Jason Stipp: And moving to the commercial mortgage-backed real estate and the commercial real estate market in general, a lot of people have been saying this is going to be the other shoe to drop after we've seen some stability in housing. What's your 30,000-foot take on commercial real estate and how big of a problem that's going to be.
Sean Dobson: "Do we or don't we realize the losses," is the question. The current policies in place are about deferring the realization of loss. If you no longer have to sell an asset that has become in a negative equity position, then you won't present a supply problem to further decay prices.
For investors who already own the assets, it's a very tricky question to answer, because you're not quite sure what happens to your negative equity loan.
For commercial estate development, of course, there should be no capital available for it, there won't be any capital available for it. You have a tremendous backlog of failed projects in the regional banking system that have yet to have been realized.
When people say that commercial mortgage is the next shoe to drop, it's not the next shoe to drop; it's already dropped. It's now just a matter of how much damage was done. Those projects that were in development need to be re-priced, re-vetted. If they were housing- related projects, it can be a long time before they're necessary.
So those development loans are very long-term assets and with the formation of credit for those types of assets, today they have very low prices. So the realization of the losses there has been lagging the obvious existence of the losses and that will continue and maybe get extended.
We wouldn't suspect any upper movement in the prices, but we would assume that the rules have been changed to prevent people from having to recognize these losses in a narrow period of time, and that will somewhat dampen the retracement and extend the length of time that people are able to deal with these problems.