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Bad underwriting + inability to refinance =?

According to this Journal piece, the next potential mortgage crisis. We, of course, have been hearing about this for a long, long time now. Extending loans (sometimes called "extend and pretend") has been working well, especially, when the property is performing; i.e., cash flowing. But there is less flexibility in the CMBS market, where investors are expecting to clip coupons.

I am going to go out on a limb and do a little crystal balling here, so please realize that these are just my own personal views. There will not be a collapse. Special servicers will be working long and hard and borrowers to find ways to stop a complete collapse. Lenders, as the story notes, have no incentive to realize losses. And there are supposedly buyers with dry powder waiting to pounce on properties at heavy discounts. The hedge to that is that I am not sure government programs will help that much on these deals. The other hedge is that the commercial market traditionally lags the residential market by what -- eighteen months, is it? -- so we could see pain before we move back into a market uptrend.

If you have your own thoughts or predictions, please feel free to share them.