Law Firm Ramps Up For Covered Bonds

The nascent covered bond marketplace in the U.S. appears set to get a boost in coming months as issuers ready themselves to test the waters with the first set of issuances, according to published reports; not surprisingly, the law firms that were critical to the issuance process in securitization are now reorganizing their practices to serve this emerging market for mortgage liquidity. New York-based Seyfarth Shaw LLP, one such law firm, said Thursday that it has established a “covered bonds team” to assist clients with covered bond offerings. The team will help clients assess the viability of this product in their particular circumstances while factoring in current market conditions, the law firm said in a press statement. While the firm is far from the only law firm touting representation in covered bonds, Seyfarth Shaw has something going for it that few others can claim: in a word, Shirley Curfman. A partner in the firm’s Los Angeles office, Curfman was counsel to the mortgage bond indenture trustree in one of only two covered bond transactions issued in the States. Bank of America Corp. (BAC) is the only bank to have issued a dollar-denominated covered bond; Washington Mutual also issued a covered bond, but the offering was euro-denominated, so we’ll let readers discern which issuer she represented. Curfman will co-manage Seyfarth Shaw’s covered bonds group along with Nanette Heide, the law firm said. The first issuances in a newly-established covered bond market have yet to come to market, and are likely to be delayed until the first quarter of 2009, according to a recent Reuters report. Part of the delay comes as alternative sources of bank funding have appeared recently. “As a form of mortgage funding, covered bonds are unlikely to be very competitive versus the alternatives of equity capital from the Treasury and 3-year FDIC-guaranteed senior unsecured bank debt,” analysts at Bank of America said in a late October research report. “The FDIC guarantee program ends on June 30th, 2009 and we may see institutions focus on diversifying their sources of funding.” Most analysts that have spoken with HousingWire said they could see covered bonds as a potential replacement for securitization in the jumbo mortgage market, which has literally died in the current credit crunch; no one yet sees the market for covered bonds competing the with GSEs or FHA as sources of mortgage funding. Write to Paul Jackson at paul.jackson@housingwire.com.