Initial reports seem to indicate that so long as the modifications are done in a prudent manner including a thorough examination of the borrower’s creditworthiness, banks will be able to engage in the modifications without any adverse regulatory impact.  Additionally, initial reports have indicated that a bank may modify a loan even if the loan is underwater.  This is a major shift as in recent months many banks have been requiring principal pay downs on loans that are underwater as a prerequisite to a modification.  All of this seems to bode well for borrowers.

This is likely one of the major reasons that the FDIC will soon be announcing a set of guidelines for commercial mortgage modifications.  You hope that the FDIC will be better at implementing these guidelines than they were at implementing the 2006 guidelines.  A comprehensive set of guidelines for the modification of commercial mortgages is likely the only solution for the impending collapse of the real estate markets.  Had the banks not been so highly leveraged and had they not so highly leveraged almost all of their loans, the market may not have reached the breaking point that it is currently at.  But the banks did not follow the rules and the FDIC did not enforce them, so there is blame to be shared by everyone.