I 

111TH CONGRESS 

2D SESSION H. R. 5823 

To establish a covered bond regulatory oversight program, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 22, 2010 

Mr. GARRETT of New Jersey (for himself, Mr. KANJORSKI, and Mr. BACHUS) 

introduced the following bill; which was referred to the Committee on Financial Services 

A BILL 

To establish a covered bond regulatory oversight program, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘United States Covered 

5 Bond Act of 2010’’. 

6 SEC. 2. DEFINITIONS. 

7 For purposes of this Act, the following definitions 

8 shall apply: 

9 (1) ANCILLARY ASSET.—The term ‘‘ancillary 

10 asset’’ means— 


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1 (A) any interest rate or currency swap as2 sociated with an eligible asset, substitute asset, 

3 or other asset in a cover pool; 

4 (B) any credit enhancement or liquidity ar5 rangement associated with an eligible asset, 

6 substitute asset, or other asset in a cover pool; 

7 (C) any guarantee, letter-of-credit right, or 

8 other secondary obligation that supports any 

9 payment or performance on an eligible asset, 

10 substitute asset, or other asset in a cover pool; 

11 and 

12 (D) any proceeds of, or other property in13 cident to, an eligible asset, substitute asset, or 

14 other asset in a cover pool. 

15 (2) CORPORATION.—The term ‘‘Corporation’’ 

16 means the Federal Deposit Insurance Corporation. 

17 (3) COVER POOL.—The term ‘‘cover pool’’ 

18 means a dynamic pool of assets that is comprised 

19 of— 

20 (A) eligible assets from a single eligible 

21 asset class; and 

22 (B) any substitute assets or ancillary as23 sets. 


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1 (4) COVERED BOND.—The term ‘‘covered 

2 bond’’ means any senior recourse debt obligation of 

3 an eligible issuer that— 

4 (A) has an original term to maturity of not 

5 less than 1 year; 

6 (B) is secured by a perfected security in7 terest in a cover pool that is owned directly or 

8 indirectly by the issuer of the obligation; 

9 (C) is issued under a covered bond pro10 gram that has been approved by the covered 

11 bond regulator and is identified in a register of 

12 covered bonds maintained by the covered bond 

13 regulator; and 

14 (D) is not a deposit. 

15 (5) COVERED BOND PROGRAM.—The term 

16 ‘‘covered bond program’’ means any program of an 

17 eligible issuer under which 1 or more series or 

18 tranches of covered bonds may be issued. 

19 (6) COVERED BOND REGULATOR.—The term 

20 ‘‘covered bond regulator’’ means the Comptroller of 

21 the Currency. 

22 (7) ELIGIBLE ASSET.—The term ‘‘eligible 

23 asset’’ means— 

24 (A) in the case of the residential mortgage 

25 asset class— 


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1 (i) any first-lien mortgage loan that is 

2 secured by 1-to-4 family residential prop3 erty and that is in compliance with any 

4 rule or supervisory guidance of a Federal 

5 agency that is applicable to the loan at the 

6 time of loan origination; 

7 (ii) any mortgage loan insured under 

8 the National Housing Act (12 U.S.C. 1701 

9 et seq.), or any loan guaranteed, insured, 

10 or made under chapter 37 of title 38, 

11 United States Code; and 

12 (iii) rural housing loans; 

13 (B) in the case of the home equity asset 

14 class, any home equity loan that is secured by 

15 1-to-4 family residential property and that is in 

16 compliance with any rule or supervisory guid17 ance of a Federal agency that is applicable to 

18 the loan at the time of loan origination; 

19 (C) in the case of the commercial mortgage 

20 asset class, any commercial mortgage loan (in21 cluding any multifamily mortgage loan) that is 

22 in compliance with any rule or supervisory guid23 ance of a Federal agency that is applicable to 

24 the loan at the time of loan origination; 


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1 (D) in the case of the public sector asset 

2 class— 

3 (i) any security issued by a State or 

4 municipality; 

5 (ii) any loan made to a State or mu6 nicipality; and 

7 (iii) any loan, security, or other obli8 gation that is insured or guaranteed, in 

9 full or substantially in full, by the full faith 

10 and credit of the United States Govern11 ment (whether or not such loan, security, 

