I 
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 addi-
tion to the Committee on Ways and Means, for a period to be subse-
quently 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 Representa-
tives 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: 
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(1) ANCILLARY
ASSET.—The term ‘‘ancillary 
asset’’ means— 
(A) any interest rate or currency swap as-
sociated with 1 or more eligible assets, sub-
stitute assets, or other assets in a cover pool; 
(B) any credit enhancement or liquidity ar-
rangement 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 in-
cident 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 de-
scribed in subparagraph (A), (B), or (C) of 
paragraph (9)— 
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(i) 1 or more eligible assets from a 
single eligible asset class; and 
(ii) 1 or more substitute assets or an-
cillary assets; and 
(B) in the case of any eligible issuer de-
scribed in paragraph (9)(D)— 
(i) the covered bonds issued by each 
sponsoring eligible issuer; and 
(ii) 1 or more substitute assets or an-
cillary assets. 
(4) COVERED
BOND.—The term ‘‘covered 
bond’’ means any recourse debt obligation of an eli-
gible issuer that— 
(A) has an original term to maturity of not 
less than 1 year; 
(B) is secured by a perfected security in-
terest 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 pro-
gram 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 
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(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 sin-
gle cover pool, 1 or more series or tranches of cov-
ered bonds may be issued. 
(6) COVERED
BOND
REGULATOR.—The term 
‘‘covered bond regulator’’ means— 
(A) the appropriate Federal banking agen-
cy (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 sub-
ject to the jurisdiction of an appropriate Fed-
eral 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 prop-
erty and that is in compliance with any 
rule or supervisory guidance of a Federal 
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cy 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 compli-
ance 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 Admin-
istration and that is in compliance with any 
rule or supervisory guidance of a Federal agen-
cy 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 ‘‘eligi-
ble asset class’’ means— 
(A) a residential mortgage asset class; 
(B) a home equity asset class; 
(C) a commercial mortgage asset class; 
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(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 sav-
ings and loan holding company, and any sub-
sidiary of either of such companies; 
(C) any nonbank financial company (as de-
fined 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. 
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(10) OVERSIGHT PROGRAM.—The term ‘‘over-
sight 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 ‘‘sub-
stitute 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 qual-
ity, 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 out-
standing 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 
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the approval of the applicable covered bond reg-
ulator; 
(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 ac-
count into which only an asset described in sub-
paragraph (A), (B), (C), (D), or (E) may be de-
posited or credited. 
SEC. 3. REGULATORY OVERSIGHT OF COVERED BOND PRO-
GRAMS ESTABLISHED. 
(a) ESTABLISHMENT.— 
(1) IN
GENERAL.—Not later than 180 days 
after the date of the enactment of this Act, the Sec-
retary 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 
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appropriate by the Secretary to further the pur-
poses of this Act; 
(B) covered bond programs to be main-
tained in a manner that is consistent with this 
Act and safe and sound asset-liability manage-
ment 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 PRO-
GRAM.— 
(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 applica-
ble covered bond regulator. 
(B) APPROVAL
PROCESS.—Each covered 
bond regulator shall apply the standards estab-
lished by the Secretary under the oversight pro-
gram to evaluate a covered bond program that 
has been submitted by an eligible issuer for ap-
proval. Each covered bond regulator, promptly 
after approving a covered bond program, shall 
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provide the Secretary with the name of the cov-
ered bond program, the name of the eligible 
issuer, and all other information reasonably re-
quested 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 rea-
sonably requested by the Secretary in order to 
update the registry under paragraph (3)(B). 
(C) 
EXISTING
COVERED
BOND
PRO-
GRAMS.—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 pub-
lished on a Web site available to the public and that, 
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for each covered bond program approved by a cov-
ered bond regulator, contains— 
(A) the name of the covered bond program, 
the name of the eligible issuer, and all other in-
formation that the Secretary considers nec-
essary to adequately identify the covered bond 
program and the eligible issuer; and 
(B) all information that the Secretary con-
siders necessary to adequately identify all out-
standing covered bonds issued under the cov-
ered bond program (including the reports de-
scribed in paragraphs (3) and (4) of subsection 
(b)). 
