Take into account the actuality that Constitutional tort theories have not changed significantly during the past 15 years, and most of the related litigation revolves around the immunity of the government and government employees, special tort statutes, and limitation of damages. Furthermore, the existing literature on risk regulation for mortgages and foreclosures, REITs, title systems, and securitization is well developed but does not address the economic effects of constitutions or public health issues.

Please remember that modern banking is now almost inseparable from insurance, and many non-insurance entities now provide direct or indirect insurance products. Banks and nonbank entities that trade derivatives provide insurance (entities that provide third-party guarantees are essentially providing insurance). Also, banks differ from insurance companies in various ways.

It is crucial to not forget the additional information that in the United States, banks are regulated by both state governments and the U.S. federal government. The U.S. Constitution grants the federal government the power to “coin money” and “regulate the value thereof”. Another major difference is that most western and eastern European countries have “federal constitutional courts” that do not exist in the United States. These constitutional courts have limited the scope of business transactions in Europe.

Bear in mind that aside from the answer in the question above, some of the factors that can facilitate or hamper risk regulation are funding and balance-sheet structure, types of investments and assets, sources of funding, duration of assets and liabilities. As well as ability to participate directly or indirectly in reinsurance (some may argue that loan trading is a form of reinsurance). And finally, the nature of the entity’s asset-liability management and investment management.

MDT inaccurately implies that the mechanism’s main role is either allocation or coordination. In reality, many mechanisms serve other economic and non-economic purposes (some of which are unintended) such as:

(a) psychological re-assurance (e.g., voting, auctions, etc.)
(b) information dissemination
(c) comparison—which increases social welfare by reducing overall agents’ search costs
(d) entertainment

Always recall that one more way that lack of fiscal federalism for matters as mentioned in the question exacerbates risk and increases transaction costs, monitoring costs, and enforcement costs, is through increasing taxes because it substantially increases the cost of government and also creates costly uncertainty (all of which are funded by higher taxes). Likewise, it also precludes “learning effects” because best practices in any state can be implemented in only that state/jurisdiction.

Be aware that due to the given situation above, in countries where there are heterogeneous populations or cultures that insist on some form of regional independence, there may be optimal levels of federalism that promote economic development and reduce risk in transactions. However, given the global financial crisis, it is likely that such limited federalism will not be beneficial in the realm of mortgages, foreclosures, REITs, and title systems.

It is worth noting that the United States, Asia, Latin America, and the European Union, all of them follow the “traditional tests” for constitutionality, which are woefully inadequate to handle the complexities of modern interconnected international financial systems. The importance of an efficient financial system has become very clear—without it, sufficient basic services and necessities will not be available or affordable.

Retain the added information that traditional tests in constitutional analysis focus on the following core elements: the “balancing-of-interests” test, the “discriminatory classifications” tests, the “burden-on-interstate-commerce” test, the “economic harm” test, the “state-action” requirement, the Penn-Central three-pronged tests, and the “Agins” tests (whether specific statutes or conduct advances or impedes “special interests” or “government interests”). These tests do not consider elements of risk and are insufficient in today’s economy.

It should be borne in mind that in cases where the burden of proof is too high or too expensive to achieve, the facts and/or reasonable inference should be adequate to establish a deprivation of constitutional rights. Apart from this, most perpetrators who want to deprive rights may know of the compulsion requirement and can easily tailor their actions to avoid evidence.

Keep in your view the practicality that in commerce among immigrants or minority persons, it is sometimes difficult to classify persons or transactions based on wealth, activity, or race, or location. Similarly, the growth of the Internet, innovations in electronics, and consumer marketing have changed the definitions of and expectations for privacy. Consumer data are collected, stored, and sold in many ways. Often, consumers do not have the resources to pursue lawsuits against offending parties.

Be reminded that in addition to the seven feasible criteria for quasi constitutions are actual and perceived “Permanence” that refers to the extent to which the statute or agreement is deemed to be a permanent element of daily life and/or transactions. And “Costly amendment” which pertains to the cost of amending the subject statute/agreement, which is significant and excessively burden defined classes of persons or transactions in order for the statute/agreement to be deemed a quasi constitution.

Pay heed to the fact that mortgages (deeds of trust), title systems, real estate investment trusts (REITs), and foreclosure processes (for real estate and property taxes) are market mechanisms that are typically designed and implemented by legislatures (and governments of most common law countries) for the protection of investors, borrowers, and lenders, for enhanced social welfare, and for the improved coordination of transactions.

Do not overlook the case that a traditional mortgage is an inefficient contract and the associated foreclosure proceedings are also inefficient and socially, economically, and psychologically costly. What is more, the social, economic, and psychological costs of mortgages and foreclosures are staggering and both have become public health disasters in many countries.

Keep reminding yourself of the supplementary knowledge that the main products in the secondary mortgage markets, on the other hand, are whole loans, CMBS, RMBS, and mortgage derivatives (interest-only securities; principal-only securities; mortgage options). Secondary mortgage markets are global because foreign investors often purchase CMBS/RMBS.

