Treasury Secretary Geithner

US Treasury Secretary Timothy Geithner told the House Financial Services Committee yesterday (Tuesday) that the Obama administration is ready to explore covered bond legislation as a part of moves to reform mortgage finance in the US.

His comments came in testimony during a hearing “Mortgage Finance Reform: An examination of the Obama Administration’s Report to Congress”. That report, by the Treasury and Department of Housing & Urban Development, was released on 11 February.

Geithner discussed the government’s position on reform of Government Sponsored Enterprises Fannie Mae and Freddie Mac.

“We also believe it is appropriate to consider additional means of advance funding for mortgage credit as a part of the broader reform process, including potentially developing a legislative framework for a covered bond market,” he said. “We will work with Congress to explore opportunities in this area.”

Republican Congressman Scott Garrett will chair a hearing of his HFSC subcommittee next week that is expected to discuss a new legislative covered bond proposal and yesterday he reiterated his belief in covered bonds as part of the solution to the need for mortgage finance reform in the US.

“And finally, an area that we have strong agreement on is the need to create a US covered bond market,” he said. “While not a cure all, a covered bond market could provide significant liquidity benefits and help bring private capital back to our mortgage market.”