(4) FEES.—Each covered bond regulator may 
levy, on the issuers of covered bonds under the pri-
mary 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 car-
rying out the provisions of this Act. Such funds shall 
not be construed to be Government funds or appro-
priated monies and shall not be subject to apportion-
ment for purposes of chapter 15 of title 31, United 
States Code, or any other provision of law. 
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(b) MINIMUM OVER-COLLATERALIZATION REQUIRE-
MENTS.— 
(1) REQUIREMENTS ESTABLISHED.— 
(A) IN GENERAL.—The Secretary, by rule 
and in consultation with the covered bond regu-
lators, shall establish minimum over-collaterali-
zation requirements for covered bonds backed 
by each of the eligible asset classes. The min-
imum over-collateralization requirements shall 
be designed to ensure that sufficient eligible as-
sets 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 (ex-
cluding the liquidity risks) associated with the 
eligible asset class. 
(B) 
RELIANCE
ON
OTHER
OVER- 
COLLATERALIZATION
STANDARDS.—In estab-
lishing the minimum over-collateralization re-
quirements, 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 ex-
tending credit to depository institutions 
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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 as-
sets and the substitute assets in any cover pool shall 
be required, in the aggregate, to meet at all times 
the applicable minimum over-collateralization re-
quirements. 
(3) MONTHLY
REPORTING.—On a monthly 
basis, each issuer of covered bonds shall submit a re-
port on whether the cover pool that secures the cov-
ered 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 
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(E) the applicable independent asset mon-
itor. 
(4) INDEPENDENT ASSET MONITOR.— 
(A) APPOINTMENT.—Each issuer of cov-
ered 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 mon-
itor appointed under subparagraph (A) shall, on 
an annual or other more frequent periodic basis 
determined by the Secretary under the over-
sight program— 
(i) verify whether the cover pool meets 
the applicable minimum over-collateraliza-
tion requirements; and 
(ii) report to the Secretary, the appli-
cable covered bond regulator, the applica-
ble 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 
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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-collateraliza-
tion 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 cov-
ered bonds shall promptly give the Secretary 
and the applicable covered bond regulator writ-
ten 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 eli-
gible 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 
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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 el-
igible 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 SUB-
STITUTE
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 secur-
ing the covered bonds. 
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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 CON-
SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK-
RUPTCY.— 
(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 subse-
quent conservatorship, receivership, liquidating agen-
cy, 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 com-
prised of the cover pool that secures the covered 
bond. The cover pool shall be immediately and auto-
matically 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, 
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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 obliga-
tions 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, liqui-
dating 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, liq-
uidating 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 es-
tate has become liable under paragraph (2) shall re-
tain a claim against the issuer for any deficiency 
with respect to the covered bond or related obliga-
tion. 
(4) RESIDUAL INTEREST.— 
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(A) ISSUANCE OF RESIDUAL INTEREST.— 
Upon the creation of an estate under paragraph 
(1), a residual interest in the estate shall be im-
mediately 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 de-
scribed 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 exe-
cuted 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 re-
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lating to the assets and liabilities of the es-
tate; 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 es-
tate in return for a fair-market-value fee, 
as determined by the trustee in consulta-
tion with the applicable covered bond regu-
lator, that shall be payable from the estate 
as an administrative expense. 
(B) 
OBLIGATIONS
ABSOLUTE.—Neither 
the issuer, whether acting as debtor in posses-
sion or in any other capacity, nor any conser-
vator, 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 con-
tinue servicing the cover pool as provided in 
subparagraph (A). 
(c) DEFAULT
ON COVERED BONDS UPON CON-
SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK-
RUPTCY.— 
(1) CORPORATION
CONSERVATORSHIP
OR
RE-
CEIVERSHIP.— 
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(A) IN GENERAL.—If the Corporation is 
appointed as conservator or receiver for an 
issuer of covered bonds before an uncured de-
fault 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 require-
ments specified in the related transaction docu-
ments. 
