Although covered bonds are seen as a safer funding alternative for mortgages, there are still some hindrances to the growth of the sector in the U.S, according to participants at last week's Information Management Network ABS East conference in Hollywood, Florida.

Law firm Morrison & Foerster's (MoFo) presentation at the conference said that one of the impediments holding up this type of financing is that current covered bonds are structured contemplating a fire sale of mortgage pools. This becomes a significant risk, considering the current lack of a liquid mortgage loan market. This, according to representatives from MoFo, suggests the need for a revision of the structure.

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