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WaMu and Covered Bonds.

Covered bonds are similar to mortgage-backed securities and asset-backed securities in that they are derived from pools of mortgages or public sector loans, but unlike those derivatives the loans remain on the issuer's balance sheet. Washington Mutual was the first US bank to issue euro-based covered bonds in 2007, but the declining housing market and economic distress led to restructuring, downgrades of WaMu's covered bonds, and plunging share prices, until JP Morgan-Chase acquired WaMu's assets and some liabilities, including the covered bonds, exactly one year later.

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Varun Abbineni
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90 views3 pages

WaMu and Covered Bonds.

Covered bonds are similar to mortgage-backed securities and asset-backed securities in that they are derived from pools of mortgages or public sector loans, but unlike those derivatives the loans remain on the issuer's balance sheet. Washington Mutual was the first US bank to issue euro-based covered bonds in 2007, but the declining housing market and economic distress led to restructuring, downgrades of WaMu's covered bonds, and plunging share prices, until JP Morgan-Chase acquired WaMu's assets and some liabilities, including the covered bonds, exactly one year later.

Uploaded by

Varun Abbineni
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Washington Mutual

Covered Bonds

Covered Bonds

Created from pools of mortgages or public sector loans

Backed by separate groups of loans

Derivatives, similar to mortgage-backed securities / asset-backed


securities

Unlike ABSs and MBSs, covered bonds remain on issuers balance sheet

Usually awarded high credit ratings

Generally have a maturity rate of 2 10 years

Washington Mutual

WaMu first US bank to issue based covered bonds in September 2007

Housing market distress -> Declining prices -> US economy faltered

WaMu covered bonds started sinking

Restructuring, rating downgrades, share price plunged

Uncertainty over FDIC bailout

Exactly one year later, JP Morgan-Chase acquired all WaMu assets and
some of its liablities (covered bonds, deposits, secured debt)

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