered Bond Investor™ we believe that development of a U.S. covered bond market could strongly benefit the nation’s economy as a supplemental source of funding.

For that reason, we have volunteered to help spread the word about a panel discussion on the topic to be held in Washington, DC this month, hosted by the Association of German Pfandbrief Banks (vdp). You may listen on Friday January 29 at 1 – 2:15 p.m. (EST) to a complimentary live WEBCAST BUT REGISTRATION IS REQUIRED.

The event comes at an opportune moment, just weeks after a landmark hearing on covered bonds by a key committee of the U.S. House of Representatives.

Also the Mortgage Bankers Association recently listed covered bond legislation as one of its legislative and regulatory priorities for 2010, which could help develop covered bonds as a funding tool in the U.S. In fact, the MBA is officially in collaboration with the webcast event.

The webcast will bring together participants with vital and incisive insights into prospects for covered bonds in the U.S. Many of you are familiar with the moderator, Tim Skeet, who has kept his finger on the (sometimes weak) pulse of U.S. covered bonds for years and is actively involved in moving the cause forward. Jerry Marlatt is in the forefront among U.S. lawyers on the topic — often called a “pioneer.” David Power offers the unique perspective of a banker involved with covered bond issuance right next door, in Canada. Jens Tolckmitt’s institution, Germany’s venerable vdp, has been instrumental in aiding development of covered bonds in a variety of European countries. I will also join the panel discussion and provide perspective from my years in the U.S. mortgage market and financial services.

So if you have interest in covered bonds, be sure to make your webcast reservation now by

January 21, 2010

MORTGAGE BANKERS ASSOCIATION (MBA) BACKS COVERED BOND LEGISLATION

By Covered Bond Investor™ Staff

Calling covered bonds “one of the most affordable wholesale funding instruments for financial institution asset-liability management,” the Mortgage Bankers Association (MBA) has included support for them in its just-announced legislative and regulatory priorities for 2010.

The organization’s official statement (Jan. 12) reads in part:

“MBA supports legislation and regulation to provide for equal treatment of covered bonds with other qualified financial contracts. Covered bonds are debt securities backed by cash flows from mortgages that remain on the issuer’s consolidated balance sheet. Covered bonds provide an additional source of liquidity for residential and commercial real estate financing. READ MORE>>

http://www.coveredbondinvestor.com/news/us-covered-bonds-mbas-legislative-agenda-2010

January 13, 2010

Covered Bonds “Soar” and “Roar” in New Year

By Covered Bond Investor™ Staff

So far, 2010 is a happy new year for covered bonds, as financial news outlets are reporting with enthusiasm:

In a column titled “Covered Bonds Set to Roar?” Richard Kemmish of the Wall Street Journal wrote (Dec. 8): “If 2009 was the year of the European corporate bond market, perhaps 2010 will be the year of the European covered bond market.”

A news story from Dow Jones’ Mark Brown and Michael Wilson struck a similar note: “The market for covered bonds … is off to a roaring start in 2010.”

Meanwhile, the headline of a Bloomberg article by Sonja Cheung and Caroline Hyde trumpeted: “Covered Bond Sales Soar to 3-Month High, Lead European Issuance.”

Bloomberg pegged covered bond sales so far this year [as of January 8] at €12 billion (more than USD $17 billion) – about 30 times the volume over the same period in 2009. READ MORE>>

http://www.coveredbondinvestor.com/news/covered-bonds-soar-and-roar-new-year

January 8, 2010

Covered Bonds Hearing Showed Bipartisan Support

By Mercy Jiménez and Spencer Punnett

WASHINGTON, D.C. Although the prime mover in the push for U.S. covered bond legislation is a Republican (Rep. Scott Garrett of New Jersey), substantial support from the other side of the aisle will be essential for any success in the current Democrat-controlled Congress. That political reality gives special significance to positive statements made by Democratic members of the House Committee on Financial Services during the committee’s hearing on covered bonds earlier this week (Dec. 15).

Here are some examples from members’ opening remarks preceding testimony by expert witnesses on the topic:

Rep. Melissa Bean (D-IL): “Establishing a U.S. covered bond market could be very helpful to the residential and commercial real estate markets, but [also to] other asset markets like public-sector loans and other consumer loans as well.”

Rep. Bill Foster (D-IL): “We have to look at what provides over time the best stability and the best deal for consumers. And I think both of these lead to the covered bond market as a way forward.”

Rep. David Scott (D-GA): “This type of loan [funding] could provide a sense of accountability for both the lender and the borrower … which could potentially decrease risky lending practices.” (Rep. Scott also highlighted the dynamic nature of the cover pools backing covered bonds, which permit problem loans to be “swapped out for better assets.”)

Committee Chairman Barney Frank (D-MA): “I am struck by … the unanimity [here] that the European experience [with covered bonds] has been a good one — that it is instructive for us — that it gives us lessons, and that this is the case where acknowledging that something has been done in Europe has some useful lessons for us. We ought to go forward.”

READ MORE >>

http://www.coveredbondinvestor.com/news/hcfs-covered-bonds-hearing-showed-bipartisan-support

December 17, 2009

Covered Bonds: Commentary in American Banker

By Mercy Jiménez

American Banker today (Dec. 11) published a “Viewpoint” commentary I wrote on Congressman Scott Garrett’s (R-NJ) groundbreaking proposal for covered bond legislation in the U.S.

This legislation could open up the way for diversified sources of funding for banks as well as a partial solution for the Fed’s exit strategy on its $1 trillion MBS holdings. We are at a crossroads in the U.S., where we must make a proactive decision to attract private capital back into the mortgage markets— or else remain in limbo dependency on government subsidies for the foreseeable future.

A hearing has been scheduled for next Tuesday at 10 AM in which the merits of Congressman Garrett’s proposal will be discussed. If enacted, the proposed legislation would include game changers we have so desperately needed in this space to attract issuers and investors alike — i.e., legal structures for bondholder protections, standards for cover pools, and the role of Treasury as regulator.

Of particular interest are the proposed asset classes beyond real estate loans, because the amendment would open the way for covered bonds secured by student loans, auto loans, credit card receivables and small business loans.

All of us, of any political persuasion, should take interest in this supplemental funding source, which has proved resilient over the past 200 years — and even more so during the current financial crisis.

The link to my American Banker commentary is below. (If you are not a subscriber, it is easy to get a free two-week online subscription that will allow you to view the full text.)

http://www.americanbanker.com/issues/174_237/covered-bond-proposal-1005024-1.html

December 11, 2009

Potential Covered Bond Legislation Impact on U.S. Funding – A Drill-Down

By Mercy Jiménez

Professionals in the U.S. lending community should be keeping an eye on Congressman Scott Garrett’s proposed covered bonds amendment to the Financial Stability Improvement Act of 2009, which is currently pending in the House of Representatives.

If Garrett’s proposed legislation succeeds in becoming part of U.S. law, how competitive could covered bonds become as a source of real estate funding? What is the outlook for covered bonds vis-à-vis MBS from Fannie Mae and Freddie Mac? What is the potential for financing other types of debt — such as auto or small business loans — with covered bonds? Exactly how would the amendment increase the cost efficiency of covered bond funding?

In an in-depth interview for Covered Bond Investor™, transactional attorney Jerry Marlatt of Morrison & Foerster and the U.S. Covered Bonds Council answers those questions and more. Since its release Monday, it has already become one of our publication’s most-read articles ever.

To read the interview, click on the link below:

http://www.coveredbondinvestor.com/news/covered-bonds-amendment-interview-jerry-marlatt

December 1, 2009