12 or other obligation is also part of another 

13 eligible asset class); 

14 (E) in the case of the auto asset class, any 

15 auto loan or lease that is in compliance with 

16 any rule or supervisory guidance of a Federal 

17 agency that is applicable to the loan or lease at 

18 the time of loan or lease origination; 

19 (F) in the case of the student loan asset 

20 class, any student loan (whether guaranteed or 

21 nonguaranteed) that is in compliance with any 

22 rule or supervisory guidance of a Federal agen23 cy that is applicable to the loan at the time of 

24 loan origination; 


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1 (G) in the case of the credit or charge card 

2 asset class, any extension of credit to a person 

3 under an open-end credit plan that is in compli4 ance with any rule or supervisory guidance of a 

5 Federal agency that is applicable to the exten6 sion of credit at the time the extension is made; 

7 (H) in the case of the small business asset 

8 class, any loan made or guaranteed under a 

9 program of the Small Business Administration; 

10 and 

11 (I) in the case of any other eligible asset 

12 class, any asset designated by the covered bond 

13 regulator, by rule and in consultation with the 

14 applicable primary financial regulatory agen15 cies, as an eligible asset for purposes of such 

16 class. 

17 (8) ELIGIBLE ASSET CLASS.—The term ‘‘eligi18 ble asset class’’ means— 

19 (A) a residential mortgage asset class; 

20 (B) a commercial mortgage asset class; 

21 (C) a public sector asset class; 

22 (D) a small business asset class; or 

23 (E) any other eligible asset class, as deter24 mined by the covered bond regulator by rule 


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1 and in consultation with the applicable primary 

2 financial regulatory agencies. 

3 (9) ELIGIBLE ISSUER.—The term ‘‘eligible 

4 issuer’’ means— 

5 (A) any insured depository institution and 

6 any subsidiary of such institution; 

7 (B) any bank holding company and any 

8 savings and loan holding company; 

9 (C) any nonbank financial company that is 

10 approved as an eligible issuer by the primary fi11 nancial regulatory agency for the nonbank fi12 nancial company and the covered bond regu13 lator; and 

14 (D) any issuer that is sponsored by 1 or 

15 more eligible issuers for the sole purpose of 

16 issuing covered bonds on a pooled basis. 

17 (10) NONBANK FINANCIAL COMPANY.—The 

18 term ‘‘nonbank financial company’’ has the meaning 

19 given such term under section 102(a)(4) of the 

20 Dodd-Frank Wall Street Reform and Consumer Pro21 tection Act. 

22 (11) OVERSIGHT PROGRAM.—The term ‘‘over23 sight program’’ means the covered bond regulatory 

24 oversight program established under section 3(a). 


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1 (12) PRIMARY FINANCIAL REGULATORY AGEN2 CY.—The term ‘‘primary financial regulatory agen3 cy’’ has the meaning give such term under section 

4 2(12) of the Dodd-Frank Wall Street Reform and 

5 Consumer Protection Act. 

6 (13) SUBSTITUTE ASSET.—The term ‘‘sub7 stitute asset’’ means— 

8 (A) cash; 

9 (B) any direct obligation of the United 

10 States Government, and any security or other 

11 obligation, the full principal and interest of 

12 which are insured or guaranteed by the full 

13 faith and credit of the United States Govern14 ment; 

15 (C) any direct obligation of a United 

16 States Government corporation or Government17 sponsored enterprise of the highest credit qual18 ity, and any other security or other obligation 

19 of the highest credit quality whose full principal 

20 and interest are insured or guaranteed by any 

21 such corporation or enterprise, except that the 

22 outstanding principal amount of these obliga23 tions in any cover pool may not exceed an 

24 amount equal to 20 percent of the outstanding 

25 principal amount of all assets in the cover pool 


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1 without the approval of the covered bond regu2 lator; 

3 (D) any overnight investment in Federal 

4 funds; 

5 (E) any other substitute asset, as deter6 mined by the covered bond regulator by rule 

7 and in consultation with the applicable primary 

8 financial regulatory agencies; and 

9 (F) any deposit account or securities ac10 count into which only an asset described in sub11 paragraphs (A), (B), (C), (D), or (E) may be 

12 deposited or credited. 

