ILLEGAL: When Zoning Enforcement Bites

I recently placed this duplex under contract with a client looking for a great investment bargain.  The property has two separate 1 bedroom units in an up-and-down configuration.  The structure was build around 1950.  This was a bank owned property and our negotiations settled at a price of $57,000.

Once we got into our due diligence though, we had a major problem.  A phone call to Ogden City Zoning shows that this duplex does not have a non-conforming use certificate.  Although clearly a single family home that was subivided into a duplex decades ago, the previous owners did it without property application to the city.  Therefore, the property was not grandfathered the use.

Then, another client and I were shopping for a property and placed this triplex under contract:

This bank owend property had three mailboxes at the curb that are also decades old.  Yet, during our due diligence we discover that South Ogden City has only permitted the home for use as a duplex.  So where has city zoning enforcement been all these years?  Who knows.

The cities do appear to be in an enforcement mood however.  The glut of bank owned properties make it politically palatable to be so while not provoking the ire of owner occupants that would otherwise inhabit the property.  It's best to get the enforcement done while the property is vacant and the owner is a faceless corporation thousands of miles away.  

Real Estate Regulation and De-Regulation from The Hill

This year was an interesting and exciting Legislative season.  While working on my committee, I saw several real estate related bills come through for discussion and debate.  There were several more that were debated on the House Floor.  Here is a summary of some of the Real Estate related legislation that will become law this year:

Window Egress and Zoning Enforcement

HB383 - This was a bill that I ran which dovetailed with SB178 that I reported on last year.  My bill puts teeth into the law which prevents building officials from requiring owners of rental property to cut into the foundation of their properties in order to enlarge existing egress windows.  The State Fire Marshall wrote the language for the bill and testified in its behalf at committee.  This should bring an end to most of the egress window non-sense where owners have been forced to endanger their properties by cutting into old and fragile foundations.

Short Sales and Deficiency Collections

SB42 - This bill brings deficiency collection for short sales in line with those for foreclosure.  Before this law passed, lenders had 6 YEARS to file a deficiency judgement against the seller of a property.  Most lenders don't file these judgements because the financial status of the sellers makes the action pointless.  However, in some cases, the lenders do file.  If they do, they now have 3 MONTHS from the time of the short sale closing to do so.  This should increase the number of short sales being worked in the marketplace and help us churn through our distressed inventory faster.  That, in turn, should help us accelerate toward a full market recovery.  


Property Tax Reductions for Urban Farms

SB122 - This bill allows parcels of land of 2 acres or greater that are zoned for uses other than agriculture in urban areas to be taxed at an agricultural rate when they are dedicated to that purpose. The bill closely follows greenbelt statute and allows the property to have reduced taxes as long as the property is in use for agriculture production.  When the property is sold, the seller must pay up to 10 years of the difference between the taxes they paid and what they would have paid had it been taxed the full rate through that time.  This should do two things.  First, it should increase the number of viable agricultural operations in urban settings; second, it should create an incentive for the properties to stay in agricultural use over longer periods due to the lump tax due at time of sale.

Mortgage Fraud Prosecution

SB281 - This bill funds the Mortgage and Financial Fraud Unit of the State Attorney General's Office.  The unit has been in hibernation for several years due to budget constraints.  The funds were available this year to restart the unit and begin investigating bad actors in the market.  

Good Landlord Program Changes

SB216 - This bill makes some changes to Good Landlord programs across the state.  It creates reciprocity for certification between cities who have a GL program.  It also restricts the fees that cities can charge for a business license to be no more than the actual cost of providing the license.  Ogden landlords have nothing to worry about.  The city charges $83 for a non-GL and $13 for a GL license when the actual cost to the city is $108.  Ogden has been an excellent example of how to run a GL program. The bill also provides an appeal process in the even that a landlord is kicked off the program.

Zoning Enforcement

HB302 - This bill requires cities to issue notices to owners and property managers, if desired, when giving notice of zoning violations.  It also requires that a notice be issued for each instance of a violation.  This will likely affect owners in Ogden regarding mowing of yards.  The city policy prior to this bill has been to send a notice once in the year and then move strait to issuing fines if the violation occurs again later in the same calendar year.  This will require a notice for each instance of the violation.

Uncle Sam's New Mortgage Tax

Headlines today report of a discouraging new tax being levied on new purchase loans and refinances.

Here is a video from CBS:



This is what happens when government spends more than it generates in revenue. If they will tax mortgages, what else will they tax? Your auto loan? Your student loan?