Acknowledge the substance of the historical material that during the 1990 to 1992 recession in the United States, domestic interest rates were at historically low levels, but did not result in the same rapid substantial increases in home prices. More than that, the worst bear markets in the U.S. real estate sector occurred during 1974 to 1975, 1980, and 1990 to 1992, and in each of these periods, the prime lending rate was declining.

Don’t lose track of the insightful detail that the tenure cost differential is conjectured to vary drastically when calculated on a monthly and yearly basis. This is because of the frequency/amount of income, disposable income, the timing of required payments, applicable penalties for breach of lease or mortgage, and so on. The tenure cost differential is positive if it costs more to rent than to own, and vice versa.

Please notice that options I and II from the question above are probable substantial differences between the decision process of experienced and inexperienced lenders. Moreover, the classification mention also should also include the ability or willingness to revise risk estimates, third-party property valuations, and internalized property valuations in a timely manner that vary with lender experience. And the correlations between lender decisions and performance evaluation criteria will vary with lenders’ experience.

Dwell upon the evidence that the tax anticipation bias can be confirmed by comparing the absolute volume of and monthly changes in new home sales in states/towns that have historically high property tax rates and states/towns that have historically low property tax rates. More so, the tax anticipation bias is much more pronounced in residential real estate markets (buildings that contain one to four residential units) than in commercial real estate markets.

It will be meaningful to note that because the government can foreclose on properties for tax delinquencies, the willingness of lenders, prospective buyers, and property owners to participate in real estate markets will be affected by their perceptions of the likelihood of tax foreclosure and/or increases/reductions in assessed property taxes. Even so, tax foreclosure bias is more prevalent in residential real estate markets than commercial real estate markets.

Also, not forget that housing costs are subject to “Externalities”. Taxes, rent controls/rent stabilizations (which may make renting more attractive than ownership), transaction costs; crime; environmental psychology issues, and so on, all of which affect the household’s allocation of income and choices. Then, individual and group impulses may also account for changes in the allocation of income/resources to housing.

It would be helpful to ruminate on the auxiliary info that the aforesaid appraisals are regarded as major elements of internal controls and corporate governance. Property appraisal has become a major element in the sale/purchase decision process. Most property sales/purchases are financed with mortgage debt. To comply with corporate governance standards, banks/lenders must appraise properties in order to provide the mortgage—these appraisals are performed in-house or are outsourced.

Please do not lose sight of the added knowledge that it is conjectured that where the lender’s appraisal differs substantially from the agreed-on price and the buyer cannot obtain a sufficient loan to finance the purchase, the lender’s, buyer’s, and seller’s perceptions of market liquidity change substantially; such perceptions are dissipated throughout the local/regional market.

Take into account the factual word that the possible resulting effects of the MLS on buyers include, but are not limited to, comparison price referencing; justification; loss aversion; and increased expectations of higher prices. By the same token, “Price inertia” is the tendency for the seller of a housing unit to maintain a relatively stable offering price after listing the property in an MLS, in order to support beliefs about prices.

Think over the piece of awareness that the duration and quality of such conflict deferral, if among lender’s staff, such conflicts are a function of opportunity costs, knowledge about risk and capital requirements, risk management processes, performance evaluation standards for staff, incentive programs, corporate governance concerns, internal controls, and so on.

Ponder over the fact that some states have enacted deed-in-lieu statutes (wherein the borrower relinquishes the property upon mortgage default that is not cured) – but this remedy is not common. Foreclosure processes are similar across countries. Beyond that, foreclosures dampen and reduce the efficiency of both monetary and fiscal policies. Foreclosures substantially reduce banks’ incentives to provide business loans and/or mortgages to borrowers in neighborhoods that have experienced relatively high rates of foreclosures.

It is noteworthy to bear in mind that borrower defaults and judicial foreclosures can also affect the perceived direction/trend of property prices. Judicial foreclosures typically last for 6 to 36 months and can be very expensive – sometimes the foreclosure transaction costs are as much as the value of the subject property. On the contrary, in the eastern U.S. states, mortgages do not usually contain such foreclosure waiver clauses; and some state laws expressly prohibit such waiver clauses.

Be cognizant of the fact that another adverse effect of foreclosure aside from options I and III is inertia contagion, wherein residents of neighborhoods that have known high foreclosure rates (information that is often publicly disclosed) tend to lose faith in their ability to overcome foreclosure and “underwater mortgages” (where the mortgage value exceeds the value of the underlying property), reallocate their resources to other expenses, and do not make extra efforts to prepare for or solve foreclosures.

Call to your perspective that the lack of specific state-law legislation that expressly addresses the inclusion/prohibition/waiver of judicial foreclosure proceedings clauses in the deed of trust (or “DOT”) is a major omission that is a state action for purposes of constitutional law analysis, because the state has an affirmative duty to enact laws that enhance the efficiency of transactions.

You must consider the authenticity that the borrower and the lender have constitutionally guaranteed property interests in entering into contracts as they see fit, so long as such contracts do not have a negative effect on third parties—such property interests arise from state constitutional law, state contract laws, state/municipal property laws, expectations, and norms. Furthermore, the lender and borrower have constitutionally guaranteed rights to state contractual procedures for managing default of the mortgage (which may include foreclosure).