The Next Mortgage Tsunami Is Not What You Think

There's another wave about to hit the financial institutions that are already hit hard enough to go to the Treasury for taxpayer dollars. The Wall Street Journal's Lingling Wei and Prabha Natarajan have a story today about a thing called the CMBS market (commercial mortgage backed securities). Remember how you've read about mortgaged backed securities where banks bundle mortgages and sell them off (ie - securitization)? The same thing happens with commercial loans - and these are the loans for shopping centers, office building, malls - place you work in or count on in some way. That market is having a tough time. And the tough time will impact the same financial institutions that you're already keeping an eye on. You need to understand how this piece relates to the rest of the economy.

Here's why you care: Last week in our installment of Next Week's News Today we pointed out that there will be a growing pressure for a stimulus package. Today you see that piece from CNNMoney.com's Jeanne Sahadi. Her reporting points out delaying a stimulus package could mean drawing out the pain. Then on Friday we pointed out that a plan to help residential mortgages from FDIC head, Sheila Bair, was about to get a lot more attention from Congress because Capitol Hill wants something done for homeowners. That's what happened yesterday, and the Wall Street Journal's Michael Crittenden has a great report on the Congressional hearing in today's paper. You'll note that Fed Chairman Ben Bernanke voiced encouragement for Ms. Bair's suggested game plan.

If you take all these stories together you care greatly because at the exact moment that the commercial mortgage market is having problems, you see both the possibility of a stimulus package being delayed and and direct help for homeowners still debated. We've given you a great deal of information here - but the idea that's important is to see how all of these events will play in concert with each other. Understanding that will help you understand what's going to not just happen next week, but for at least the first part of 2009.