The dark cloud that looms is that the Feds have now created a dependency on Federally backed financing to help generate tax revenue. That can create all kinds of mischief, including an incentive to increase government's involvement in its already near-monopoly in residential lending. However, there is a silver lining.  If the taxes increase to a substantial level, it may be an incentive for private lenders to step in and provide a more affordable option to borrowers.

The best policy decision would be to get the government out of the mortgage and housing business.

HARPooned: Fed Mortgage Mods Let Owners Spear Self In Foot

Headlines showed up recently praising a revamped Mortgage Modification program proposal coming out of Washington.  The official acronym is HARP.  Here are some highlights courtesy of Housingwire:

The plan...allows borrowers in privately funded loans to refinance into a lower rate Federal Housing Administration mortgage. The program would be expected to cost between $5 billion and $10 billion through a tax charged on the banks.

A separate option under the program would apply to borrowers in Fannie Mae and Freddie Mac loans as well. Anyone who refinances could reduce the term of their mortgage to less than 20 years. If the borrower commits to keeping the monthly payment where it is, the GSEs or the FHA would cover the closing costs estimated at roughly $3,000 per refinance.

This is government intervention in the market at its worst.  To understand how bad this policy is, you have to follow the money chain.  Currently, many banks own loans issues to homeowners during the housing bubble.  Many of those loans went bad over the past few years and those banks are now licking their wounds trying to rebuild capital and stay afloat.  For the good loans that are left, the bank receives a monthly payment that includes interest and a portion of principal.  This is income to the bank.

What the HARP program proposes is to refinance the bank's good loans (i.e. eliminate its income source) and lend the homeowner money from FHA (a loan insured by my tax dollars and yours). At prevailing rates which are far lower than rates on loan issues several years ago.

So what kind of crazy consequences could come from this kind of policy?  There are several.

First, the program has the potential to handicap the banks even further.  By holding good loans that have interest rates above prevailing interest rates today, the banks can make use that money to repair their balance sheets and return to health.  If those loans are refinanced, it means that the bank looses that income and must reissue those funds in new loans at todoay's lower rates.  This reduces their income stream and postpones their return to health.

Even more sinister however is the effect that future inflation could have on these banks.  If the bank reissues its entire portfolio at today's record low rates, when rates increase, it means that the banks will be loosing money again hand over fist as borrowers have no incentive to refinance at punitively higher rates.  Inflation could drag banks back into insolvency at interest payments on savings and deposits exceed interest income on loans.   

Think about FHA and all these government owned loans.  What does it mean to the taxpayers if their money is sitting in super low interest loans as inflation pushes interest rates up?  These loans become a loss on the public balance sheet.

Add interest rate risk to the fact that the Feds want to tax banks to pay for a forced divestiture of their assets and you have a recipe for gross unintended consequences.  It's the equivalent of thugs ransacking your house, taking your valuables, and then sending you a bill for their efforts.

It might be tempting to say, "Hey, those slimy banks deserve it!".  Well, not all banks are slimy.  Unfortunately, this policy proposal will affect the good as well as the bad. How much better off will the public be when their good banks whither? The public should not be surprised when their local bank gasps for air after having been HARPooned by the Feds.       

Developer Deliverance: Changes to Development Rules

I am currently on the Hill working on Legislative issues.  One of the committees I sit on is called the Political Subdivisions committee.  It sounds like a bland name but it deals with all kinds of fun issues that address our democratic system and the function of "subdivisions" (i.e. cities and counties) of the State. 

Today we heard a bill in committee by a Representative from Kaysville.  Under current law, cities and counties have the right to change the specifications required on asphalt depth, street width, curb width, and other infrastructure specifications as they see fit.  Unfortunately, this poses a problem when a developer purchases land, begins development and then has the city change the specifications mid-stream.e

The bill we heard today eliminates this as a possibility and fixes the specifications that are required for a development when the development starts.   You would think that this was the law already.  It is not.  Due to the length of time it takes to complete developments, some contractors were running into issues with this. 

Fortunately, it passed out of our committee unanimously and will go to the House floor for a vote.  This should create a more predictable environment for developers and cities to work together.

Uncle Sam To Play Landlord?

The vicious cycle of federal encroachment into the housing market is coming full circle in the near future.  Housingwire reports that the Federal Reserve is endorsing a program to allow Federally owned homes to be made into rental properties:

 "Preliminary estimates suggest that about two-fifths of Fannie Mae’s REO inventory would have a cap rate above 8% — sufficiently high to indicate renting the property might deliver a better loss recovery than selling the property," Bernanke's staff writes in a supporting white paper.

