Last week, the New York Times ran a
piece discussing how efforts to keep people in their homes by restructuring mortgages were not only failing but detrimental to those people who really should just move out and move on. This might actually be true to an extent, though the Times primary concern was of course with the state of the banking system (who cares about people when Chase's bottom line is at stake).
Today, however, in discussing New York City's commercial real estate market, the Times
discussed only how complex structured finance deals would make working out the problems at many properties difficult and time consuming. Of course, if the banking system needs quick foreclosures to right itself (and it might) then it certainly will need that in commercial real estate, which is about as hard hit as any subprime property. What the Times fails to do is point out that structured finance is only complicated when you are worried about the subordinate debt, but the primary mortgage holders can foreclose and should do so (even if securitized, someone services the loan, collects the money and makes decisions about foreclosures and defaults). Quickly foreclosing on these properties will bring them down to their real worth, which is substantially less than the amount of even the first mortgages on many properties. In addition, unlike in a residential foreclosure, there is no family to toss out on the street. The banks can take the properties and rent them out the same way developers do.
