United States Covered Bond Act of 2011 - (Sec. 3) Directs the Secretary of the Treasury to establish a regulatory oversight program for specified recourse debt obligations of an eligible issuer (covered bonds) that provides for such bonds to be maintained in a manner consistent with safe and sound asset-liability management and other financial practices.
Subjects a covered bond to this Act only if it is issued by an eligible issuer under a covered bond program approved by the applicable bond regulator.
Specifies as a covered bond regulator: (1) the appropriate federal banking agency, for any eligible issuer under its jurisdiction; (2) the Secretary, for any eligible issuer not subject to an appropriate federal banking agency; (3) the covered bond regulator for the sponsor of an issuer if the issuer is not subject to a federal banking agency's jurisdiction; and (4) the covered bond regulator for a sponsor whose covered bonds constitute the largest share of the issuer's cover pool, if the issuer is is not subject to a federal banking agency's jurisdiction, and is sponsored by one or more eligible issuers for the sole purpose of issuing covered bonds on a pooled basis.
Prescribes an approval process for a covered bond under which the covered bond regulator must apply standards established by the Secretary pursuant to an oversight program that evaluates covered bond programs. Authorizes the approval of any covered bond program in existence on the date of enactment of this Act.
Permits an eligible issuer to have more than one covered bond program.
Grants covered bond regulators cease and desist authority. Requires such regulators to set, as a percentage of an issuer's total assets, and consistent with safety and soundness principles, the maximum amount of outstanding covered bonds the issuer may issue.
Requires the Secretary to maintain a publicly accessible Web site registry for each covered bond program approved by a covered bond regulator.
Authorizes a covered bond regulator to levy fees upon issuers of covered bonds in order to defray the costs of implementing this Act.
Directs the Secretary to establish minimum over-collateralization requirements for covered bonds designed to ensure that sufficient eligible assets and substitute assets are maintained in the cover pool to satisfy all principal and interest payments on the covered bonds when due through maturity, based upon the credit, collection, and interest rate risks (excluding the liquidity risks) associated with the eligible asset class.
Requires eligible and substitute assets in any cover pool to meet, in the aggregate and at all times, such minimum over-collateralization requirements.
Requires a covered bonds issuer to appoint the indenture trustee for the covered bonds, or another unaffiliated entity, as an independent asset monitor to verify and report to the Secretary and specified persons whether the cover pool meets such minimum over-collateralization requirements.
Treats failure of a covered pool to meet minimum over-collateralization requirements as an uncured default if such failure is not cured within the time specified in related transaction documents.
Requires the issuer of covered bonds to give the Secretary and the applicable covered bond regulator prompt written notice if the cover pool securing the covered bonds fails to meet the applicable minimum over-collateralization requirements.
Prescribes requirements for eligible assets, including loans, originations and double pledges.
Requires an issuer of covered bonds to deliver, at least monthly, a schedule of assets that identifies all eligible assets and substitute assets in the cover pool securing the covered bonds.
(Sec. 4) Prescribes a procedure for automatic creation of two separate estates when an uncured default occurs on a covered bond before its issuer enters conservatorship, receivership, liquidation, or bankruptcy following default or insolvency.
Requires creation by operation of law of a separate estate for each affected covered bond program, to be administered separately and apart from the issuer or any subsequent conservatorship, receivership, liquidating agency, or estate in bankruptcy of the issuer.
Prescribes treatment of the assets and liabilities of each separate estate. States that such estate consists of the cover pool securing the covered bond (including over-collateralization in the cover pool). Releases the cover pool automatically to such an estate free and clear of any claim of either the issuer or any conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer or any other assets of the issuer.
Grants the holder of a covered bond or related obligation for which an estate has become liable a claim against the issuer for any deficiency regarding the covered bond or related obligation.
Grants a residual interest in the separate estate to: (1) the issuer; and (2) the conservator, receiver, liquidating agent, or trustee in bankruptcy for the issuer.
Specifies absolute obligations of the issuer, after creation of the separate estate, to: (1) transfer all estate property to the trustee; and (2) continue servicing the applicable cover pool for a certain time, at the election of the trustee or a servicer or administrator of the estate, in return for a fair-market-value fee payable from the estate as an administrative expense.
Sets forth the rights and obligations of the Federal Deposit Insurance Corporation (FDIC), if it is appointed as conservator or receiver for a covered bond issuer before an uncured default results in the creation of an estate.
Prescribes procedures for administration and resolution of estates.
Directs the Comptroller General to study: (1) whether federal reserve banks should be authorized to extend credit to an estate of a covered bond in bankruptcy; and (2) if so, what conditions and limits should be established to mitigate any risk that the U.S. government could absorb credit losses on the cover pool held by the estate.
Declares that taxpayers shall bear no losses from the resolution of an estate under this Act.
(Sec. 5) Treats as a security within the purview of specified securities laws a covered bond issued or guaranteed under this Act by a bank or eligible issuer that is sponsored solely for the sole purpose of issuing covered bonds.
Prohibits such product from being treated as an asset-backed security under the Securities and Exchange Act of 1934. Prescribes reporting and disclosure requirements.
Exempts from all securities laws: (1) the separate estates created under this Act (but subjects them to reporting requirements imposed by the applicable covered bond regulator), and (2) any residual interest in a separate estate created under this Act.
(Sec. 6) Amends the Secondary Mortgage Market Enhancement Act of 1984 to encompass covered bonds within its purview.
Prohibits treatment of the separate estate created under this Act as an entity subject to taxation under the Internal Revenue Code separate from the owner of the residual interest.
Prohibits construction of the transfer or assumption of any asset or liability to or by an estate or an eligible issuer under this Act as causing or constituting an event in which gain or loss is recognized for tax purposes.
Treats as qualified mortgages for purposes of real estate mortgage investment conduits (REMICs) any covered bonds secured by eligible assets from the residential or commercial mortgage asset class. Requires such a bond to be treated as a real estate asset in the same manner as a regular interest in a REMIC.
Treats acquisition of a covered bond as acquisition of an investment security for tax purposes.