"..support for such a program will cost mortgage servicers, bond investors and even taxpayers. But it may be a sacrifice for the greater good.

"Some actions that cause greater losses to be sustained by the GSE in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery," the white paper states.

This would complete the pernicious circle of government intrusion into the free housing market.  Right now Uncle Sam issues about 95% of all home loans.  Presently, many of those loans are being issued on REO homes that are owned by Uncle Sam as well.  Finally, we find out that Uncle Sam will now be wanting to rent all the homes that it owns due to making bad loans in the first place.

This proposition of an REO-to-Rental program is inappropriate.  The article sites tight underwriting guidelines as the reason for the program.  The Federal government created this scenario by keeping unhealthy banks alive and not letting them fail.  Banks have no incentive to lend while they get cheap money to buy Treasuries that yield them a guaranteed (but low) return on investment.  Why would they lend to the man on the street when they can get a risk free ride from Uncle Sam?  Pure folly.

Let's get government out of the housing market.  

Treasure Hunt: Obtaining Non-Conforming Use Certificates in Ogden

I was speaking to a client the other day and he was relating a problem.  He owns a triplex in Ogden and has been renting it for a number of years.  Then, suddenly, Ogden City zoning enforcement notifies him that his property is not zoned for a triplex.  The city has no record of a non-conforming use certificate.

So, how do we fix this problem?  Ogden City typically will grandfather a multi-unit property if it can be shown that there was use going back prior to 1952.  But where do you find this information?  The answer lies in the archives of the Weber County Library.

On the  main floor in the south end of the building is a reference desk.  Hand the lady your cell phone and tell her that you want to see the "Polk Directories" for any year you can think of off the top of your head that is before 1952.  Might I suggest 1951 as a good start.

The Polk Directories is like an old phone book but without phone numbers.  It lists addresses and the names of people living at the property.

They are also full of cool old advertisement for local businesses.

If you are needing a non-conforming use certificate, you will be looking for multiple names at the same address.  Unfortunately for my client, it appears his property was subdivided after the cut off date for grandfathering.  It looks like we will be seeking some alternative solutions for his property woes.

Oops! I Stepped in HUD: Top 6 Reasons to Avoid HUD Homes

Once in a great while, I experience something so ridiculous that I find myself bereft of words to express myself.  I had two experiences like this recently working with buyers to purchase two HUD homes.  One client was an owner-occupant.  The other was an investor. The grievances are many and poignant. Hopefully, by sharing our ulcer-inducing experiences, you will come to the same conclusion I have regarding HUD homes.  Here are six reasons you should think twice before placing an offer on a HUD home:  

1.  Appraisal Aggravations - When entering a purchase contract, HUD boasts that it will provide an appraisal it has conducted on the property in advance.  This sounds sweet and endearing doesn't it?  Well, there is a catch. If the appraisal expires sometime during the contract period, the buyer has to pay for a new appraisal at their own expense.  In marketing we call this the bait-and-switch.  What would otherwise be a selling point of HUD homes turns instead into a slap to the face of buyers.  This happened to my clients during a recent purchase.  The new appraisal cost an outrageous $690.  HUD refuses to order a new appraisal at their expense unless the buyers cancel their contract, lose their earnest money, and start over by winning the competitive bid process again.  Nice!  

2.  Field Service Insanity - HUD contracts with independent companies such as Sigma out of San Diego and AMS to make sure the properties are secured and winterized. A buyer cannot turn on the utilities for an inspection or an appraisal, unless they work through one of these companies.  You would think this would be easily done through a phone call to an 800-number or via the internet.  No!  Instead, buyers are required to fill out a form, include a cashiers check for $150 (non-refundable), snail mail it to their office, then wait three more business days for a response.  The only contact number is a long distance area code.  Then they send the buyer an email granting permission to turn the utilities on at the buyers expense and then only for a 3 day window of time.  Of course, buyers can only hope that both their home inspector AND appraiser (if HUD's appraisal has expired) have an open calendar to fit into this brief 72 hour window of opportunity.  Typically, this coordination has not gone well and utilities have to be turned on multiple times...at the buyer's expense of course.   

