Link News Headlines By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.
There are two options. Realize the losses now and take another massive hit to our already shaky financial system or continue to "pretend and extend". I don't fully understand the ramifications of pretend and extend but it probably just spreads the issues out over the next five or more years.
"pretend and extend" seems like taking methadone to get rid of your heroin addiction, you aren't really fixing anything, you are just delaying the inevitable.
Kind of, but there's also principal paydown that goes along with that. So instead of a developer/owner having 75% in debt after 5 years, they may have 100%. Sounds bad, but not when you compare it to the 110% they have now. Pretend and extend helps the banks, but will hurt construction and growth moving forward as there is no way to refinance and get money for new projects.
