minimum over-collateralization requirements estab-
lished under paragraph (1) at any time after the 
covered bonds are issued. 
(6) FAILURE TO MEET REQUIREMENTS.—If a 
cover pool securing covered bonds fails to meet the 
applicable minimum over-collateralization require-
ments established under paragraph (1), and if such 
failure is not cured within the time specified in the 
transaction documents related to the covered 
bonds— 
(A) such failure shall be deemed to be an 
uncured default for purposes of section 4(a); 
and 
(B) the issuer shall notify the covered bond 
regulator of such failure. 
(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 
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 
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is subject to a prior perfected security interest that 
has been granted in an unrelated transaction. Noth-
ing in this Act shall affect such a prior perfected se-
curity interest. 
(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 that secures the covered bonds. 
(2) SCHEDULE OF ELIGIBLE ASSETS AND SUB-
STITUTE
ASSETS.—Each issuer of covered bonds 
shall deliver to the indenture trustee for the covered 
bonds, on at least a monthly basis, a schedule of all 
eligible assets and substitute assets in the cover pool 
that secures the covered bonds. 
SEC. 4. RESOLUTION UPON DEFAULT OR INSOLVENCY. 
(a) UNCURED DEFAULT.—In this section, the term 
‘‘uncured default’’, when used with respect to a covered 
bond, means a default on the covered bond that has not 
been cured within the time, if any, required by the trans-
action documents related to the covered bond. 
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(b) DEFAULT ON COVERED BONDS PRIOR TO CON-
SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK-
RUPTCY.— 
(1) CREATION OF SEPARATE ESTATE.—If an 
uncured default occurs with respect to a covered 
bond before the issuer of such covered bond enters 
conservatorship, receivership, liquidation, or bank-
ruptcy, an estate shall be 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, which shall be 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 created under paragraph (1) shall be fully lia-
ble on the covered bond and all other covered bonds 
and related obligations of the issuer (including obli-
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gations under related derivative transactions) that 
are secured by the cover pool. The estate shall not 
be liable on any obligation of the issuer that is not 
secured by the cover pool. 
(3) RETENTION OF CLAIMS.—Any holder of a 
covered bond or related obligation secured by a cover 
pool for which an estate has been created under 
paragraph (1) 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 
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 paid in full; and 
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(iii) be evidenced by a certificate exe-
cuted by the trustee of the estate. 
(5) OBLIGATION
OF
ISSUER.—After the cre-
ation of an estate under paragraph (1), the issuer 
shall— 
(A) transfer to the covered bond regulator, 
or a designee of the covered bond regulator, all 
tangible or electronic books, records, files, and 
other documents or materials relating to the as-
sets and liabilities of the estate; and 
(B) at the election of the covered bond reg-
ulator, continue servicing the cover pool for 120 
days after the creation of the estate in return 
for a fair-market-value fee, as determined by 
the covered bond regulator, that shall be pay-
able from the estate as an administrative ex-
pense. 
(c) DEFAULT
ON COVERED BONDS UPON CON-
SERVATORSHIP, RECEIVERSHIP, LIQUIDATION, OR BANK-
RUPTCY.— 
(1) CORPORATION
CONSERVATORSHIP
OR
RE-
CEIVERSHIP.— 
(A) IN GENERAL.—If the Corporation is 
appointed as conservator or receiver for an 
issuer of covered bonds before an uncured de-
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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 secured 
by the cover pool, to another eligible issuer that 
meets all conditions and requirements specified 
in the transaction documents related to the cov-
ered bonds. 
(B) OBLIGATIONS
DURING
180-DAY
PE-
RIOD.—During the 180-day period described in 
subparagraph (A), the Corporation as conser-
vator or receiver shall satisfy all monetary and 
nonmonetary obligations of the issuer under the 
covered bonds and the related transaction docu-
ments until the earlier of— 
(i) the transfer of the covered bond 
program to another eligible issuer; 
(ii) the repudiation of further per-
formance by the Corporation as conser-
vator or receiver under the covered bond 
program; or 
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(iii) the failure of the Corporation as 
conservator or receiver to timely cure a de-
fault (other than the issuer’s conservator-
ship or receivership) under the covered 
bond program. 