I am aware of an experience where the field service provider would not give permission to turn on the water.  Yet, HUD also required that ALL systems be checked including plumbing in order for an appraisal to be completed.  So, one person says don't turn the water on and the other person says that it has to be turned on to complete the transaction. The buyer's were caught in a wasteful bureaucratic crossfire and charged late fees for it by HUD...for more on this read on...

3.  Extortion Fees - HUD charges $25 per day that a buyer extends past the original contract deadline.  They charge buyers $375 at a time.  They refund the difference at closing or waive the fee if the delay is their fault...unless you are an investor.  If you are an investor, you are charged the fee even if the delay is HUD's fault.  HUD could drag its feet indefinitely and run the meter up while investor-buyers wait to close on a home.   

Also, the field service providers charge $150 to re-winterize a home when the water has been turned on during winter months.  But, local plumbers only charge $90 for the same service.  The field service providers are making $60 to make a phone call to local plumbers.  How do I become a field service provider?  This parasitic fee fleeces all buyers.

4.  Non-Refundable Earnest Money - Investors are charged a much larger earnest money deposit than end-user buyers. To add injury to insult, HUD deems the investor's earnest money NON-refundable upon contract acceptance!  Investors are also granted NO due diligence period. HUD unreasonably expects investors to spend money inspecting the property before they even know if they can buy it or not. This totally contradicts market practices. 

5.  Commission Forfeiture - If a contract extension request is not completed on time, HUD forfeits the buying agent's commissions!  Now, doesn't that give you a warm fuzzy feeling all over?

6.  Deadline Nonsense - HUD requires to be notified 5 business days in advance to set up closing.  That means that once docs are ordered and received by a lender, HUD takes up to 5 more business days to close the file.  This adds another layer of aggravation to buyers who have cleared today's difficult underwriting standards to wait around an extra 5 days to close.  Keep in mind that many buyer's contracts have to be extended (and thus pay the $25 per day "extortion" rate) to fulfill this requirement. 

There are more complaints but this should be enough. The HUD home system is convoluted and completely contradicts market tradition...let alone being a buyer friendly enterprise.  Rather than creating incentives for homeowners, the system badgers them with fees, deadlines, and bureaucratic nonsense.  Who wants to put up with that?   

My buyers had terrible experiences during this process.  I refuse put my clients through this needless hassle any more.  You and I deserve much better than what HUD has to offer.

 

Hungry Hungry Repos: Banks Take Preemptive Possession

One of the things I do as a Realtor is help folks sell their homes on short sale.  To find these clients, I use one of the oldest prospecting methods in the book...the door knock.  Usually, I show up and let the owner know their home is headed for foreclosure and then discuss some options with them.  As you can guess, it's a sensitive conversation.  However, it has been a source of business for years. 

While I was scouting homes today I noticed a curious thing.  Of the homes on my list, 60% of them had keyboxes on the front door with notices from bank-contracted asset management companies saying that the home was vacant.  This is very interesting because the banks do not own the homes.  Yet, somehow the property has been deemed vacant by the lender and the property has been rekeyed...all before the property is even returned to the bank via trustee sale.

How would you feel if I rekeyed your home on a whim while you are on vacation?

I wonder if these folks participated in a deed-in-lieu of foreclosure with their lenders.  Either way, to find 60% of my prospective short sale list "pre-possessed" by banks is a pretty alarming development.

I inquired with Bill at CalculatedRisk to see if he had any insight.  From his response, it appears that most trust deeds allow a bank to protect the collateral on their loan in the event that a home is in danger of being damaged.  Winter weather can pose a real threat via plumbing which might explain the preponderance of pre-possessed homes.

Let's see what happens when I contact the owners and let them know their homes have been re-keyed.  

Making Ogden Water Realtor Friendly

In a recent Realtor political luncheon held during the Ogden City mayor's race, one of the questions that was posed to the Mayoral candidates was this: What are you going to do to make Ogden City a friendly place for Realtors to do business?

One of the particular complaints Realtors have had against Ogden City over the years is its unhelpful demeanor when it comes to turning on water to vacant homes.

Why make such a fuss about a seemingly small issue?  Well, current loan underwriting standards and traditional market practice have been to conduct inspections and appraisals on property.  These inspections require that utilities be turned on.  If they aren't on, you can't inspect the systems.  If you can't inspect the systems, then the buyer assumes a lot more risk and will either not buy the home or demand a significant price reduction.

