Covered bonds, a financing tool that has been popular in Europe is beginning to gain ground in the U.S. as a new way to finance residential and commercial mortgages, the New York Times reported. A covered bond is a securitized debt instrument backed by a group of high-quality assets, usually mortgages. As opposed to the assets in a securitized mortgage bond, the assets in a covered bond are kept on the issuer’s balance sheet, which may provide extra security, since the issuer will be less likely to underwrite risky loans, according to experts. Due to the safety features, most covered bonds are rated triple-A. These bonds are a $3 trillion business overseas. Though there is no established market for them yet in the U.S., they have been attracting American investors. In July, the House Financial Services Committee passed a bill that would establish a covered bond framework and experts predict that it could pass both houses next year. [NYT]
Posts Tagged ‘house financial services committee’
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Covered bonds, a financing tool that has been popular in Europe is beginning to gain ground in the U.S. as a new way to finance residential and commercial mortgages, the New York Times reported. A covered bond is a securitized debt instrument backed by a group of high-quality assets, usually mortgages. As opposed to the assets in a securitized mortgage bond, the assets in a covered bond are kept on the issuer’s balance sheet, which may provide extra security, since the issuer will be less likely to underwrite risky loans, according to experts. Due to the safety features, most covered bonds are rated triple-A. These bonds are a $3 trillion business overseas. Though there is no established market for them yet in the U.S., they have been attracting American investors. In July, the House Financial Services Committee passed a bill that would establish a covered bond framework and experts predict that it could pass both houses next year. [NYT]
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With the House Financial Services Committee is set to discuss consumer protection in the home mortgage industry later this month, ranking Republican member Spencer Bachus, sat down with CNBC’s Squawk Box today to discuss this intersection of politics and the housing market. Bachus disagrees with the Democratic proposal for an independent agency to handle consumer protection, which he says has already been largely addressed through strict new regulation. “I don’t believe in too big to fail,” Bachus said. “I think it’s unfair. It implies too small to save. It implies 95 percent of your institutions don’t matter.”
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When Secretary of Housing and Urban Development Shaun Donovan appeared before the House Financial Services Committee to propose risk-reducing changes at the Federal Housing Administration, he made sure to note that encouraging the return of private investment in the mortgage market was still a priority, CNBC’s Diana Olick reported. Donovan proposed raising the minimum Fair Isaac Corporation, or FICO, score for new FHA borrowers, as well as the upfront cash and annual insurance premiums that risky borrowers would need to pay. He also proposed protecting the FHA against lenders who commit fraud or misrepresent borrower qualifications.
