Tuesday, November 11, 2008

On modifying mortgages

From an esteemed colleague in the asset management business:

Moody's Economy.com forecasts that even with loan modification programs, 1.6 million Americans will lose their homes this year either in a foreclosure or a distressed sale, and another 1.9 million are projected to lose their homes in 2009.

How to stem it?  I liked this idea of a shared appreciation mortgage from Andrew Caplan.  Read that article and then read this discussion between Caplan and Greg Mankiw.  I'm going to see Mankiw speak on Thursday at MIT hopefully so I look forward to hearing some more ideas on it.  
That doesn't appear to be the direction the industry is headed in though.  The new plan with Freddie and Fannie modifying mortgages so far only helps people that are really, really underwater.  These are things that mortgage owners should have been doing in the first place anyhow. It makes complete sense, lest they be left holding a bevy of foreclosed houses.  Oh wait, that has already happened.

The rot is beginning to spread bigtime to commercial real estate.  Locally, General Growth Properties, the REIT that owns Quincy Market is in danger of bankruptcy.  

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