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CMSA to testify before House Financial Services Committee on covered bonds issue

Dec 15, 2009

Commercial Mortgage Securities Association (CMSA) will testify today before the House Financial Services Committee where it will share its perspectives on the U.S. covered bond market. Christopher Hoeffel, immediate past president of CMSA and a current member of its executive committee, will testify on behalf of the association. The full House Committee hearing, “Covered Bonds: Prospects for a U.S. Market Going Forward,” is scheduled to be held at 10:00 a.m. ET in 2128 Rayburn House Office Building. To view and listen to the hearing live, please refer to the House Financial Services Committee Web site by clicking here. Given the severely limited credit availability in the commercial real estate market, CMSA supports today’s hearing and also the timely legislative proposals on the covered bond issue, which is offered by Capital Markets Subcommittee Ranking Member Scott Garrett (R-NJ), and Chairman Paul Kanjorski (D-PA). In Hoeffel’s testimony before the House Committee, he will outline how a covered bond market could be a helpful financing tool for the commercial market since, in the association’s view, traditional sources of capital for extending credit to commercial real estate owners, such as commercial mortgage-backed securities, are developing slowly due to technical and regulatory hurdles. A full transcript of Hoeffel's testimony is available by clicking here. Hoeffel will also testify that covered bonds shouldn’t serve as a replacement for CMBS as a capital source, noting that a commercial covered bond market would only be additive to the process, providing another source of liquidity for banks to raise capital to fund commercial mortgage loans. “Covered bonds can provide another source of liquidity for financial institutions to help raise much needed capital to fund commercial real estate loans, and in turn, ease the current credit crisis, which persists despite high borrower demand,” Mr. Hoeffel said. Covered Bonds originated in the European bond market and are debt securities backed by cash flows from mortgage and public sector loans. Assets from covered bonds, which normally carry a 2-10 maturity rate and include high credit ratings, are kept on the issuer’s balance sheet. To this end, as commercial mortgages are already permitted in covered bond pools in most European jurisdictions, CMSA believes any U.S. covered bond framework should converge with its European counterparts so U.S. financial institutions have a level playing field internationally and so U.S. consumers and borrowers have equal credit availability. For more information, visit www.cmsaglobal.org.
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