Authorizes the Secretary to promulgate regulations precluding state and local taxation if the separate estate is not treated as an entity subject to taxation separate from the owner of the residual interest.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 940 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 940
To establish standards for covered bond programs and a covered bond
regulatory oversight program, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 8, 2011
Mr. Garrett (for himself and Mrs. Maloney) introduced the following
bill; which was referred to the Committee on Financial Services, and in
addition to the Committee on Ways and Means, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee
concerned
_______________________________________________________________________
A BILL
To establish standards for covered bond programs and a covered bond
regulatory oversight program, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``United States Covered Bond Act of
2011''.
SEC. 2. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) Ancillary asset.--The term ``ancillary asset'' means--
(A) any interest rate or currency swap associated
with 1 or more eligible assets, substitute assets, or
other assets in a cover pool;
(B) any credit enhancement or liquidity arrangement
associated with 1 or more eligible assets, substitute
assets, or other assets in a cover pool;
(C) any guarantee, letter-of-credit right, or other
secondary obligation that supports any payment or
performance of 1 or more eligible assets, substitute
assets, or other assets in a cover pool; and
(D) any proceeds of, or other property incident to,
1 or more eligible assets, substitute assets, or other
assets in a cover pool.
(2) Corporation.--The term ``Corporation'' means the
Federal Deposit Insurance Corporation.
(3) Cover pool.--The term ``cover pool'' means a dynamic
pool of assets that is comprised of--
(A) in the case of any eligible issuer described in
subparagraph (A), (B), or (C) of paragraph (9)--
(i) 1 or more eligible assets from a single
eligible asset class; and
(ii) 1 or more substitute assets or
ancillary assets; and
(B) in the case of any eligible issuer described in
paragraph (9)(D)--
(i) the covered bonds issued by each
sponsoring eligible issuer; and
(ii) 1 or more substitute assets or
ancillary assets.
(4) Covered bond.--The term ``covered bond'' means any
recourse debt obligation of an eligible issuer that--
(A) has an original term to maturity of not less
than 1 year;
(B) is secured by a perfected security interest in
or other lien on a cover pool that is owned directly or
indirectly by the issuer of the obligation;
(C) is issued under a covered bond program that has
been approved by the applicable covered bond regulator;
(D) is identified in a register of covered bonds
that is maintained by the Secretary; and
(E) is not a deposit (as defined in section 3(l) of
the Federal Deposit Insurance Act (12 U.S.C. 1813(l))).
(5) Covered bond program.--The term ``covered bond
program'' means any program of an eligible issuer under which,
on the security of a single cover pool, 1 or more series or
tranches of covered bonds may be issued.
(6) Covered bond regulator.--The term ``covered bond
regulator'' means--
(A) the appropriate Federal banking agency (as
defined in section 3(q) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(q))); and
(B) for any eligible issuer that is not subject to
the jurisdiction of an appropriate Federal banking
agency, the Secretary.
(7) Eligible asset.--The term ``eligible asset'' means--
(A) in the case of the residential mortgage asset
class--
(i) any first-lien mortgage loan that is
secured by 1-to-4 family residential property
and that is in compliance with any rule or
supervisory guidance of a Federal agency
applicable to the loan at the time of loan
origination;
(ii) any mortgage loan that is insured
under the National Housing Act (12 U.S.C. 1701
et seq.) and that is in compliance with any
rule or supervisory guidance of a Federal
agency applicable to the loan at the time of
loan origination; and
(iii) any loan that is guaranteed, insured,
or made under chapter 37 of title 38, United
States Code, and that is in compliance with any
rule or supervisory guidance of a Federal
agency applicable to the loan at the time of
loan origination;
(B) in the case of the home equity asset class, any
home equity loan that is secured by 1-to-4 family
residential property and that is in compliance with any
rule or supervisory guidance of a Federal agency
applicable to the loan at the time of loan origination;
(C) in the case of the commercial mortgage asset
class, any commercial mortgage loan (including any
multifamily mortgage loan) that is in compliance with
any rule or supervisory guidance of a Federal agency
applicable to the loan at the time of loan origination;
(D) in the case of the public sector asset class--
(i) any security issued by a State,
municipality, or other governmental authority;
(ii) any loan made to a State,
municipality, or other governmental authority;
and
(iii) any loan, security, or other
obligation that is insured or guaranteed, in
full or substantially in full, by the full
faith and credit of the United States
Government (whether or not such loan, security,
or other obligation is also part of another
eligible asset class);
(E) in the case of the auto asset class, any auto
loan or lease that is in compliance with any rule or
supervisory guidance of a Federal agency applicable to
the loan or lease at the time of loan or lease
origination;
(F) in the case of the student loan asset class,
any student loan (whether guaranteed or nonguaranteed)
that is in compliance with any rule or supervisory
guidance of a Federal agency applicable to the loan at
the time of loan origination;
(G) in the case of the credit or charge card asset
class, any extension of credit to a person under an
open-end credit plan that is in compliance with any
rule or supervisory guidance of a Federal agency
applicable to the extension of credit at the time the
extension is made;
(H) in the case of the small business asset class,
any loan that is made or guaranteed under a program of
the Small Business Administration and that is in
compliance with any rule or supervisory guidance of a
Federal agency applicable to the loan at the time of
loan origination; and
(I) in the case of any other eligible asset class,
any asset designated by the Secretary, by rule and in
consultation with the covered bond regulators, as an
eligible asset for purposes of such class.
(8) Eligible asset class.--The term ``eligible asset
class'' means--
(A) a residential mortgage asset class;
(B) a home equity asset class;
(C) a commercial mortgage asset class;
(D) a public sector asset class;
(E) an auto asset class;
(F) a student loan asset class;
(G) a credit or charge card asset class;
(H) a small business asset class; and
(I) any other eligible asset class designated by
the Secretary, by rule and in consultation with the
covered bond regulators.
(9) Eligible issuer.--The term ``eligible issuer'' means--
(A) any insured depository institution and any
subsidiary of such institution;
(B) any bank holding company, any savings and loan
holding company, and any subsidiary of either of such
companies;
(C) any nonbank financial company (as defined in
section 102(a)(4) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5311(a)(4)))
that is approved as an eligible issuer by the
applicable covered bond regulator and any subsidiary of
such company; and
(D) any issuer that is sponsored by 1 or more
eligible issuers for the sole purpose of issuing
covered bonds on a pooled basis.