13 SEC. 3. REGULATORY OVERSIGHT OF COVERED BOND PRO14 GRAMS ESTABLISHED. 

15 (a) ESTABLISHMENT.— 

16 (1) IN GENERAL.—Not later than 180 days 

17 after the date of the enactment of this Act, the cov18 ered bond regulator shall, by rule and in consulta19 tion with the applicable primary financial regulatory 

20 agencies, establish a covered bond regulatory over21 sight program that provides for— 

22 (A) covered bond programs to be evaluated 

23 according to reasonable and objective standards 

24 in order to be approved under paragraph (2), 

25 including eligibility standards for eligible assets; 


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1 (B) covered bond programs to be main2 tained in a manner consistent with this Act and 

3 safe and sound financial practices; and 

4 (C) any estate created under section 4 to 

5 be administered in a manner that is consistent 

6 with maximizing the value and the proceeds of 

7 the related cover pool in a resolution under this 

8 Act. 

9 (2) APPROVAL OF EACH COVERED BOND PRO10 GRAM.— 

11 (A) IN GENERAL.—A covered bond shall be 

12 subject to this Act only if the covered bond is 

13 issued by an eligible issuer under a covered 

14 bond program that is approved by the covered 

15 bond regulator. 

16 (B) EXISTING COVERED BOND PRO17 GRAMS.—The covered bond regulator may ap18 prove a covered bond program that is in exist19 ence on the date of enactment of this Act. Upon 

20 such approval, each covered bond under the 

21 covered bond program shall be subject to this 

22 Act, regardless of when the covered bonds were 

23 issued. 

24 (C) CONSULTATION WITH ANY PRIMARY

25 REGULATOR.—Before approving any covered 


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1 bond program of any eligible issuer, the covered 

2 bond regulator shall consult with the primary 

3 financial regulatory agency, if any, of the eligi4 ble issuer and shall confirm with such agency, 

5 if any, that the covered bond program is con6 sistent with safe and sound financial practices. 

7 (D) MULTIPLE COVERED BOND PROGRAMS

8 PERMITTED.—An eligible issuer may have more 

9 than 1 covered bond program. 

10 (3) REGISTRY.—Under the oversight program, 

11 the covered bond regulator shall maintain a registry 

12 on a Web site available to the public that contains— 

13 (A) the name of each approved covered 

14 bond program; and 

15 (B) information on all outstanding covered 

16 bonds issued under each approved covered bond 

17 program, (including the reports described under 

18 paragraphs (3) and (4) of subsection (b). 

19 (4) FEES.—The covered bond regulator may 

20 levy fees on the issuers of covered bonds in an 

21 amount the covered bond regulator determines is 

22 necessary or appropriate to defray, in the aggregate, 

23 the costs of the covered bond regulator in carrying 

24 out the provisions of this Act. 


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1 (b) MINIMUM OVER-COLLATERALIZATION REQUIRE2 MENTS.— 

3 (1) REQUIREMENTS ESTABLISHED.— 

4 (A) IN GENERAL.—The covered bond regu5 lator, from time to time, shall establish min6 imum over-collateralization requirements for 

7 covered bonds backed by each of the eligible 

8 asset classes, which are designed to ensure that 

9 sufficient assets exist in the cover pool to sat10 isfy all principal and interest due on the cov11 ered bonds and which are based on the credit, 

12 collection, and interest rate risks (excluding the 

13 liquidity risks) associated with the eligible asset 

14 class. 

15 (B) RELIANCE ON OTHER OVER16 COLLATERALIZATION STANDARDS.—In estab17 lishing requirements under subparagraph (A), 

18 the covered bond regulator may rely on over19 collateralization levels required for the same or 

20 similar asset classes by— 

21 (i) any Federal reserve bank when ex22 tending credit to depository institutions 

23 under the Federal Reserve Act (12 U.S.C. 

24 221 et seq.); 


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1 (ii) any Federal home loan bank when 

2 extending credit to member institutions 

3 under the Federal Home Loan Bank Act 

4 (12 U.S.C. 1421 et seq.); or 

5 (iii) any other comparable lenders in 

6 substantially similar transactions. 

