Bloomberg reported today that the FDIC will set guidelines to modify commercial real estate loans.  This could be a major development for both the commercial real estate and lending markets.  Government guidelines could provide lending institutions with a framework within which to modify commercial mortgages, something that they are desperately lacking.  In addition, the guidelines may modify current accounting rules that serve to discourage modifications, particularly those related to capital and loss reserve accounts.  These changes in loss reserve requirements will also make available more money for new lending which will serve to bolster the market as well.

A set of guidelines by the FDIC is what the market needs in order avert the disaster that befell the residential real estate market.  Encouraging lenders to modify these commercial mortgages will serve to stabilize the market by preventing a flood of foreclosures from coming online over the next three years.  These guidelines could provide for loan extensions at lower interest rates which will serve to address the issue of the influx of loan maturities that are expected.  Since the available funds for refinancing are minimal at best, such programs are necessary to maintain some sense of stability in the market until the economy can turn around.