Realtors Urge Barney Frank to Support U.S. Covered Bond Bill

The National Association of Realtors® (NAR) has sent a letter to U.S. House Financial Services Committee (HFSC) Chairman Barney Frank (D-MA), urging him to support the revised version of the proposed U.S. Covered Bond Act of 2010 that was introduced in Congress July 22 as H.R. 5823.

Vicki Cox GolderThe letter (dated July 26) comes one day before the HFSC is scheduled to include H.R. 5823 in a markup session of the full committee.  Proponents believe comprehensive covered bond legislation could help bring more private capital back into the U.S. housing finance market.

Signed by Vicki Cox Golder, NAR's 2010 President, the letter reads in full:

Dear Chairman Frank:

On behalf of the 1.1 million members of the National Association of REALTORS® (NAR), I respectfully request that you support H.R. 5823, the "United States Covered Bond Act of 2010," introduced by Representatives Paul Kanjorski (D-PA) and Scott Garrett (R-NJ).

The foundation of our economy is housing.  Many business sectors have developed from it, and many more thrive because of it.  In nearly all of our economic downturns, it has been housing that has pulled us through.  Therefore, as we endeavor to reform and rebuild our housing system, Realtors® believe that it is imperative that all housing finance instruments in our arsenal be utilized.

The "covered bond" is one tool which our members want to see integrated into our housing finance system.  Our members recognize that this tool will not take the place of mortgage backed securities (MBS) as the primary generator of liquidity for our housing market.  However, we do believe that using this tool, in tandem with MBS, can offer increased liquidity and safety in our secondary market.

Realtors® thank you for your diligent work to bring confidence and strength back to our finance system.  As you continue this endeavor, we strongly encourage you to support Representatives Kanjorski and Garrett's legislation, H.R. 5823, ensuring that no housing finance tool is left unused as we step toward the future.

As always, NAR stands ready to collaborate with you and our industry partners to enact comprehensive and effective mortgage reform legislation.

Sincerely,

Vicki Cox Golder, CRB

2010 President, National Association of Realtors® 

NAR has previously endorsed the concept of covered bonds in testimony before Congress (March 23) and in a document on how best to restructure troubled mortgage giants Fannie Mae and Freddie Mac (March 3).

Covered bonds are debt obligations that have recourse to a pool of assets—the "cover pool"—that secures or "covers" the bond if the issuer becomes insolvent.  Bondholders can rely on recourse to the assets in the cover pool as well as to the direct obligation of the issuer.

Disclosure: Covered Bond Investor™ cofounders Mercy Jiménez and Spencer Punnett performed a consulting project for NAR's Presidential Advisory Group in 2009 on the topic of covered bonds and the future of U.S. home financing.