7 (2) ASSET COVERAGE TEST.—The eligible as8 sets and the substitute assets in each cover pool that 

9 secures covered bonds shall, in the aggregate, at all 

10 times, meet the applicable minimum over11 collateralization requirements established under 

12 paragraph (1). 

13 (3) MONTHLY REPORTING.—Every month, each 

14 issuer of covered bonds shall submit a report on 

15 whether the cover pool that secures the covered 

16 bonds meets the applicable minimum over17 collateralization requirements established under 

18 paragraph (1) to— 

19 (A) the primary financial regulatory agen20 cy of the issuer, if any; 

21 (B) the covered bond regulator; and 

22 (C) the applicable covered bondholders. 

23 (4) INDEPENDENT ASSET MONITOR.— 

24 (A) APPOINTMENT OF INDEPENDENT

25 ASSET MONITOR.—Each issuer of covered bonds 


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1 shall appoint the indenture trustee for the cov2 ered bonds, or another unaffiliated entity, as an 

3 independent asset monitor for the applicable 

4 cover pool. 

5 (B) DUTIES.—The independent asset mon6 itor appointed under subparagraph (A) shall, on 

7 a semiannual or other more frequent periodic 

8 basis determined by the covered bond regu9 lator— 

10 (i) verify whether the cover pool that 

11 secures the covered bonds meets the appli12 cable minimum over-collateralization re13 quirements established under paragraph 

14 (1); and 

15 (ii) disclose to the primary financial 

16 regulatory agency of the issuer, if any, the 

17 covered bond regulator, and the applicable 

18 covered bond holders whether the cover 

19 pool that secures the covered bonds meets 

20 the applicable minimum over-collateraliza21 tion requirements established under para22 graph (1). 

23 (5) NO LOSS OF STATUS.—Covered bonds shall 

24 remain subject to this Act regardless of whether the 

25 applicable cover pool ceases to meet the applicable 


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1 minimum over-collateralization requirements estab2 lished under paragraph (1) at any time after the 

3 covered bonds are issued. 

4 (6) FAILURE TO MEET REQUIREMENTS.—If a 

5 cover pool securing covered bonds fails to meet the 

6 applicable minimum over-collateralization require7 ments established under paragraph (1), and if such 

8 failure is not cured within the time specified in the 

9 transaction documents related to the covered 

10 bonds— 

11 (A) such failure shall be deemed to be an 

12 uncured default for purposes of section 4(a); 

13 and 

14 (B) the issuer shall notify the covered bond 

15 regulator of such failure. 

16 (c) REQUIREMENTS FOR ELIGIBLE ASSETS.— 

17 (1) LOANS.—A loan shall not qualify as an eli18 gible asset for so long as the loan is delinquent for 

19 more than 60 consecutive days. 

20 (2) SECURITIES.—A security shall not qualify 

21 as an eligible asset for so long as the security does 

22 not meet any credit-quality requirement under this 

23 Act. 

24 (3) NO DOUBLE PLEDGE.—An asset shall not 

25 qualify as an eligible asset for so long as the asset 


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1 is subject to a prior perfected security interest that 

2 has been granted in an unrelated transaction. Noth3 ing in this Act shall affect such a prior perfected se4 curity interest. 

5 (4) SINGLE ELIGIBLE ASSET CLASS.—No cover 

6 pool may include eligible assets from more than 1 el7 igible asset class. 

8 (d) OTHER REQUIREMENTS.— 

9 (1) BOOKS AND RECORDS OF ISSUER.—Each 

10 issuer of covered bonds shall clearly mark its books 

11 and records to identify the assets that comprise the 

12 cover pool that secures the covered bonds. 

13 (2) SCHEDULE OF ELIGIBLE ASSETS AND SUB14 STITUTE ASSETS.—Each issuer of covered bonds 

15 shall deliver to the indenture trustee for the covered 

16 bonds, on at least a monthly basis, a schedule of all 

17 eligible assets and substitute assets in the cover pool 

18 that secures the covered bonds. 

19 SEC. 4. RESOLUTION UPON DEFAULT OR INSOLVENCY. 

20 (a) UNCURED DEFAULT.—In this section, the term 

21 ‘‘uncured default’’, when used with respect to a covered 

22 bond, means a default on the covered bond that has not 

23 been cured within the time, if any, required by the trans24 action documents related to the covered bond. 