(C) ASSUMPTION BY TRANSFEREE.—If the 
Corporation as conservator or receiver effects a 
transfer described in subparagraph (A) within 
the 180-day period described in subparagraph 
(A), the transferee shall take ownership of the 
cover pool and shall become fully liable on all 
covered bonds and related obligations of the 
issuer that are secured by the cover pool. 
(2) OTHER CIRCUMSTANCES.—An estate shall 
be automatically created by operation of law and 
shall exist and be administered separate and apart 
from an issuer of covered bonds and the conservator-
ship, 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 
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(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 related covered bond program to an-
other eligible issuer within the 180-period 
described in paragraph (1)(A); 
(ii) repudiates the Corporation’s fur-
ther performance under the related covered 
bond program; or 
(iii) fails to timely cure a default 
(other than the issuer’s conservatorship or 
receivership) under the related covered 
bond program. 
A separate estate shall be created for each af-
fected 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, which shall be 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 
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estate created under paragraph (2) shall be fully lia-
ble 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 the cover pool. The estate shall not 
be liable on any obligation of the issuer that is not 
secured by the cover pool. 
(4) CONTINGENT CLAIM.—Any contingent claim 
for a deficiency with respect to a covered bond or re-
lated obligation for which an estate has been created 
under paragraph (2) shall be estimated by the con-
servator, receiver, liquidating agent, or bankruptcy 
court for purposes of allowing the claim as a prov-
able claim if awaiting the fixing of that contingent 
claim would unduly delay the resolution of the con-
servatorship, 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 automatically issued by operation of 
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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 paid in full; and 
(iii) be evidenced by a certificate exe-
cuted by the trustee of the estate. 
(6) OBLIGATION
OF
ISSUER.—After the cre-
ation of an estate under paragraph (2), the issuer 
and its conservator, receiver, liquidating agent, or 
trustee in bankruptcy shall— 
(A) transfer to the covered bond regulator, 
or a designee of the covered bond regulator, all 
tangible or electronic books, records, files, and 
other documents or materials relating to the as-
sets and liabilities of the estate; and 
(B) at the election of the covered bond reg-
ulator (but subject to and not withstanding any 
right of repudiation or rejection held by the 
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conservator, receiver, liquidating agent, or 
trustee in bankruptcy), continue servicing the 
cover pool for 120 days after the creation of the 
estate in return for a fair-market-value fee, as 
determined by the covered bond regulator, that 
shall be payable from the estate as an adminis-
trative expense. 
(d) ADMINISTRATION
AND RESOLUTION
OF ES-
TATES.— 
(1) 
TRUSTEE, 
SERVICER, 
AND
ADMINIS-
TRATOR.— 
(A) IN GENERAL.—The covered bond regu-
lator shall— 
(i) act as or appoint the trustee of 
any estate created under subsection (b)(1) 
or (c)(2); and 
(ii) appoint 1 or more servicers or ad-
ministrators for the cover pool held by the 
estate. 
(B) POWERS AND DUTIES OF SERVICER OR 
ADMINISTRATOR.—Any servicer or adminis-
trator appointed for an estate— 
(i) shall— 
(I) collect, realize on (by liquida-
tion or other means), and otherwise 
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manage the cover pool held by the es-
tate; and 
(II) invest and use the proceeds 
and funds received to make all re-
maining interest and principal pay-
ments on the applicable covered bonds 
according to their terms (or, if an ac-
celeration or similar event occurs 
under the related transaction docu-
ments, at the times specified in the 
transaction documents) and to satisfy 
any other liabilities of the estate; and 
(ii) may borrow or otherwise procure 
funds for the benefit of the estate on a se-
cured or unsecured basis and on a priority, 
pari passu, or subordinated basis. 
(C) SUPERVISION OF SERVICER OR ADMIN-
ISTRATOR
BY
THE
COVERED
BOND
REGU-
LATOR.— 
(i) IN GENERAL.—The covered bond 
regulator shall supervise any servicer or 
administrator that is appointed for an es-
tate created under subsection (b)(1) or 
(c)(2). 
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(ii) REMOVAL AND REPLACEMENT.— 
If the covered bond regulator determines 
that it is in the best interests of an estate, 
the covered bond regulator may remove or 
replace any servicer or administrator for 
the estate. 
