The people that lend all the money in America have decided that they are going to start to use covered bonds as a way to finance mortgages. The top four banks think that these bonds will help to revitalize the mortgage market, especially in the secondary market.
Here is a link to the covered bonds definition on Wikipedia. The gist of these bonds is that they remain on the bank's balance sheet and are backed by the bank's cash flow/assets. They have a good credit rating and are almost fail-proof.
What does this mean for the housing market?
I’m not exactly sure, but I do know that at this point in the housing cycle, anything can help. Any money put in the housing sector is a good thing in my book. These bonds are also very popular in Germany where they have had some great success.
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