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1 (b) DEFAULT ON COVERED BONDS PRIOR TO CON2 SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK3 RUPTCY.— 

4 (1) CREATION OF SEPARATE ESTATE.—If an 

5 uncured default occurs with respect to a covered 

6 bond before the issuer of such covered bond enters 

7 conservatorship, receivership, liquidation, or bank8 ruptcy, an estate shall be automatically created by 

9 operation of law and shall exist and be administered 

10 separate and apart from the issuer or any subse11 quent conservatorship, receivership, liquidating agen12 cy, or estate in bankruptcy for the issuer or any 

13 other assets of the issuer. A separate estate shall be 

14 created for each affected covered bond program. 

15 (2) ASSETS AND LIABILITIES OF ESTATE.—Any 

16 estate created under paragraph (1) shall be com17 prised of the cover pool that secures the covered 

18 bond, which shall be automatically released to and 

19 held by the estate free and clear of any right, title, 

20 interest, or claim of the issuer or any conservator, 

21 receiver, liquidating agent, or trustee in bankruptcy 

22 for the issuer or any other assets of the issuer. The 

23 estate created under paragraph (1) shall be fully lia24 ble on the covered bond and all other covered bonds 

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1 gations under related derivative transactions) that 

2 are secured by the cover pool. The estate shall not 

3 be liable on any obligation of the issuer that is not 

4 secured by the cover pool. 

5 (3) RETENTION OF CLAIMS.—Any holder of a 

6 covered bond or related obligation secured by a cover 

7 pool for which an estate has been created under 

8 paragraph (1) shall retain a claim against the issuer 

9 for any deficiency with respect to the covered bond 

10 or related obligation. 

11 (4) RESIDUAL INTEREST.— 

12 (A) ISSUANCE OF RESIDUAL INTEREST.— 

13 Upon the creation of an estate under paragraph 

14 (1), a residual interest in the estate shall be 

15 automatically issued by operation of law to the 

16 issuer. 

17 (B) NATURE OF RESIDUAL INTEREST.— 

18 The residual interest under subparagraph (A) 

19 shall— 

20 (i) be an exempted security as de21 scribed in section 5; 

22 (ii) represent the right to any surplus 

23 from the cover pool after the covered bonds 

24 and all other liabilities of the estate have 

25 been paid in full; and 


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1 (iii) be evidenced by a certificate exe2 cuted by the trustee of the estate. 

3 (5) OBLIGATION OF ISSUER.—After the cre4 ation of an estate under paragraph (1), the issuer 

5 shall— 

6 (A) transfer to the covered bond regulator, 

7 or a designee of the covered bond regulator, all 

8 tangible or electronic books, records, files, and 

9 other documents or materials relating to the as10 sets and liabilities of the estate; and 

11 (B) at the election of the covered bond reg12 ulator, continue servicing the cover pool for 120 

13 days after the creation of the estate in return 

14 for a fair-market-value fee, as determined by 

15 the covered bond regulator, that shall be pay16 able from the estate as an administrative ex17 pense. 

18 (c) DEFAULT ON COVERED BONDS UPON CON19 SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK20 RUPTCY.— 

21 (1) CORPORATION CONSERVATORSHIP OR RE22 CEIVERSHIP.— 

23 (A) IN GENERAL.—If the Corporation is 

24 appointed as conservator or receiver for an 

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1 fault results in the creation of an estate under 

2 subsection (b), the Corporation as conservator 

3 or receiver shall have an exclusive right, during 

4 the 180-day period beginning on the date of the 

5 appointment, to transfer any cover pool owned 

6 by the issuer in its entirety, together with all 

7 covered bonds and related obligations secured 

8 by the cover pool, to another eligible issuer that 

9 meets all conditions and requirements specified 

10 in the transaction documents related to the cov11 ered bonds. 

12 (B) OBLIGATIONS DURING 180-DAY PE13 RIOD.—During the 180-day period described in 

14 subparagraph (A), the Corporation as conser15 vator or receiver shall satisfy all monetary and 

16 nonmonetary obligations of the issuer under the 

17 covered bonds and the related transaction docu18 ments until the earlier of— 

19 (i) the transfer of the covered bond 

20 program to another eligible issuer; 

21 (ii) the repudiation of further per22 formance by the Corporation as conser23 vator or receiver under the covered bond 

24 program; or 


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1 (iii) the failure of the Corporation as 

2 conservator or receiver to timely cure a de3 fault (other than the issuer’s conservator4 ship or receivership) under the covered 

5 bond program. 

