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View Diary: The Commercial Real Estate Bust Spells Problems for Foreclosure Fraud Settlement Cheerleaders (50 comments)

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  •  I'm curious (10+ / 0-)

    about how the crash in the commercial real estate market was held off so successfully.  We have been hearing for three years that there would be mass foreclosures in CRE but it did not seem to happen.  How did they hold that off?  Or did I miss the big wave?


    "Justice is a commodity"

    by joanneleon on Thu Feb 23, 2012 at 09:02:25 AM PST

    •  They are structured differently in ways (5+ / 0-)

      In the RRE context, the property being the borrower’sresidence, as well as an investment serves as a major mitigant against exercising the “put option” through “jingle mail” or “strategic default”. Residential real estate is both an investment and a consumable, and thetransaction costs plus idiosyncratic preferences for particular residencesserve as strong counterweights to strategic default which is one reason. Also CRE are income producing properties which give them more collateral.

      The exposure seemed to be structured somewhat better, though we're now seeing the effects and they are going to be bad, but not catastrophic like the residential housing bubble and many CRE will be suing these banks with the resources to do so.

      There are supposed to be a decent number of defaults this year that were held off which will have some bad effects.

      Pro Life??? Conservatives want live babies so they can raise them to be dead soldiers!- George Carlin - I Illustrate #OWS protest T-shirts you can buy at priceman political prints

      by priceman on Thu Feb 23, 2012 at 09:16:27 AM PST

      [ Parent ]

      •  Try this again without typos. Sorry. (5+ / 0-)

        In the RRE context, the property being the borrower’s residence, as well as an investment serves as a major mitigant against exercising the “put option” through “jingle mail” or “strategic default”. Residential real estate is both an investment and a consumable, and the transaction costs plus idiosyncratic preferences for particular residencesserve as strong counterweights to strategic default which is one reason. Also CRE are income producing properties which give them more collateral.

        The exposure seemed to be structured somewhat better, though we're now seeing the effects and they are going to be bad, but not catastrophic like the residential housing bubble and many CRE will be suing these banks with the resources to do so.

        There are supposed to be a decent number of defaults this year that were held off. This bubble burst a little bit later, too.

        Pro Life??? Conservatives want live babies so they can raise them to be dead soldiers!- George Carlin - I Illustrate #OWS protest T-shirts you can buy at priceman political prints

        by priceman on Thu Feb 23, 2012 at 09:22:57 AM PST

        [ Parent ]

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