Can Covered Bonds Resuscitate Residential Mortgage Finance in the United States? / Jay Surti.

Format:

Book

Government document

Author/Creator:

Surti, Jay.

Series:

IMF Working Papers; Working Paper ; No. 2010/277

IMF Working Papers

Language:

English

Subjects (All):

Mortgage-backed securities--United States.

Mortgage-backed securities.

Mortgage loans--United States.

Mortgage loans.

Physical Description:

1 online resource (86 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2010.

Language Note:

English

Summary:

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.

Contents:

Cover Page; Title Page; Copyright Page; Contents; I. Motivation and Summary; II. The Case for Covered Bonds; A. Credit Risk Retention: Capital Market Funding with Skin in the Game; 1. Implied Leverage Under Alternate Mortgage Funding Strategies; 1. Delinquency and Foreclosure Rates of Securitized Loans, 2000-09; B. Risk Allocation and Choice of Covered Bonds Model; 1. Covered Bond Variants and the Bond Market in Denmark; C. Greater Transparency in the Provision of Investor Protection; 2. Comparison of U.S. RMBS and Covered Bonds Programs

3. Valuation of Residential Property for Lending PurposesD. Caveats; III. A Robust Framework for U.S. Covered Bonds; A. The Rationale for Issuing Under a Legal Framework; 4. Main Features of WaMu and BoA Structured Covered Bonds Issues; 2. SPV Issuance Structure of U.S. Covered Bonds Programs; 3. FDIC Treatment of Bond Holder Claims; 5. Conditions for Early Release of Cover Pool to Bond Holders; B. An Assessment of the Proposed Legislative Framework; 6. Comparison of Main Features of Covered Bond Programs Under Past, Current, and Proposed Regulatory Frameworks

4. European Covered Bond Programs: Cover Pool Composition, Q42009IV. Meeting Challenges to Market Development; 5. Spanish Cajas' Pooled Funding Model; 6. FHLB Funding of Mortgages via Advances; V. Concluding Remarks; Annex; 1. Insolvency Administrator's Choice of FIDI Resolution in the Presence of a Covered Bonds Program; References; Footnotes

Notes:

"December 2010."

Includes bibliographical references.

Description based on print version record.

ISBN:

9786613880932

9781462331512

1462331513

9781455235704

1455235709

9781283568487

1283568489

9781455211609

1455211605