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Article: The next unsinkable ship? Covered bonds may look more solid than securities, but could bring a new set of risks.(Secondary Market)
- Article from:
- Mortgage Banking
- Article date:
- October 1, 2009
- Author:
CopyrightCOPYRIGHT 2009 Mortgage Bankers Association of America. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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To an extent, American-style loan securitization grew out of the savings-and-loan (S&L) debacle of the early 1990s, when the Resolution Trust Corporation (RTC) needed a way to get a lot of loans off the government balance sheet in a hurry. In the wake of another crisis a generation later, the capital markets are hunting once more for a funding mechanism that will get real estate lending moving again--and some think covered bonds just might fit the bill. At first glance, the covered bond seems made to order as an alternative to securitization. It's a tested structure, for one thing, in use for more than 200 years in Europe. It's also popular: Like the metric system, it's ...