Search Results

You are looking at 1 - 10 of 63 items for :

  • "cover pool" x
Clear All
Jay Surti

Challenges to Market Development V. Concluding Remarks References Tables 1. Implied Leverage Under Alternate Mortgage Funding Strategies 2. Comparison of U.S. RMBS and Covered Bonds Programs 3. Valuation of Residential Property for Lending Purposes 4. Main Features of WaMu and BoA Structured Covered Bonds Issues 5. Conditions for Early Release of Cover Pool to Bond Holders 6. Comparison of Main Features of Covered Bond Programs Under Past, Current, and Proposed Regulatory Frameworks Figures 1. Delinquency and Foreclosure Rates of Securitized Loans

Jay Surti

stable and low cost supply of capital. However, since the mortgage collateral ( cover pool ) backing an issue of covered bonds is held on an issuer’s balance-sheet, this funding strategy entails a higher capital cost for the originator-issuer compared to OtD, which potentially, could raise borrowing costs in the home purchase market. One should, however, weigh the increase in (capital) cost entailed by covered bonds against the salutary incentive impact of greater credit risk retention. Deterioration of credit quality in a falling housing market directly hurts the

Jay Surti
This paper considers the case for mortgage covered bonds as an alternative to the originate-to-distribute mortgage funding model. It argues that the economic incentives provided to market participants under the covered bonds model are less susceptible to moral hazard even while retaining the key benefits of securitization such as capital market funding and flexibility in risk allocation. Notwithstanding these advantages, however, limited market size and the greater pro-cyclicality of mortgage loan quality in the United States - potentially reflecting borrower incentives under the personal bankruptcy framework - impose limits on the benefits ensuing from this model. The analysis underscores the need for a comprehensive legal-regulatory framework to underpin market development and discusses a number of ways in which the current draft legislation may be further strengthened. A potential strategy to hasten market development within the current institutional framework is identified.
Mr. Renzo G Avesani and Ms. Elina Ribakova

countries (such as Spain), all mortgages on the balance sheet of the issuer are acting as collateral for the bonds. Following the ‘cover principle’, the outstanding amount and interest claims on covered bonds must be covered by the amount of eligible cover assets. In contrast to other mortgage-backed securities (MBS), there is a special legal regime that governs the issuance and provides “special” protection to investors. The law governs the type of eligible assets for the covered pool, the asset/liability management (ALM), credit enhancements and over

International Monetary Fund. European Dept.
This 2013 Article IV Consultation examines the performance of Sweden’s fiscal policies to counter effects of global financial crisis. Economic growth in Sweden has been moderate since global financial crisis of 2008–2009. The IMF report posits that with potential growth moderately weaker and the natural rate of unemployment to remain elevated, policies should focus on growth-enhancing reforms, especially in the labor market. It suggests that good policies that secure the soundness of Swedish international banking groups are expected to benefit borrowers not only in Sweden but across the region.
International Monetary Fund
As part of the 2011 Financial Sector Assessment Program (FSAP) update for Germany, this Technical Note reviews recent developments of mortgage-covered bond (Pfandbrief) and mortgage securitization markets in Germany, and explores future prospects for each against the background of ongoing regulatory changes. It examines the characteristics of the two markets and their performance through the crisis, and analyzes some of the policy reactions that are currently tending to favor covered bonds over securitization. Some of the systemic vulnerabilities associated with covered bonds are also discussed.
International Monetary Fund. European Dept.

bonds assure holders a priority claim to specially selected collateral in the so-called cover pool . A covered bond is a claim on the issuing institution, where if the issuer is not able to meet its obligations, the holder of the bond has priority to specially-selected collateral. Covered bonds differ from traditional mortgage bonds in four main aspects: (i) they are governed by a well-defined regulatory framework that ensures that the cover pool is of high quality (e.g., in Sweden, as detailed in Table 1 , this is a function of maximum Loan to Value (LVT) ratios

International Monetary Fund

bailout of a distressed issuer if authorities are determined to keep this important market open. This risk of moral hazard is mitigated by strong legislation, which not only ensures high levels of over-collateralization (the minimum requirement is 2 percent; a higher level may be required depending on the composition of the cover pool), but also includes the possibility of segregating the cover pool assets into a specialized Pfandbrief bank with limited business activity (Pfandbriefbank mit beschränkter Geschäftstätigkeit) . Such an entity is administered by a