(10) Oversight program.--The term ``oversight program''
means the covered bond regulatory oversight program established
under section 3(a).
(11) Secretary.--The term ``Secretary'' means the Secretary
of the Department of the Treasury.
(12) Substitute asset.--The term ``substitute asset''
means--
(A) cash;
(B) any direct obligation of the United States
Government, and any security or other obligation whose
full principal and interest are insured or guaranteed
by the full faith and credit of the United States
Government;
(C) any direct obligation of a United States
Government corporation or Government-sponsored
enterprise of the highest credit quality, and any other
security or other obligation of the highest credit
quality whose full principal and interest are insured
or guaranteed by such corporation or enterprise, except
that the outstanding principal amount of these
obligations in any cover pool may not exceed an amount
equal to 20 percent of the outstanding principal amount
of all assets in the cover pool without the approval of
the applicable covered bond regulator;
(D) any overnight investment in Federal funds;
(E) any other substitute asset designated by the
Secretary, by rule and in consultation with the covered
bond regulators; and
(F) any deposit account or securities account into
which only an asset described in subparagraph (A), (B),
(C), (D), or (E) may be deposited or credited.
SEC. 3. REGULATORY OVERSIGHT OF COVERED BOND PROGRAMS ESTABLISHED.
(a) Establishment.--
(1) In general.--Not later than 180 days after the date of
the enactment of this Act, the Secretary shall, by rule and in
consultation with the covered bond regulators, establish a
covered bond regulatory oversight program that provides for--
(A) covered bond programs to be evaluated according
to reasonable and objective standards in order to be
approved under paragraph (2), including any additional
eligibility standards for eligible assets and any other
criteria determined appropriate by the Secretary to
further the purposes of this Act;
(B) covered bond programs to be maintained in a
manner that is consistent with this Act and safe and
sound asset-liability management and other financial
practices; and
(C) any estate created under section 4 to be
administered in a manner that is consistent with
maximizing the value and the proceeds of the related
cover pool in a resolution under this Act.
(2) Approval of each covered bond program.--
(A) In general.--A covered bond shall be subject to
this Act only if the covered bond is issued by an
eligible issuer under a covered bond program that is
approved by the applicable covered bond regulator.
(B) Approval process.--Each covered bond regulator
shall apply the standards established by the Secretary
under the oversight program to evaluate a covered bond
program that has been submitted by an eligible issuer
for approval. Each covered bond regulator, promptly
after approving a covered bond program, shall provide
the Secretary with the name of the covered bond
program, the name of the eligible issuer, and all other
information reasonably requested by the Secretary in
order to update the registry under paragraph (3)(A).
Each eligible issuer, promptly after issuing a covered
bond under an approved covered bond program, shall
provide the Secretary with all information reasonably
requested by the Secretary in order to update the
registry under paragraph (3)(B).
(C) Existing covered bond programs.--A covered bond
regulator may approve a covered bond program that is in
existence on the date of the enactment of this Act.
Upon such approval, each covered bond under the covered
bond program shall be subject to this Act, regardless
of when the covered bond was issued.
(D) Multiple covered bond programs permitted.--An
eligible issuer may have more than 1 covered bond
program.
(3) Registry.--Under the oversight program, the Secretary
shall maintain a registry that is published on a Web site
available to the public and that, for each covered bond program
approved by a covered bond regulator, contains--
(A) the name of the covered bond program, the name
of the eligible issuer, and all other information that
the Secretary considers necessary to adequately
identify the covered bond program and the eligible
issuer; and
(B) all information that the Secretary considers
necessary to adequately identify all outstanding
covered bonds issued under the covered bond program
(including the reports described in paragraphs (3) and
(4) of subsection (b)).
(4) Fees.--Each covered bond regulator may levy, on the
issuers of covered bonds under the primary supervision of such
covered bond regulator, reasonably apportioned fees that such
covered bond regulator considers necessary, in the aggregate,
to defray the costs of such covered bond regulator carrying out
the provisions of this Act. Such funds shall not be construed
to be Government funds or appropriated monies and shall not be
subject to apportionment for purposes of chapter 15 of title
31, United States Code, or any other provision of law.
(b) Minimum Over-Collateralization Requirements.--
(1) Requirements established.--
(A) In general.--The Secretary, by rule and in
consultation with the covered bond regulators, shall
establish minimum over-collateralization requirements
for covered bonds backed by each of the eligible asset
classes. The minimum over-collateralization
requirements shall be designed to ensure that
sufficient eligible assets and substitute assets are
maintained in the cover pool to satisfy all principal
and interest payments on the covered bonds when due
through maturity and shall be based on the credit,
collection, and interest rate risks (excluding the
liquidity risks) associated with the eligible asset
class.
(B) Reliance on other over-collateralization
standards.--In establishing the minimum over-
collateralization requirements, the Secretary may rely
on over-collateralization levels that are required for
the same or similar asset classes by--
(i) any Federal reserve bank when extending
credit to depository institutions under the
Federal Reserve Act (12 U.S.C. 221 et seq.);
(ii) any Federal home loan bank when
extending credit to member institutions under
the Federal Home Loan Bank Act (12 U.S.C. 1421
et seq.); or
(iii) any other comparable lender when
extending credit in substantially similar
transactions.
(2) Asset coverage test.--The eligible assets and the
substitute assets in any cover pool shall be required, in the
aggregate, to meet at all times the applicable minimum over-
collateralization requirements.
(3) Monthly reporting.--On a monthly basis, each issuer of
covered bonds shall submit a report on whether the cover pool
that secures the covered bonds meets the applicable minimum
over-collateralization requirements to--
(A) the Secretary;
(B) the applicable covered bond regulator;
(C) the applicable indenture trustee;
(D) the applicable covered bondholders; and
(E) the applicable independent asset monitor.