6 (C) ASSUMPTION BY TRANSFEREE.—If the 

7 Corporation as conservator or receiver effects a 

8 transfer described in subparagraph (A) within 

9 the 180-day period described in subparagraph 

10 (A), the transferee shall take ownership of the 

11 cover pool and shall become fully liable on all 

12 covered bonds and related obligations of the 

13 issuer that are secured by the cover pool. 

14 (2) OTHER CIRCUMSTANCES.—An estate shall 

15 be automatically created by operation of law and 

16 shall exist and be administered separate and apart 

17 from an issuer of covered bonds and the conservator18 ship, receivership, liquidating agency, or estate in 

19 bankruptcy for the issuer or any other assets of the 

20 issuer, if— 

21 (A) a conservator, receiver, liquidating 

22 agent, or trustee in bankruptcy, other than the 

23 Corporation, is appointed for the issuer before 

24 an uncured default results in the creation of an 

25 estate under subsection (b); or 


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1 (B) in the case of the appointment of the 

2 Corporation as conservator or receiver as de3 scribed in paragraph (1)(A), the Corporation as 

4 conservator or receiver— 

5 (i) does not complete the transfer of 

6 the related covered bond program to an7 other eligible issuer within the 180-period 

8 described in paragraph (1)(A); 

9 (ii) repudiates the Corporation’s fur10 ther performance under the related covered 

11 bond program; or 

12 (iii) fails to timely cure a default 

13 (other than the issuer’s conservatorship or 

14 receivership) under the related covered 

15 bond program. 

16 A separate estate shall be created for each af17 fected covered bond program. 

18 (3) ASSETS AND LIABILITIES OF ESTATE.—Any 

19 estate created under paragraph (2) shall be com20 prised of the cover pool that secures the covered 

21 bonds, which shall be automatically released to and 

22 held by the estate free and clear of any right, title, 

23 interest, or claim of the issuer or any conservator, 

24 receiver, liquidating agent, or trustee in bankruptcy 

25 for the issuer or any other assets of the issuer. The 


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1 estate created under paragraph (2) shall be fully lia2 ble on the covered bonds and all other covered bonds 

3 and related obligations of the issuer (including obli4 gations under related derivative transactions) that 

5 are secured by the cover pool. The estate shall not 

6 be liable on any obligation of the issuer that is not 

7 secured by the cover pool. 

8 (4) CONTINGENT CLAIM.—Any contingent claim 

9 for a deficiency with respect to a covered bond or re10 lated obligation for which an estate has been created 

11 under paragraph (2) shall be estimated by the con12 servator, receiver, liquidating agent, or bankruptcy 

13 court for purposes of allowing the claim as a prov14 able claim if awaiting the fixing of that contingent 

15 claim would unduly delay the resolution of the con16 servatorship, receivership, liquidating agency, or 

17 bankruptcy case. 

18 (5) RESIDUAL INTEREST.— 

19 (A) ISSUANCE OF RESIDUAL INTEREST.— 

20 Upon the creation of an estate under paragraph 

21 (2), and regardless of whether any contingent 

22 claim described in paragraph (4) becomes fixed 

23 or is estimated, a residual interest in the estate 

24 shall be automatically issued by operation of 


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1 law to the conservator, receiver, liquidating 

2 agent, or trustee in bankruptcy for the issuer. 

3 (B) NATURE OF RESIDUAL INTEREST.— 

4 The residual interest under subparagraph (A) 

5 shall— 

6 (i) be an exempted security as de7 scribed in section 5; 

8 (ii) represent the right to any surplus 

9 from the cover pool after the covered bonds 

10 and all other liabilities of the estate have 

11 been paid in full; and 

12 (iii) be evidenced by a certificate exe13 cuted by the trustee of the estate. 

