Members from both branches of Congress are reconciling financial regulatory reform bills that could ultimately include comprehensive covered bond legislation offered by the House of Representatives. House members offered covered bond legislation modeled after the proposed bill by Rep Scott Garrett (R-NJ). Garrett’s United States Covered Bond Act, introduced in March, aims to establish a regulatory framework for covered bonds in the US. It lists eligible assets for covered bonds as residential property, home equity assets, as well as auto, commercial and student loans. Covered bonds are so named for the dual recourse provided, where the issuer is on the hook to pay out regardless of whether or not the collateral performs as expected. Senate conferences working to reconcile financial reform reportedly rejected the House’s offered covered bond language “without prejudice,” according to Covered Bond Investor, which noted that consideration of the covered bond legislation could be taken up again later. “As our nation continues to recover from the recent financial crisis and certain credit markets remain locked, Congress must examine new and innovative ways to encourage private capital and investment to return to our capital markets,” Garret told Covered Bond Investor. “We must also consider creative means to enable the private sector to provide additional consumer, commercial, public sector and other types of credit.” Industry groups are already speaking up in favor of covered bond legislation added to overall financial reform. American Securitization Forum (ASF) executive director Tom Deutsch released a statement today urging lawmakers to adopt the House offer on covered bonds. “The ASF strongly believes the proposal would facilitate a robust covered bond market as it includes important provisions for default and insolvency of covered bond issuers and subjects covered bonds to appropriate securities regulation by federal regulators,” Deutsch said. Write to Diana Golobay.