(4) Independent asset monitor.--
(A) Appointment.--Each issuer of covered bonds
shall appoint the indenture trustee for the covered
bonds, or another unaffiliated entity, as an
independent asset monitor for the applicable cover
pool.
(B) Duties.--An independent asset monitor appointed
under subparagraph (A) shall, on an annual or other
more frequent periodic basis determined by the
Secretary under the oversight program--
(i) verify whether the cover pool meets the
applicable minimum over-collateralization
requirements; and
(ii) report to the Secretary, the
applicable covered bond regulator, the
applicable indenture trustee, and the
applicable covered bondholders on whether the
cover pool meets the applicable minimum over-
collateralization requirements.
(5) No loss of status.--Covered bonds shall remain subject
to this Act regardless of whether the applicable cover pool
ceases to meet the applicable minimum over-collateralization
requirements.
(6) Failure to meet requirements.--
(A) In general.--If a cover pool fails to meet the
applicable minimum over-collateralization requirements,
and if the failure is not cured within the time
specified in the related transaction documents, the
failure shall be an uncured default for purposes of
section 4(a).
(B) Notice required.--An issuer of covered bonds
shall promptly give the Secretary and the applicable
covered bond regulator written notice if the cover pool
securing the covered bonds fails to meet the applicable
minimum over-collateralization requirements, if the
failure is cured within the time specified in the
related transaction documents, or if the failure is not
so cured.
(c) Requirements for Eligible Assets.--
(1) Loans.--A loan shall not qualify as an eligible asset
for so long as the loan is delinquent for more than 60
consecutive days.
(2) Securities.--A security shall not qualify as an
eligible asset for so long as the security does not meet any
credit-quality requirement under this Act.
(3) No double pledge.--An asset shall not qualify as an
eligible asset for so long as the asset is subject to a prior
perfected security interest or other lien that has been granted
in an unrelated transaction. Nothing in this Act shall affect
such a prior perfected security interest or other lien.
(4) Single eligible asset class.--No cover pool may include
eligible assets from more than 1 eligible asset class.
(d) Other Requirements.--
(1) Books and records of issuer.--Each issuer of covered
bonds shall clearly mark its books and records to identify the
assets that comprise the cover pool securing the covered bonds.
(2) Schedule of eligible assets and substitute assets.--
Each issuer of covered bonds shall deliver to the applicable
indenture trustee and the applicable independent asset monitor,
on at least a monthly basis, a schedule that identifies all
eligible assets and substitute assets in the cover pool
securing the covered bonds.
SEC. 4. RESOLUTION UPON DEFAULT OR INSOLVENCY.
(a) Uncured Default Defined.--For purposes of this section, the
term ``uncured default'' means a default on a covered bond that has not
been cured within the time, if any, specified in the related
transaction documents.
(b) Default on Covered Bonds Prior to Conservatorship,
Receivership, Liquidation, or Bankruptcy.--
(1) Creation of separate estate.--If an uncured default
occurs on a covered bond before the issuer of the covered bond
enters conservatorship, receivership, liquidation, or
bankruptcy, an estate shall be immediately and automatically
created by operation of law and shall exist and be administered
separate and apart from the issuer or any subsequent
conservatorship, receivership, liquidating agency, or estate in
bankruptcy for the issuer or any other assets of the issuer. A
separate estate shall be created for each affected covered bond
program.
(2) Assets and liabilities of estate.--Any estate created
under paragraph (1) shall be comprised of the cover pool that
secures the covered bond. The cover pool shall be immediately
and automatically released to and held by the estate free and
clear of any right, title, interest, or claim of the issuer or
any conservator, receiver, liquidating agent, or trustee in
bankruptcy for the issuer or any other assets of the issuer.
The estate shall be fully liable on the covered bond and all
other covered bonds and related obligations of the issuer
(including obligations under related derivative transactions)
that are secured by a perfected security interest in or other
lien on the cover pool when the estate is created. The estate
shall not be liable on any obligation of the issuer that is not
secured by a perfected security interest in or other lien on
the cover pool when the estate is created. No conservator,
receiver, liquidating agent, or trustee in bankruptcy for the
issuer may charge or assess the estate for any claim of the
conservator, receiver, liquidating agent, or trustee in
bankruptcy or the conservatorship, receivership, liquidating
agency, or estate in bankruptcy and may not obtain or perfect a
security interest in or other lien on the cover pool to secure
such a claim.
(3) Retention of claims.--Any holder of a covered bond or
related obligation for which an estate has become liable under
paragraph (2) shall retain a claim against the issuer for any
deficiency with respect to the covered bond or related
obligation.
(4) Residual interest.--
(A) Issuance of residual interest.--Upon the
creation of an estate under paragraph (1), a residual
interest in the estate shall be immediately and
automatically issued by operation of law to the issuer.
(B) Nature of residual interest.--The residual
interest under subparagraph (A) shall--
(i) be an exempted security as described in
section 5;
(ii) represent the right to any surplus
from the cover pool after the covered bonds and
all other liabilities of the estate have been
fully and irrevocably paid; and
(iii) be evidenced by a certificate
executed by the trustee of the estate.
(5) Obligations of issuer.--
(A) In general.--After the creation of an estate
under paragraph (1), the issuer shall--
(i) transfer to or at the direction of the
trustee for the estate all property of the
estate that is in the possession or under the
control of the issuer, including all tangible
or electronic books, records, files, and other
documents or materials relating to the assets
and liabilities of the estate; and
(ii) at the election of the trustee or a
servicer or administrator for the estate,
continue servicing the applicable cover pool
for 120 days after the creation of the estate
in return for a fair-market-value fee, as
determined by the trustee in consultation with
the applicable covered bond regulator, that
shall be payable from the estate as an
administrative expense.
(B) Obligations absolute.--Neither the issuer,
whether acting as debtor in possession or in any other
capacity, nor any conservator, receiver, liquidating
agent, or trustee in bankruptcy for the issuer or any
other assets of the issuer may disaffirm, repudiate, or
reject the obligation to turn over property or to
continue servicing the cover pool as provided in
subparagraph (A).
