Taken together, these mechanisms create a negative feedback loop between prices, credit terms, and inventories of distressed property in falling markets that may cause prices to overshoot their underlying values.
Packaging sizable blocks of, say, residential mortgages and selling them to international investment funds (while continuing to administer the loans at the retail level) is one conceivable way of achieving the Basel long-term stable funding ratio in a way that allows the banks to de-risk further by funding a much higher proportion of their remaining asset portfolio with their own retail and corporate customer deposits, and not be so dependent as they are at present on short-term wholesale funding including central bank funding.