So, what? Well, from a city perspective, either one of these outcomes is undesirable.  The city looses water revenue from homes that sit vacant.  Plus, the longer homes sit vacant, the lower their property value goes and thus the assessed property taxes as well.  Putting up road blocks to homes being sold is a lose-lose proposition for the municipal coffers.

I had a conversation today with city staff sharing some of my thoughts.  They assured me that they have been working diligently to change the culture at the Ogden City Utility Department and make it easier for Realtors and buyers to turn the water on to vacant homes.

They asked that Realtors take notes about their experience with the City Utility Department and report in a few weeks to give feedback.  Let's be vigilant and hopefully we can make Ogden one of the most Realtor friendly cities in the county.

If you have any recent experiences you would like to share, please email them to me and I can share those when I report.  

Nanny State Real Estate: The Rise of the Ridiculous

It seems that with the increase in bank owned inventory there has been a proportionate increase in ridiculous Federally mandated safety fixes to properties.  Here is today's example:

My, doesn't that look pretty.  I am so grateful that Uncle Sam, in his well-intended way, has mandated these to protect us from ourselves.  Had these shabby railings not been there, I would have flung myself off the terrace and onto the driveway below. 

Upon reflection, it's remarkable that mankind has survived the ages without handrails....

Notice that there is only one person in all of these pictures.  I am sure the rest of them died of neck and back injuries sustained when their governments failed to mandate handrails.

Safer Neighborhoods: Ogden's Proposed Gated Community

Recently I have been made aware of efforts to make Ogden's neighborhoods feel safer.  One of these efforts includes a proposal to create a unique gated community in Downtown.  Here is a map of that neighborhood:

Basically, the proposal includes gating Eccles, Van Buren, and Brinker Avenues at 20th Street and also at 19th Street and Jackson Ave.  The four gates would  enclose a community of approximately 150 homes, most of which were built in the 1940's. 

The idea is to create an environment that would allow home owners to feel safer but also create an environment that makes it more difficult and less opportunistic for criminals. 

Interestingly, crime is not necessarily higher in this neighborhood than the surrounding area but rather the geography and street layout provide a unique opportunity to create a gated community with the least amount of infrastructure expenditures.  It will also be interesting to see how this kind of project will affect crime statistics once it is completed.

The project is still in the research stage so it will be interested to report on this again as community buy-in gets underway and plans are presented for approval. 

Watch for a report on this again in the future.

Appraiser Atrocity: Bureaucracy in Real Estate Hell

I just closed with some buyers after spending 75 days working on a small file that would normally take just 35 days.  You can read details about the negotiation and price points in JUST SOLD! Bargain Cottage Starter Home. 

Once we locked the home up at the $59,000 price point the first thing we did was order an inspection.  We found some ticky tacky problems but nothing serious.  We then ordered the appraisal.  The appraiser came to the home and several days later we received her findings.  To our surprise, the appraisal came in low with the appraiser indicating the home's worth at $57,000...the original list price.  This was disconcerting because the home was in very good condition for its age and we estimated that the home was actually listed several thousand dollars below its comparable market value.

An examination of the appraisal was shocking (click to enlarge):

A couple things popped out at me on this page.  First, the comparables the appraiser used were cash transactions rather than financed transactions as you would normally expect to see with retail owner-occupied homes (homes that are actually comparable to the home my buyers were trying to purchase).  A review of the MLS confirmed my suspicions.  These comparables are scratch-and-dent BANK OWNED homes!  Our appraiser was comparing apples to oranges in her work.  Tisk. Tisk.

Five minutes on the MLS revealed traditional non-distressed homes that sold just a block away. After I put our evidence together, my lender and I threw a Hail Mary pass and disputed the appraisal.  We were pleasantly surprised when the appraisal management company called us a week later to say that our dispute was successful and the value was adjusted to $60,000.  Whew!

Little did we know what kind of waves we had made by succeeding in our dispute.  As you can see on the appraisal form, the home called for "Exterior cracked and peeling paint needs to be scraped and painted."  When we notified the sellers they immediately scraped and painted the appropriate places.  We ordered our Own In Ogden inspection and the inspector passed us off except for a couple interior repairs.  Own In Ogden is picky about paint and they could find nothing wrong in their inspection.

Shortly after that, the original appraiser returned to review the paint work.  She was unsatisfied and identified several places that were not noted in the original appraisal that needed to be "fixed" according to her.  Flustered, the sellers scraped and painted those areas.  We called the appraiser back to the property and she refused to sign off on the repairs yet again, this time indicating she could see transition lines where the old paint had been scraped off even though it was all covered in new paint.  The appraiser said "I am the eyes and ears of FHA and this needs to be sanded, scrapped and painted to our satisfaction."  Wonderful.  It cost $150 each time the appraiser had to revisit the property.  Someone's ego had been bruised so they were running up the meter.

