By Spencer Punnett for  Covered Bond Investor™

“Well, they were in, and then they were out.”

That’s how a Client Alert from the Morrison & Foerster law firm described the fate of the covered bond provisions that came close — apparently very close — to inclusion in the final version of the financial service reform bill (June 25).

“The outcome: no statutory framework for covered bonds (yet). Just one vote short.”

Work by the House-Senate conference committee to arrive at the compromise bill continued until about 5:00 a.m., Congressional staffers said. More details were hard to obtain this morning, in part because many of those involved reportedly went straight home to sleep.

In retrospect, the covered bond amendment’s failure was foreshadowed by word Wednesday from House Financial Services Committee Chairman Barney Frank — who served on the conference committee — that the Treasury Department and FDIC had voiced concerns.

Resistance from those quarters was cited by various sources as the reason why prospects for the covered bond amendment were deteriorating Thursday as the conference committee’s marathon final session continued.

“Because of the crush of the Volker rule, the derivative pushout rule, the “too big to fail” resolution authority, and the other provisions of the reform bill, the covered bond language did not get the time and attention needed to get everybody’s concerns on the table,” Morrison & Foerster Senior of Counsel Jerry Marlatt told Covered Bond Investor™ (June 25). READ MORE>>

http://www.coveredbondinvestor.com/news/push-covered-bonds-financial-regulatory-reform-bill-fails

By Covered Bond Investor™ Staff

Just when it seemed relegated to the sidelines, proposed comprehensive U.S. covered bond legislation may be back in the game.

House members of the Conference Committee working toward a compromise with their Senate counterparts on the financial services reform bill voted (June 22) to attach covered bond language to the House’s offer.

The Senate side has also “appeared supportive” of the House move to include covered bonds in the compromise bill. Reporters for Dow Jones Newswires went so far as to write (June 22) that “the conference committee appeared likely to approve language establishing rules to foster a covered bond market in the U.S.” READ MORE>>

http://www.coveredbondinvestor.com/news/house-negotiators-add-covered-bond-provisions-financial-reform

The announcement below was released May 7 by the office of Rep. Scott Garrett, who introduced the United States Covered Bond Act of 2010 in the House of Representatives (March 18).

(Washington, DC)– Rep. Scott Garrett (R-NJ) is asking Senate leaders to consider the inclusion of legislative language that would create a statutory framework for a U.S. covered bond market in S. 3217, the “Restoring American Financial Stability Act.” READ MORE>>

http://www.coveredbondinvestor.com/news/garrett-senate-please-include-covered-bonds-reg-reform-legislation

In a long-anticipated move, France’s Compagnie de Financement Foncier (CFF) priced its first-ever U.S. dollar-denominated (USD) covered bond Thursday (April 15).

This is also the first USD covered bond (CB) ever issued under French law and the first USD CB from any European financial institution since 2007.

CFF’s launch follows in the wake of two recent USD CB issues by Canadian banks — a $1.5 billion deal from Royal Bank of Canada (RBC) on April 7 and a $2 billion issue from Canadian Imperial Bank of Commerce (CIBC) on Jan. 27.

About 62% of CFF’s three-year, $2 billion covered bond went to investors in the U.S., according to a source familiar with the deal. This compares to 84% for CIBC’s issue. READ MORE>>

http://www.coveredbondinvestor.com/news/frances-cff-prices-2b-us-dollar-denominated-covered-bond

Royal Bank of Canada (RBC) priced its first U.S. dollar-denominated covered bond Wednesday (April 7).

The $1.5 billion issue, with a five-year maturity, sold at 45.85 basis points over comparable Treasury yields, according to Reuters.

This is the second USD covered bond issue from a Canadian bank — both in 2010. The first, a three-year, $2 billion covered bond from Canadian Imperial Bank of Commerce (CIBC) (Jan. 27), was priced at 66 basis points over the 1.375% January 2013 U.S. Treasury benchmark.

Like CIBC’s issue, RBC’s covered bond was offered to U.S. institutional investors in the private placement market as permitted under SEC Rule 144a.

Meanwhile, there is still no new covered bond from a U.S. bank on the horizon. Although Bank of America and now-defunct Washington Mutual (WaMu) successfully sold large covered bond issues in 2006 and 2007 (WaMu’s program is now sponsored by JP Morgan), momentum ground to a halt with the global economic crisis.

Proponents of U.S. covered bonds hope that covered bond legislation recently introduced in Congress by Rep. Scott Garrett (R-NJ) could help encourage their use as an additional funding tool for real estate mortgages and other asset classes here. However, at this point the bill is still in committee, with prospects for passage unclear.

Covered bonds are dual-recourse debt obligations that give an investor recourse for payment both (1) directly against the issuer and (2) to a pool of assets — the cover pool — that secures or “covers” the bond if the issuer becomes insolvent. Still little known in the U.S., they are widely used in Europe for real estate and public sector financing.

(Source: http://www.coveredbondinvestor.com/news/rbc-prices-usd-15-billion-covered-bond)

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

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

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