14 (6) OBLIGATION OF ISSUER.—After the cre15 ation of an estate under paragraph (2), the issuer 

16 and its conservator, receiver, liquidating agent, or 

17 trustee in bankruptcy shall— 

18 (A) transfer to the covered bond regulator, 

19 or a designee of the covered bond regulator, all 

20 tangible or electronic books, records, files, and 

21 other documents or materials relating to the as22 sets and liabilities of the estate; and 

23 (B) at the election of the covered bond reg24 ulator (but subject to and not withstanding any 

25 right of repudiation or rejection held by the 


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1 conservator, receiver, liquidating agent, or 

2 trustee in bankruptcy), continue servicing the 

3 cover pool for 120 days after the creation of the 

4 estate in return for a fair-market-value fee, as 

5 determined by the covered bond regulator, that 

6 shall be payable from the estate as an adminis7 trative expense. 

8 (d) ADMINISTRATION AND RESOLUTION OF ES9 TATES.— 

10 (1) TRUSTEE, SERVICER, AND ADMINIS11 TRATOR.— 

12 (A) IN GENERAL.—The covered bond regu13 lator shall— 

14 (i) act as or appoint the trustee of 

15 any estate created under subsection (b)(1) 

16 or (c)(2); and 

17 (ii) appoint 1 or more servicers or ad18 ministrators for the cover pool held by the 

19 estate. 

20 (B) POWERS AND DUTIES OF SERVICER OR

21 ADMINISTRATOR.—Any servicer or adminis22 trator appointed for an estate— 

23 (i) shall— 

24 (I) collect, realize on (by liquida25 tion or other means), and otherwise 


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1 manage the cover pool held by the es2 tate; and 

3 (II) invest and use the proceeds 

4 and funds received to make all re5 maining interest and principal pay6 ments on the applicable covered bonds 

7 according to their terms (or, if an ac8 celeration or similar event occurs 

9 under the related transaction docu10 ments, at the times specified in the 

11 transaction documents) and to satisfy 

12 any other liabilities of the estate; and 

13 (ii) may borrow or otherwise procure 

14 funds for the benefit of the estate on a se15 cured or unsecured basis and on a priority, 

16 pari passu, or subordinated basis. 

17 (C) SUPERVISION OF SERVICER OR ADMIN18 ISTRATOR BY THE COVERED BOND REGU19 LATOR.— 

20 (i) IN GENERAL.—The covered bond 

21 regulator shall supervise any servicer or 

22 administrator that is appointed for an es23 tate created under subsection (b)(1) or 

24 (c)(2). 


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1 (ii) REMOVAL AND REPLACEMENT.— 

2 If the covered bond regulator determines 

3 that it is in the best interests of an estate, 

4 the covered bond regulator may remove or 

5 replace any servicer or administrator for 

6 the estate. 

7 (iii) REPORTS.—Each servicer or ad8 ministrator for an estate shall, at such 

9 times and in such manner as the covered 

10 bond regulator shall require, submit to the 

11 covered bond regulator, the owner of the 

12 residual interest, and any other person 

13 designated by the covered bond regulator, 

14 reports that describe the activities of the 

15 servicer or administrator on behalf of the 

16 estate and the performance of the cover 

17 pool held by the estate. 

18 (iv) FEES AND EXPENSES.—All fees 

19 and expenses of a servicer or administrator 

20 for an estate shall be approved by the cov21 ered bond regulator and shall be paid from 

22 the estate as an administrative expense. 

23 (D) JUDICIAL OR ADMINISTRATIVE AC24 TIONS.—Any servicer or administrator ap25 pointed for an estate may commence or conVerDate Mar 15 2010 01:06 Jul 26, 2010 Jkt 089200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H5823.IH H5823

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1 tinue judicial or administrative actions, in its 

2 own name on behalf of the estate, for the pur3 pose of collecting, realizing on, or otherwise 

4 managing the cover pool held by the estate or 

5 exercising its other powers or duties on behalf 

6 of the estate. No covered bondholder, indenture 

7 trustee, or other person to whom an estate is or 

8 is alleged to be liable may commence or con9 tinue any judicial or administrative action 

10 against the estate, the trustee, or any servicer 

11 or administrator, except for an action to compel 

12 the release of funds that are available to the es13 tate, that are permitted to be distributed under 

14 this Act and regulations promulgated by the 

15 covered bond regulator, and that are permitted 

16 and required to be distributed under the related 

17 transaction documents and any contracts exe18 cuted by or on behalf of the estate after its cre19 ation under this Act. No court may issue an at20 tachment or execution on the assets of an es21 tate. Except at the request of the covered bond 

22 regulator or as otherwise provided in this sub23 paragraph, no court may take any action to re24 strain or affect the resolution of an estate 

25 under this Act. The covered bond regulator 


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1 shall be entitled to sovereign immunity in car2 rying out the provisions of this Act. 

