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Covered Bond Market to be Expanded to Fund Mortgages
July 29, 2008


The bank Masters of the Universe announce an innovative new system for banks to fund mortgages: do what the Europeans do.


The U.S. Treasury Department and four of the largest banks in the country announced plans Monday to leverage a little-used method for financing mortgages to try to breathe life into the flat lined housing market.

A type of debt security called covered bonds would be used more by U.S. banks. Covered bonds are securities that a bank sells to raise money to finance home loans. The bank receives monthly payments from homeowners and pays back the bonds according to the terms of their issuance.

Covered bonds are popular among European lenders.

If the operation seems simple compared to the complex securities banks have been selling this decade, then regulators are getting their wish. Treasury Secretary Henry Paulson said the use of covered bonds should lead to better loan writing standards on Wall Street because banks would retain the risk of the bonds.

"The availability of affordable mortgage financing is essential to turning the corner on the current housing correction," Paulson said at a news conference Monday. "We are at the early stages of what should be a promising path, where the nascent U.S. covered bond market can grow and provide a new source of mortgage financing."

Bank of America, Citigroup, JPMorgan Chase and Wells Fargo released a joint statement Monday supporting the idea of creating a covered bond market in the U.S.

“We believe a robust U.S. covered bond market would provide an additional stable and cost effective funding source for banks to originate and hold mortgages on their balance sheet. We look forward to being leading issuers as the U.S. covered bond market develops, with programs consistent with the FDIC and Treasury statements,” the companies said in the statement.



Property Taxes Latest New Market for Credit Card Processors
July 29, 2008


Credit card processors are getting creative in opening new markets for consumers to use cards. A company is now pushing property tax payments by credit card.


Credit cards are continuing to enter previously uncharted waters in creating new markets due to third-party payment providers.

Only a couple of weeks after ChargeSmart LLC, San Francisco, announced its program to enable cardholders to pay mortgages, student loans and auto loans, through its service ("New Program Allows Consumers to Pay Mortgage with Credit Cards," July 10), Houston County, Ala., announced that it has selected Paymentus to handle credit card transactions for annual property taxes. Powell, Wyo., already allows citizens to pay utility bills through the Payment us service.

The company, which has offices in Atlanta, Georgia and Toronto, Ontario, charges users a 2.5 percent fee for the service, according to a report in the Dothan (Ala.) Eagle.

Previously, Houston County had paid a 2.4 percent fee to a card processor for payments, with fees ranging from $7,000 to $8,000 annually, according to the Eagle. With Paymentus, the fee burden shifts to the payer.

The property tax payment program is a pilot. County officials have expressed interest in expanding the credit card option to other services if the pilot pans out, according to the Eagle report.

Outside of government clients, Paymentus also works with consumer finance, auto loans, mortgages, insurance, utilities, telecommunications, service providers and small businesses for credit card and other online payments, according to the company’s Web site.


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