(B) OBLIGATIONS
DURING
180-DAY
PE-
RIOD.—During the 180-day period described in 
subparagraph (A), the Corporation as conser-
vator or receiver shall fully and timely satisfy 
all monetary and nonmonetary obligations of 
the issuer under all covered bonds and the re-
lated transaction documents and shall fully and 
timely cure all defaults by the issuer (other 
than its conservatorship or receivership) under 
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the applicable covered bond program, in each 
case, until the earlier of— 
(i) the transfer of the applicable cov-
ered bond program to another eligible 
issuer as provided in subparagraph (A); or 
(ii) the delivery to the Secretary, the 
applicable covered bond regulator, the ap-
plicable indenture trustee, and the applica-
ble covered bondholders of a written notice 
from the Corporation as conservator or re-
ceiver electing to cease further perform-
ance 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 re-
lated 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 oper-
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ation of law and shall exist and be administered sep-
arate 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 de-
scribed in paragraph (1)(A), the Corporation as 
conservator or receiver— 
(i) does not complete the transfer of 
the applicable covered bond program to an-
other eligible issuer within the 180-day pe-
riod as provided in paragraph (1)(A); 
(ii) delivers to the Secretary, the ap-
plicable covered bond regulator, the appli-
cable indenture trustee, and the applicable 
covered bondholders a written notice elect-
ing to cease further performance under the 
applicable covered bond program; or 
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(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 receiver-
ship) 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 com-
prised 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 obli-
gations under related derivative transactions) that 
are secured by a perfected security interest in or 
other lien on the cover pool when the estate is cre-
ated. The estate shall not be liable on any obligation 
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of the issuer that is not secured by a perfected secu-
rity interest in or other lien on the cover pool when 
the estate is created. No conservator, receiver, liqui-
dating 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, liq-
uidating 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 es-
tate 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 esti-
mated 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 reso-
lution of the conservatorship, receivership, liqui-
dating agency, or bankruptcy case. 
(5) RESIDUAL INTEREST.— 
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(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 de-
scribed 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 exe-
cuted 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— 
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(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 con-
servator, receiver, liquidating agent, or 
trustee in bankruptcy, including all tan-
gible 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 es-
tate in return for a fair-market-value fee, 
as determined by the trustee in consulta-
tion with the applicable covered bond regu-
lator, that shall be payable from the estate 
as an administrative expense. 
(B) 
OBLIGATIONS
ABSOLUTE.—Neither 
the issuer, whether acting as debtor in posses-
sion or in any other capacity, nor any conser-
vator, 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 con-
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tinue servicing the cover pool as provided in 
subparagraph (A). 
(d) ADMINISTRATION
AND RESOLUTION
OF ES-
TATES.— 
(1) 
TRUSTEE, 
SERVICER, 
AND
ADMINIS-
TRATOR.— 
(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 ad-
ministrators 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 APPOINT-
MENT.—All terms and conditions of any ap-
pointment 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 
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be determined by the applicable covered bond 
regulator. 
(C) QUALIFICATION.—The applicable cov-
ered bond regulator may require the trustee or 
any servicer or administrator for an estate to 
post in favor of the United States, for the ben-
efit 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 sub-
paragraph and the sufficiency of the surety on 
the bond. A proceeding on a bond required 
under this subparagraph may not be com-
menced 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; 
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(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 ad-
ministered, close the estate. 
(E) POWERS AND DUTIES OF SERVICER OR 
ADMINISTRATOR.—Any servicer or adminis-
trator for an estate— 
(i) shall— 
(I) collect, realize on (by liquida-
tion or other means), and otherwise 
manage the cover pool held by the es-
tate in compliance with this Act, the 
oversight program, and the related 
transaction documents and in a man-
ner 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 
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