3 (E) CLOSING OF ESTATE.—After an estate 

4 has been fully administered, the covered bond 

5 regulator shall close the estate and, to the ex6 tent determined appropriate by the covered 

7 bond regulator, may retain or destroy records of 

8 the estate. 

9 (2) STUDY ON LIQUIDITY ADVANCES.—The 

10 Board of Governors shall conduct a study on wheth11 er Federal reserve banks should be empowered to 

12 make advances to an estate created under subsection 

13 (b)(1) or (c)(2) solely for the purpose of providing 

14 liquidity in the case of timing mismatches among the 

15 assets and the liabilities of the estate. The Board of 

16 Governors shall submit a report to the Committee on 

17 Banking, Housing, and Urban Affairs of the Senate 

18 and the Committee on Financial Services of the 

19 House of Representatives on the results of such 

20 study not later than 180 days after the date of en21 actment of this Act. 

22 SEC. 5. SECURITIES LAW PROVISIONS. 

23 (a) COVERED BONDS ISSUED OR GUARANTEED BY

24 BANKS.—Any covered bond issued or guaranteed by a 

25 bank is a security issued or guaranteed by a bank under 


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1 Section 3(a)(2) of the Securities Act of 1933, Section 

2 3(c)(3) of the Investment Company Act of 1940, and Sec3 tion 304(a)(4)(A) of the Trust Indenture Act of 1939. No 

4 covered bond issued or guaranteed by a bank is an asset5 backed security, as defined in section 3 of the Securities 

6 and Exchange Act of 1934 (15 U.S.C. 78c). 

7 (b) EXEMPTIONS FOR ESTATES AND RESIDUAL IN8 TERESTS.—Any estate that is or may be created under 

9 subsection (b) or (c) of section 4 shall be exempt from 

10 all securities laws but shall be subject to the reporting re11 quirements established by the covered bond regulator 

12 under subsection (d)(1)(C)(iii) of section 4 and shall suc13 ceed to any requirement of the issuer to file such periodic 

14 information, documents, and reports in respect of the cov15 ered bonds as specified in section 13(a) of the Securities 

16 Exchange Act of 1934 (15 U.S.C. 78m(a)) and any other 

17 rule established by Federal Government banking agencies. 

18 Any residual interest in an estate that is or may be created 

19 under subsection (b) or (c) of section 4 shall be exempt 

20 from all securities laws. 

21 SEC. 6. MISCELLANEOUS PROVISIONS. 

22 (a) DOMESTIC SECURITIES.—Section 106(a)(1) of 

23 the Secondary Mortgage Market Enhancement Act of 

24 1984 (15 U.S.C. 77r–1(a)(1)) is amended— 


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1 (1) in subparagraph (C), by striking ‘‘or’’ at 

2 the end; 

3 (2) in subparagraph (D), by adding ‘‘or’’ at the 

4 end; and 

5 (3) by inserting after subparagraph (D) the fol6 lowing: 

7 ‘‘(E) covered bonds (as defined under sec8 tion 2(3) of the United States Covered Bond 

9 Act of 2010),’’. 

10 (b) NO CONFLICT.—The provisions of this Act shall 

11 apply, notwithstanding any provision of the Federal De12 posit Insurance Act (12 U.S.C. 1811 et seq.), title 11, 

13 United States Code, or any other provision of Federal law 

14 with respect to conservatorship, receivership, liquidation, 

15 or bankruptcy. No provision of the Federal Deposit Insur16 ance Act (12 U.S.C. 1811 et seq.), title 11, United States 

17 Code, or any other provision of Federal law with respect 

18 to conservatorship, receivership, liquidation, or bank19 ruptcy may be construed or applied in a manner that de20 feats or interferes with the purpose or operation of this 

21 Act. 

Æ 


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