(c) Default on Covered Bonds Upon Conservatorship, Receivership,
Liquidation, or Bankruptcy.--
(1) Corporation conservatorship or receivership.--
(A) In general.--If the Corporation is appointed as
conservator or receiver for an issuer of covered bonds
before an uncured default results in the creation of an
estate under subsection (b), the Corporation as
conservator or receiver shall have an exclusive right,
during the 180-day period beginning on the date of the
appointment, to transfer any cover pool owned by the
issuer in its entirety, together with all covered bonds
and related obligations that are secured by a perfected
security interest in or other lien on the cover pool,
to another eligible issuer that meets all conditions
and requirements specified in the related transaction
documents.
(B) Obligations during 180-day period.--During the
180-day period described in subparagraph (A), the
Corporation as conservator or receiver shall fully and
timely satisfy all monetary and nonmonetary obligations
of the issuer under all covered bonds and the related
transaction documents and shall fully and timely cure
all defaults by the issuer (other than its
conservatorship or receivership) under the applicable
covered bond program, in each case, until the earlier
of--
(i) the transfer of the applicable covered
bond program to another eligible issuer as
provided in subparagraph (A); or
(ii) the delivery to the Secretary, the
applicable covered bond regulator, the
applicable indenture trustee, and the
applicable covered bondholders of a written
notice from the Corporation as conservator or
receiver electing to cease further performance
under the applicable covered bond program.
(C) Assumption by transferee.--If the Corporation
as conservator or receiver transfers a covered bond
program to another eligible issuer within the 180-day
period as provided in subparagraph (A), the transferee
shall take ownership of the applicable cover pool and
shall become fully liable on all covered bonds and
related obligations of the issuer that are secured by a
perfected security interest in or other lien on the
cover pool.
(2) Other circumstances.--An estate shall be immediately
and automatically created by operation of law and shall exist
and be administered separate and apart from an issuer of
covered bonds and any conservatorship, receivership,
liquidating agency, or estate in bankruptcy for the issuer or
any other assets of the issuer, if--
(A) a conservator, receiver, liquidating agent, or
trustee in bankruptcy, other than the Corporation, is
appointed for the issuer before an uncured default
results in the creation of an estate under subsection
(b); or
(B) in the case of the appointment of the
Corporation as conservator or receiver as described in
paragraph (1)(A), the Corporation as conservator or
receiver--
(i) does not complete the transfer of the
applicable covered bond program to another
eligible issuer within the 180-day period as
provided in paragraph (1)(A);
(ii) delivers to the Secretary, the
applicable covered bond regulator, the
applicable indenture trustee, and the
applicable covered bondholders a written notice
electing to cease further performance under the
applicable covered bond program; or
(iii) fails to fully and timely satisfy all
monetary and nonmonetary obligations of the
issuer under the covered bonds and the related
transaction documents or to fully and timely
cure all defaults by the issuer (other than its
conservatorship or receivership) under the
applicable covered bond program.
A separate estate shall be created for each affected covered
bond program.
(3) Assets and liabilities of estate.--Any estate created
under paragraph (2) shall be comprised of the cover pool that
secures the covered bonds. The cover pool shall be immediately
and automatically released to and held by the estate free and
clear of any right, title, interest, or claim of the issuer or
any conservator, receiver, liquidating agent, or trustee in
bankruptcy for the issuer or any other assets of the issuer.
The estate shall be fully liable on the covered bonds and all
other covered bonds and related obligations of the issuer
(including obligations under related derivative transactions)
that are secured by a perfected security interest in or other
lien on the cover pool when the estate is created. The estate
shall not be liable on any obligation of the issuer that is not
secured by a perfected security interest in or other lien on
the cover pool when the estate is created. No conservator,
receiver, liquidating agent, or trustee in bankruptcy for the
issuer may charge or assess the estate for any claim of the
conservator, receiver, liquidating agent, or trustee in
bankruptcy or the conservatorship, receivership, liquidating
agency, or estate in bankruptcy and may not obtain or perfect a
security interest in or other lien on the cover pool to secure
such a claim.
(4) Contingent claim.--Any contingent claim against an
issuer for a deficiency with respect to a covered bond or
related obligation for which an estate has become liable under
paragraph (3) shall be allowed as a provable claim in the
conservatorship, receivership, liquidating agency, or
bankruptcy case for the issuer. The contingent claim shall be
estimated by the conservator, receiver, liquidating agent, or
bankruptcy court for purposes of allowing the claim as a
provable claim if awaiting the fixing of the contingent claim
would unduly delay the resolution of the conservatorship,
receivership, liquidating agency, or bankruptcy case.
(5) Residual interest.--
(A) Issuance of residual interest.--Upon the
creation of an estate under paragraph (2), and
regardless of whether any contingent claim described in
paragraph (4) becomes fixed or is estimated, a residual
interest in the estate shall be immediately and
automatically issued by operation of law to the
conservator, receiver, liquidating agent, or trustee in
bankruptcy for the issuer.
(B) Nature of residual interest.--The residual
interest under subparagraph (A) shall--
(i) be an exempted security as described in
section 5;
(ii) represent the right to any surplus
from the cover pool after the covered bonds and
all other liabilities of the estate have been
fully and irrevocably paid; and
(iii) be evidenced by a certificate
executed by the trustee of the estate.
(6) Obligations of issuer.--
(A) In general.--After the creation of an estate
under paragraph (2), the issuer and its conservator,
receiver, liquidating agent, or trustee in bankruptcy
shall--
(i) transfer to or at the direction of the
trustee for the estate all property of the
estate that is in the possession or under the
control of the issuer or its conservator,
receiver, liquidating agent, or trustee in
bankruptcy, including all tangible or
electronic books, records, files, and other
documents or materials relating to the assets
and liabilities of the estate; and
(ii) at the election of the trustee or a
servicer or administrator for the estate,
continue servicing the applicable cover pool
for 120 days after the creation of the estate
in return for a fair-market-value fee, as
determined by the trustee in consultation with
the applicable covered bond regulator, that
shall be payable from the estate as an
administrative expense.
