U.S. policymakers are examining new financing mechanisms, such as covered bonds, that may offer additional alternatives to traditional securitization methods. Covered bonds are debt instruments created from high quality assets held on a bank's balance sheet. This covered bond is secured by a pool of assets (such as mortgages) known as a “cover pool.” As a secured debt instrument, a covered bond provides funding to a depository institution that retains the assets and related credit risk on its balance sheet. Interest on the covered bond is paid to investors from the issuer’s cash flows, while the cover pool serves as secured collateral. In the event of an issuer default, covered bond investors first have recourse to the cover pool.
CRE Finance Council supports efforts to facilitate a U.S. commercial covered bond market because it believes these instruments add additional sources of liquidity that may aid in giving the markets a new and diverse funding mechanism. As such, the Council is working with Members of Congress on legislation that would include high quality commercial mortgage loans and CMBS as eligible collateral in any emerging covered bond marketplace.
> CREFC, Coalition Endorse Introduction of Senate Covered Bonds Bill
> CREFC, Coalition Support Covered Bonds Act
> CREFC Supports Covered Bonds Act (HR 940)
> Covered Bond Act of 2011
> Analysis of Covered Bond Act of 2011
> Council, Coalition Support U.S. Covered Bonds Market
> Council Urges Support for U.S. Covered Bond Market
> CRE Finance Council Support for H.R. 5823
> H.R. 5823 – The U.S. Covered Bond Act
> CMSA Testimony on Creating a Covered Bond Market
> CMSA Supports Covered Bond Legislation