Finally, the appraiser signed off on the repairs.  When the Appraisal Management Companies are done away with and we go back to a free market again, this appraiser will be on my short list.

However, our problems did not stop there.  Just a few days before closing, our loan officer received a full page of conditions he needed to fulfill from the underwriter, one of which was a 2nd appraisal!  Our closing was delayed a month while we jumped though numerous other hoops.  When the underwriter discovered that I was the landlord of the buyers, they tossed out my Verification of Rents as unreliable and instead demanded proof of deposits.  It took my bank a full week to pull deposit images of my buyer's rent payments.  Finally, the underwriter was satisfied, miraculously waived our 2nd appraisal, and we were able to wrap up our transaction.

In my opinion, the HVCC has been a disaster in the market and has created an appraisal industry rife with bureaucracy and paranoia. I know some very competent appraisers.  Unfortunately, our freedom to employ them has been restricted and regulated by Federal law.  The sooner this regulation is done away with, the healthier our market will be.

Mortgage Lending: Signs of Life In The Wasteland

The mortgage lending market has gone through some trauma since 2007.  For illustrative purposes let's liken the damage done to the mortgage lending business to the effects of a volcanic eruption...in this case Mt. St. Helens specifically.

Here is a picture of the as a lush forest pre-eruption.  Look at all those pretty trees living happily basking in the sun.  Think of each tree as a mortgage lender and the abundance and health of the trees in this photo as a representation of the Mortgage Industry in 2007.

Then, trouble brews and a cataclysm befalls the forest as Mt. St. Helens blasts the life out existence.

Uh oh!  Think of this as a visual representation of what happened to the mortgage industry after the housing crash of 2008.

Yet, with every disaster, there is renewal.  Here is a photo shortly after Mt. St. Helens erupted:

This looks like a lifeless moonscape.  How could anything live in this environment?

Well, lo and behold, there is life!

Please forgive the labored analogy.  The point I wanted to make today was that, as in all natural disasters, life goes on and nature has a tenacious way of springing up and clawing its way back from obliteration.  The same goes for the mortgage lending market for housing.  Just this week we get two very interesting headlines from Housingwire:

Redwood Lines Up Another Jumbo RMBS
Redwood Trust, the only company to launch private-label residential mortgage securitizations since the financial crisis began in 2008, is issuing the RMBS.  Redwood will bond 473 loans with a total balance of approximately $375 million.

This is good news!  Morgtage backed securities have been dead for nearly three years with Redwood being the recent innovator and initiating the creation of more of these products.  They anticipate doing another $1 Billions in RMBS this year.  Good for them.  Good for us.

Also we read today:

Banks May Skirt GSE Uncertainty With Covered Bonds
More banks based in the United States will establish covered bond programs to fund future mortgages on the perception of less risk and still lingering uncertainty over private and agency securitization markets, according to Moody's Investors Service.

New covered bond frameworks could take the place of mortgage-backed securities issued by either the government-sponsored enterprises or the private market.

-snip-

"New covered bonds in the U.S. will also not have the low quality assets that were common in pre-crisis residential mortgage-backed securities." Moody's said in a research note released Tuesday. "We expect future U.S. covered-bond deals will have much less market risk following a bank default than pre-crisis U.S. covered bonds because we assume future covered bond legislation will establish mechanisms permitting liquidation of a portion of the pool over a period of time."

What this is saying is that banks are seeing the writing on the wall that Fannie Mae and Freddie Mac's days of market dominance are numbered.  If the demand for home loans is going to be satisfied, banks will need to find other ways of meeting that demand than originating loans and sending them to Fannie or Freddie.  Thus, traditional banks have started to use tools called covered bonds to provide incentives for the creation of new home loans.   

Both of these reports show that the market is innovating and adapting to survive in the inevitable post-government-dominated mortgage market. 

Rules from MARS: NAR Blasts FTC With Ray Gun

It was announced today that the Federal Trade Commission will exclude Realtors from the MARS disclosure rules that it adopted earlier this year.

Basically the MARS disclosure documents were a series of four papers that were cumbersome, confusing, and in my opinion totally unnecessary.

Today's ruling is a common sensed step back.