Mortgage Cover Sheet &Amp: Fill & Download for Free

No.My first job ever was at Standard and Poors. A credit rating agency. And even though many tasks back then were manual as hell, (luckily we didn't have Lotus), there was always a two-way angle at a credit rating.Quantitative.Qualitative.I believe this has not changed.Laugh all you want, credit ratings, have and will always have this qualitative aspect. Automation won't replace that. Imagine a covered bond with pooled mortgages out of Russia or Germany. Fundamentals are all the same, but a person will argue mortgages are more trustworthy out of Germany. A very Bayesian approach. That goes to a credit rating committee and they will get a favorable rating.You need the ability to understand what goes in a cover pool. It is covid 19 times. Banks which had mortgages, all had strong fundamentals. Covid 19 caused drawdowns on mortgages to alter. Risk changed. Numbers will only tell you that risk increased. It won't tell you why.I remember the quantitative aspect was extremely manual. Forecasting cash flows in a spreadsheet. It was a joke. Took forever.The mundane, repetitive tasks, which were outsourced to India, will eventually be more and more automated. Tools like Murex, FIS all try to make that happen at lightning speed. But not too good, as their business model is to deliver half broken products, so their consultants can sit on-site for decades to come to make a firm capitulate. Bleed. That delicious consultancy fee.Stop being afraid of automation. 10 or even 20 years ago, we had to do horrible tasks which took hours are now all automated. It's great.I remember my line manager coming to me with printed papers, balance sheets, cash flow statements. I had to manually enter that in Excel. I now have a junior who could scan that on an app, who does it in less than a minute.I love automation.

I look at this stuff a decent amount since I trade covered bonds on my day-to-day job.Covered bonds are bonds that are secured by an underlying pool of assets, known as the cover pool. Investors buy covered bonds and so they have claim on the underlying pool. The underlying pool (typically mortgages or loans, but can also be ships, aircrafts, etc) generate cash flow, and that cash flow is passed on to the covered bond holders. This all sounds very similar to ABS and MBS, doesn't it?Key features (and key differences from ABS/MBS):The covered bond holders have claim on assets into the cover pool in priority to the unsecured creditors (i.e. they are more senior).If the issuer defaults, the covered bonds remain outstanding.Covered bond holders typically have dual recourse. What this means is that in the event of a default, if the assets in the cover pool are insufficient to make the bond holders whole, the investors also have senior claim back to the issuer itself (higher up than the senior unsecured holders). ABS/MBS holders typically do not have dual recourse, and they can't go back to the issuer itself.Cover pool assets remain on the balance sheet of the issuers but are segregated. This is as opposed to MBS which are off-balance sheet financing mechanisms where the cover assets are typically segregated in an SPV.Dynamic cover pool: which means non-performing assets are/must be replaced and substituted with better stuff (MBS pools are typically static). An independent monitor typically does this, and also makes sure that the pool itself is overcollateralized (some Scandie issuers by as much as 15% or so).Prepayment risk remains with the covered bond issuer, whereas for MBS and ABS, the prepayment risk is beared by the investors.Current market environment:The covered bond market in Europe is extremely well-developed and has been around for centuries. Most countries in Europe have covered bond legislation (the USA does not currently).The USD covered bond market is extremely small by comparison, only about $40bn outstanding. Last I checked, there were only 2 US issuers of USD covered bonds, with the rest of the volume (the vast majority) being issued by Canadian or Scandinavian issuers.People are talking more about covered bonds in recent months because of the government-mandated wind-down of Fannie Mae and Freddie Mac over the next few years. Without those two organizations to guarantee and support the mortgage market, covered bonds are seen as an alternative way for investors to invest in, and support the housing / housing finance market.Update: this recent article published one of PIMCO's bond traders is very good, and fills in a lot of the gaps in my answer:http://www.pimco.com/EN/Insights/Pages/Covered-Bonds-Strong-Demand-New-Regulations-Create-Global-Momentum.aspx

Let me start with similarities: they are both fixed income debt securities where holders have recourse over a portfolio of loans secured by property mortgages. However the purpose, structure and risk are fundamentally different, both from the issuers' and investors' perspective. I've highlighetd key differences below.Covered bonds are issued by a credit instituition ("bank") and are backed by a loan portfolio ("cover pool") that remain on the issuer's balance sheet. This is funding instrument specificaly designed for credit institutions. Covered bond holders have a dual recourse, both over the issuer - with whom the obligation to pay lies - and over the covered pool all its cash flows in case of issuer's insolvency. Investors can chose to either liquidate the cover pool by selling it to another entity or to continue receiving coupon from cash generated by the cover pool. All this is managed by a dedicated cover pool administrator.Residential- or commercial mortgage backed securities ("RMBS" or "CMBS", respectively) are issued by a special purpose entitity ("SPE"), to which the pool of mortgages has been sold. This SPE has thus financed the acquisition of the pool of mortgages by issuing RMBS or CMBS bonds ("secured notes" or "notes"). Subject to certain requirements being complied with, the bank ceases to have the the mortgage pool in their books. Instead the SPE is a a separate entity, with assets being the mortgage portfolio and liabilities the issued notes. As with any other bond, noteholders have recourse only over the SPE's assets, i.e., the mortgage pool, and not over the original bank. On the other hand this ensures bankruptcy remoteness, with bank insolvency having no material impact over the ability of the SPE to keep debt service payments current. The SPE has its own dedicated management as well as pool credit servicer (typically the original bank but with a back-up servicer agreed from inception).