(B) Obligations absolute.--Neither the issuer,
whether acting as debtor in possession or in any other
capacity, nor any conservator, receiver, liquidating
agent, or trustee in bankruptcy for the issuer or any
other assets of the issuer may disaffirm, repudiate, or
reject the obligation to turn over property or to
continue servicing the cover pool as provided in
subparagraph (A).
(d) Administration and Resolution of Estates.--
(1) Trustee, servicer, and administrator.--
(A) In general.--Upon the creation of any estate
under subsection (b)(1) or (c)(2), the applicable
covered bond regulator shall--
(i) act as or appoint the trustee for the
estate;
(ii) appoint 1 or more servicers or
administrators for the cover pool held by the
estate; and
(iii) give the Secretary, the applicable
indenture trustee, the applicable covered
bondholders, and the owner of the residual
interest written notice of the creation of the
estate.
(B) Terms and conditions of appointment.--All terms
and conditions of any appointment under paragraph (1),
including the terms and conditions relating to
compensation, shall conform to the requirements of this
Act and the oversight program and otherwise shall be
determined by the applicable covered bond regulator.
(C) Qualification.--The applicable covered bond
regulator may require the trustee or any servicer or
administrator for an estate to post in favor of the
United States, for the benefit of the estate, a bond
that is conditioned on the faithful performance of the
duties of the trustee or the servicer or administrator.
The covered bond regulator shall determine the amount
of any bond required under this subparagraph and the
sufficiency of the surety on the bond. A proceeding on
a bond required under this subparagraph may not be
commenced after two years after the date on which the
trustee or the servicer or administrator was
discharged.
(D) Powers and duties of trustee.--The trustee for
an estate is the representative of the estate and,
subject to the provisions of this Act, has capacity to
sue and be sued. The trustee shall--
(i) administer the estate in compliance
with this Act, the oversight program, and the
related transaction documents;
(ii) be accountable for all property of the
estate that is received by the trustee;
(iii) make a final report and file a final
account of the administration of the estate
with the applicable covered bond regulator; and
(iv) after the estate has been fully
administered, close the estate.
(E) Powers and duties of servicer or
administrator.--Any servicer or administrator for an
estate--
(i) shall--
(I) collect, realize on (by
liquidation or other means), and
otherwise manage the cover pool held by
the estate in compliance with this Act,
the oversight program, and the related
transaction documents and in a manner
consistent with maximizing the value
and the proceeds of the cover pool;
(II) deposit or invest all proceeds
and funds received in compliance with
this Act, the oversight program, and
the related transaction documents and
in a manner consistent with maximizing
the net return to the estate, taking
into account the safety of the deposit
or investment; and
(III) apply, or direct the trustee
for the estate to apply, all proceeds
and funds received and the net return
on any deposit or investment to make
distributions in compliance with
paragraphs (3) and (4);
(ii) may borrow funds or otherwise obtain
credit, for the benefit of the estate, in
compliance with paragraph (2) on a secured or
unsecured basis and on a priority, pari passu,
or subordinated basis;
(iii) shall, at the times and in the manner
required by the applicable covered bond
regulator, submit to the covered bond
regulator, the Secretary, the applicable
indenture trustee, the applicable covered
bondholders, the owner of the residual
interest, and any other person designated by
the covered bond regulator, reports that
describe the activities of the servicer or
administrator on behalf of the estate, the
performance of the cover pool held by the
estate, and distributions made by the estate;
and
(iv) shall assist the trustee in preparing
the final report and the final account of the
administration of the estate.
(F) Supervision of trustee, servicer, and
administrator.--The applicable covered bond regulator
shall supervise the trustee and any servicer or
administrator for an estate. The covered bond regulator
shall require that all reports submitted under
subparagraph (E)(iii) do not contain any untrue
statement of a material fact and do not omit to state a
material fact necessary in order to make the statements
made, in light of the circumstances under which they
are made, not misleading.
(G) Removal and replacement of trustee, servicer,
and administrator.--If the covered bond regulator
determines that it is in the best interests of an
estate, the covered bond regulator may remove or
replace the trustee or any servicer or administrator
for the estate. The removal of the trustee or any
servicer or administrator does not abate any pending
action or proceeding involving the estate, and any
successor or other trustee, servicer, or administrator
shall be substituted as a party in the action or
proceeding.
(H) Professionals.--The trustee or any servicer or
administrator for an estate may employ 1 or more
attorneys, accountants, appraisers, auctioneers, or
other professional persons to represent or assist the
trustee or the servicer or administrator in carrying
out its duties. The employment of any professional
person and all terms and conditions of employment,
including the terms and conditions relating to
compensation, shall conform to the requirements of this
Act and the oversight program and otherwise shall be
subject to the approval of the applicable covered bond
regulator.
(I) Approved fees and expenses.--Unless otherwise
provided in the applicable terms and conditions of
appointment or employment, all approved fees and
expenses of the trustee, any servicer or administrator,
or any professional person employed by the trustee or
any servicer or administrator shall be payable from the
estate as administrative expenses.
(J) Actions by or on behalf of estate.--The trustee
or any servicer or administrator for an estate may
commence or continue judicial, administrative, or other
actions, in the name of the estate or in its own name
on behalf of the estate, for the purpose of collecting,
realizing on, or otherwise managing the cover pool held
by the estate or exercising its other powers or duties
on behalf of the estate.
(K) Actions against estate.--No court may issue an
attachment or execution on any property of an estate.
Except at the request of the applicable covered bond
regulator or as otherwise provided in this subparagraph
or subparagraph (J), no court may take any action to
restrain or affect the resolution of an estate under
this Act. No person (including the applicable indenture
trustee and any applicable covered bondholder) may
commence or continue any judicial, administrative, or
other action against the estate, the trustee, or any
servicer or administrator or take any other act to
affect the estate, the trustee, or any servicer or
administrator that is not expressly permitted by this
Act, the oversight program, and the related transaction
documents, except for a judicial or administrative
action to compel the release of funds that--
(i) are available to the estate;
(ii) are permitted to be distributed under
this Act and the oversight program; and
(iii) are permitted and required to be
distributed under the related transaction
documents and any contracts executed by or on
behalf of the estate.