(iii) REPORTS.—Each servicer or ad-
ministrator for an estate shall, at such 
times and in such manner as the covered 
bond regulator shall require, submit to the 
covered bond regulator, 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 and the performance of the cover 
pool held by the estate. 
(iv) FEES AND EXPENSES.—All fees 
and expenses of a servicer or administrator 
for an estate shall be approved by the cov-
ered bond regulator and shall be paid from 
the estate as an administrative expense. 
(D) JUDICIAL
OR
ADMINISTRATIVE
AC-
TIONS.—Any servicer or administrator ap-
pointed for an estate may commence or con-
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tinue judicial or administrative actions, in its 
own name on behalf of the estate, for the pur-
pose 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. No covered bondholder, indenture 
trustee, or other person to whom an estate is or 
is alleged to be liable may commence or con-
tinue any judicial or administrative action 
against the estate, the trustee, or any servicer 
or administrator, except for an action to compel 
the release of funds that are available to the es-
tate, that are permitted to be distributed under 
this Act and regulations promulgated by the 
covered bond regulator, and that are permitted 
and required to be distributed under the related 
transaction documents and any contracts exe-
cuted by or on behalf of the estate after its cre-
ation under this Act. No court may issue an at-
tachment or execution on the assets of an es-
tate. Except at the request of the covered bond 
regulator or as otherwise provided in this sub-
paragraph, no court may take any action to re-
strain or affect the resolution of an estate 
under this Act. The covered bond regulator 
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shall be entitled to sovereign immunity in car-
rying out the provisions of this Act. 
(E) CLOSING OF ESTATE.—After an estate 
has been fully administered, the covered bond 
regulator shall close the estate and, to the ex-
tent determined appropriate by the covered 
bond regulator, may retain or destroy records of 
the estate. 
(2) STUDY
ON
LIQUIDITY
ADVANCES.—The 
Board of Governors shall conduct a study on wheth-
er Federal reserve banks should be empowered to 
make advances to an estate created under subsection 
(b)(1) or (c)(2) solely for the purpose of providing 
liquidity in the case of timing mismatches among the 
assets and the liabilities of the estate. The Board of 
Governors 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 such 
study not later than 180 days after the date of en-
actment of this Act. 
SEC. 5. SECURITIES LAW PROVISIONS. 
(a) COVERED BONDS ISSUED OR GUARANTEED BY 
BANKS.—Any covered bond issued or guaranteed by a 
bank is a security issued or guaranteed by a bank under 
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Section 3(a)(2) of the Securities Act of 1933, Section 
3(c)(3) of the Investment Company Act of 1940, and Sec-
tion 304(a)(4)(A) of the Trust Indenture Act of 1939. No 
covered bond issued or guaranteed by a bank is 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 AND RESIDUAL IN-
TERESTS.—Any estate that is or may be created under 
subsection (b) or (c) of section 4 shall be exempt from 
all securities laws but shall be subject to the reporting re-
quirements established by the covered bond regulator 
under subsection (d)(1)(C)(iii) of section 4 and shall suc-
ceed to any requirement of the issuer to file such periodic 
information, documents, and reports in respect of the cov-
ered bonds as specified in section 13(a) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m(a)) and any other 
rule established by Federal Government banking agencies. 
Any residual interest in an estate that is or may be created 
under subsection (b) or (c) of section 4 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— 
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(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 fol-
lowing: 
‘‘(E) covered bonds (as defined under sec-
tion 2(3) of the United States Covered Bond 
Act of 2010),’’. 
(b) NO CONFLICT.—The provisions of this Act shall 
apply, notwithstanding any provision of the Federal De-
posit Insurance Act (12 U.S.C. 1811 et seq.), title 11, 
United States Code, or any other provision of Federal law 
with respect to conservatorship, receivership, liquidation, 
or bankruptcy. No provision of the Federal Deposit Insur-
ance Act (12 U.S.C. 1811 et seq.), title 11, United States 
Code, or any other provision of Federal law with respect 
to conservatorship, receivership, liquidation, or bank-
ruptcy may be construed or applied in a manner that de-
feats or interferes with the purpose or operation of this 
Act. 
Æ 
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