(L) Sovereign immunity.--Except in connection with
a guarantee provided under paragraph (4) or any other
contract executed by the applicable covered bond
regulator under this section 4, the Secretary and the
covered bond regulator shall be entitled to sovereign
immunity in carrying out the provisions of this Act.
(2) Borrowings and credit.--
(A) In general.--Any servicer or administrator for
an estate created under subsection (b)(1) or (c)(2) may
borrow funds or otherwise obtain credit, on behalf of
and for the benefit of the estate, from any person in
compliance with this paragraph (2) solely for the
purpose of providing liquidity in the case of timing
mismatches among the assets and the liabilities of the
estate. Except with respect to an underwriter, section
5 of the Securities Act of 1933, the Trust Indenture
Act of 1939, and any State or local law requiring
registration for an offer or sale of a security or
registration or licensing of an issuer of, underwriter
of, or broker or dealer in a security does not apply to
the offer or sale under this paragraph (2) of a
security that is not an equity security.
(B) Conditions.--A servicer or administrator may
borrow funds or otherwise obtain credit under
subparagraph (A)--
(i) on terms affording the lender only
claims or liens that are fully subordinated to
the claims and interests of the applicable
indenture trustee and the applicable covered
bondholders and all other claims against and
interests in the estate, except for the
residual interest, if the servicer or
administrator certifies to the applicable
covered bond regulator that, in the business
judgment of the servicer or administrator, the
borrowing or credit is in the best interests of
the estate and is expected to maximize the
value and the proceeds of the cover pool held
by the estate; or
(ii) on terms affording the lender claims
or liens that have priority over or are pari
passu with the claims or interests of the
applicable indenture trustee or the applicable
covered bondholders or other claims against or
interests in the estate, if--
(I) the servicer or administrator
certifies to the applicable covered
bond regulator that, in the business
judgment of the servicer or
administrator, the borrowing or credit
is in the best interests of the estate
and is expected to maximize the value
and the proceeds of the cover pool held
by the estate; and
(II) the applicable covered bond
regulator authorizes the borrowing or
credit.
(C) Limited liability.--A servicer or administrator
shall not be liable for any error in business judgment
when borrowing funds or otherwise obtaining credit
under this paragraph (2) unless the servicer or
administrator acted in bad faith or in willful
disregard of its duties.
(D) Study on borrowings and credit.--The
Comptroller General of the United States shall conduct
a study on whether the Federal reserve banks should be
authorized to lend funds or otherwise extend credit to
an estate under this paragraph (2) and, if so, what
conditions and limits should be established to mitigate
any risk that the United States Government could absorb
credit losses on the cover pool held by the estate. The
Comptroller General shall submit a report to the
Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services of the
House of Representatives on the results of the study
not later than 6 months after the date of enactment of
this Act.
(3) Distributions by estate.--All payments or other
distributions by an estate shall be made at the times, in the
amounts, and in the manner set forth in the covered bonds, the
related transaction documents, and any contracts executed by or
on behalf of the estate in compliance with this Act and the
oversight program. To the extent that the relative priority of
the liabilities of the estate are not specified in or otherwise
ascertainable from their terms, distributions shall be made on
each distribution date under the covered bonds, the related
transaction documents, or any contracts executed by or on
behalf of the estate--
(A) first, to pay accrued and unpaid superpriority
claims under paragraph (2)(B)(ii);
(B) second, to pay accrued and unpaid
administrative expense claims under paragraph (1)(I),
paragraph (2)(B)(ii), section 4(b)(5)(A), or section
4(c)(6)(A);
(C) third, to pay--
(i) accrued and unpaid claims under the
covered bonds and the related transaction
documents according to their terms; and
(ii) accrued and unpaid pari passu claims
under paragraph (2)(B)(ii); and
(D) fourth, to pay accrued and unpaid subordinated
claims under paragraph (2)(B)(i).
(4) Distributions on residual interest.--After all other
claims against and interests in an estate have been fully and
irrevocably paid or defeased, the trustee shall or shall cause
a servicer or administrator to distribute the remainder of the
estate to or at the direction of the owner of the residual
interest. No interim distribution on the residual interest may
be made before that time, unless the applicable covered bond
regulator--
(A) approves the distribution after determining
that all other claims against and interests in the
estate will be fully, timely, and irrevocably paid
according to their terms; and
(B) provides a guarantee, for the benefit of the
estate, that all other claims against and interests in
the estate will be fully, timely, and irrevocably paid
according to their terms.
(5) Closing of estate.--After an estate has been fully
administered, the trustee shall close the estate and, except as
otherwise directed by the applicable covered bond regulator,
shall destroy all records of the estate.
(6) No loss to taxpayers.--Taxpayers shall bear no losses
from the resolution of an estate under this Act. To the extent
that the Secretary and the Corporation jointly determine that
the Deposit Insurance Fund incurred actual losses that are
higher because the covered bond program of an insured
depository institution was subject to resolution under this Act
rather than as part of the receivership of the institution
under the Federal Deposit Insurance Act (12 U.S.C. 1811 et
seq.), the Corporation may recover an amount equal to those
losses through an increase in deposit insurance assessments on
insured depository institutions with approved covered bond
programs.
SEC. 5. SECURITIES LAW PROVISIONS.
(a) Covered Bonds Issued or Guaranteed by Banks.--Any covered bond
issued or guaranteed by a bank is and shall be treated as a security
issued or guaranteed by a bank under section 3(a)(2) of the Securities
Act of 1933, section 3(c)(3) of the Investment Company Act of 1940, and
section 304(a)(4)(A) of the Trust Indenture Act of 1939. No covered
bond issued or guaranteed by a bank is or shall be treated as an asset-
backed security (as defined in section 3 of the Securities and Exchange
Act of 1934 (15 U.S.C. 78c)).
(b) Exemptions for Estates.--Any estate that is or may be created
under section 4(b)(1) or 4(c)(2) shall be exempt from all securities
laws but--
(1) shall be subject to the reporting requirements
established by the applicable covered bond regulator under
section 4(d)(1)(E)(iii); and
(2) shall succeed to any requirement of the issuer to file
such periodic information, documents, and reports in respect of
the covered bonds as specified in section 13(a) of the
Securities and Exchange Act of 1934 (15 U.S.C. 78m(a)) or rules
established by an appropriate Federal banking agency.
(c) Exemptions for Residual Interests.--Any residual interest in an
estate that is or may be created under section 4(b)(1) or 4(c)(2) shall
be exempt from all securities laws.
SEC. 6. MISCELLANEOUS PROVISIONS.
(a) Domestic Securities.--Section 106(a)(1) of the Secondary
Mortgage Market Enhancement Act of 1984 (15 U.S.C. 77r-1(a)(1)) is
amended--
(1) in subparagraph (C), by striking ``or'' at the end;
(2) in subparagraph (D), by adding ``or'' at the end; and
(3) by inserting after subparagraph (D) the following:
``(E) covered bonds (as defined in section 2 of the
United States Covered Bond Act of 2011),''.
(b) No Tax Implications.--Any estate created under section 4(b)(1)
or 4(c)(2) shall not be treated as an entity subject to taxation
separate from the owner of the residual interest for purposes of the
Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.), including by
reason of the taxable mortgage pool provisions of section 7701(i) of
the Internal Revenue Code of 1986 (26 U.S.C. 7701(i)), but instead
shall be treated as a disregarded entity that is owned by the owner of
the residual interest for such purposes as described in applicable
regulations of the Secretary, as in effect on the date of the enactment
of this Act. No transfer or assumption of any asset or liability to or
by an estate or an eligible issuer under section 4(b) or 4(c) shall
cause or constitute an event in which gain or loss shall be recognized
under section 1001 of the Internal Revenue Code of 1986 (26 U.S.C.
1001).
(c) Real Estate Mortgage Investment Conduits.--Section 860G(a)(3)
of the Internal Revenue Code of 1986 (26 U.S.C. 860G(a)(3)) is
amended--
(1) in subparagraph (B), by striking ``and'' at the end;
(2) in subparagraph (C), by striking the period and
inserting ``, and''; and
(3) by inserting after subparagraph (C) the following:
``(D) covered bonds that are secured by eligible
assets from the residential mortgage asset class, the
home equity asset class, or the commercial mortgage
asset class, as such terms are defined in section 2 of
the United States Covered Bond Act of 2011.''.
(d) Real Estate Investment Trusts.--To the extent provided by
regulations that may be promulgated by the Secretary, a covered bond
described in section 860G(a)(3)(D) of the Internal Revenue Code of 1986
(26 U.S.C. 860G(a)(3)(D)), as amended by this section 6, shall be
treated as a real estate asset in the same manner as a regular interest
in a REMIC for purposes of section 856(c)(5)(E) of such Code (26 U.S.C.
856(c)(5)(E)).
(e) Investment Treatment for Tax Purposes.--The acquisition of any
covered bond shall be treated as an acquisition of an investment
security, and not as an acquisition of an interest in a loan or
otherwise as a lending transaction, for purposes of determining the
character of any related trade or business activity of the acquirer or
any asset held by the acquirer under the Internal Revenue Code of 1986
(26 U.S.C. 1 et seq.).
(f) State and Local Taxes.--The Secretary may promulgate
regulations under this Act that are similar to the provisions of
section 346 of title 11, United States Code, including regulations to
provide that--
(1) if an estate created under section 4(b)(1) or 4(c)(2)
is not treated as an entity subject to taxation separate from
the owner of the residual interest for purposes of the Internal
Revenue Code of 1986 (26 U.S.C. 1 et seq.), no separate taxable
entity shall be created with respect to the estate for purposes
of any State or local law imposing a tax on or measured by
income; and
(2) if a transfer or assumption of an asset or liability to
or by an estate or an eligible issuer under section 4(b) or
4(c) does not cause or constitute an event in which gain or
loss is recognized under section 1001 of the Internal Revenue
Code of 1986 (26 U.S.C. 1001), the transfer or assumption shall
not cause or constitute a disposition for purposes of any
provision assigning tax consequences to a disposition in
connection with any State or local law imposing a tax on or
measured by income.
(g) No Conflict.--The provisions of this Act shall apply,
notwithstanding any provision of the Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.), title 11, United States Code, title II of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C.
5381 et seq.), or any other provision of Federal law with respect to
conservatorship, receivership, liquidation, or bankruptcy. No provision
of the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), title
11, United States Code, title II of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (12 U.S.C. 5381 et seq.), or any other
provision of Federal law with respect to conservatorship, receivership,
liquidation, or bankruptcy may be construed or applied in a manner that
defeats or interferes with the purpose or operation of this Act.
<all>
Referred to the Subcommittee on Capital Markets and Government Sponsored Enterprises.
Subcommittee Consideration and Mark-up Session Held.
Subcommittee Consideration and Mark-up Session Held.
Forwarded by Subcommittee to Full Committee (Amended) by Voice Vote .
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by the Yeas and Nays: 44 - 7 and 3 Present.
Reported (Amended) by the Committee on Financial Services. H. Rept. 112-407, Part I.
Reported (Amended) by the Committee on Financial Services. H. Rept. 112-407, Part I.
House Committee on Ways and Means Granted an extension for further consideration ending not later than March 30, 2012.
House Committee on Ways and Means Granted an extension for further consideration ending not later than May 18, 2012.
House Committee on Ways and Means Granted an extension for further consideration ending not later than June 29, 2012.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line
House Committee on Ways and Means Granted an extension for further consideration ending not later than Sept. 14, 2012.
House Committee on Ways and Means Granted an extension for further consideration ending not later than Nov. 16, 2012.
House Committee on Ways and Means Granted an extension for further consideration ending not later than Nov. 30, 2012.
House Committee on Ways and Means Granted an extension for further consideration ending not later than Dec. 14, 2012.
House Committee on Ways and Means Granted an extension for further consideration ending not later than Dec. 21, 2012.
House Committee on Ways and Means Granted an extension for further consideration ending not later than Dec. 31, 2012.
Committee on Ways and Means discharged.
Committee on Ways and Means discharged.
Placed on the Union Calendar, Calendar No. 542.