Check out those yields! Of course, many are completely illusory, but the availability of credit made them sustainable at one point, and that money was "real" for as long as investors were willing to keep believing in the ready availability of credit.

But now nobody believes in the ready availability of credit, and many poorly underwritten loans will start to come due in this environment. The volume of maturing loans will really start to pick up in 2010. Nobody really knows what 2010 will be like, except that it will be a very different world than 2005, and the market is clearly not liking what it sees. According to Green Street Advisors, a research firm, the majority of those 2010-2012 maturities - over 80% - are 2005 thru 2007 vintage loans, with the majority being 2005-2007 variable rate deals. The variable rate deals will obviously be the most problematic.

2005-2007 were not good years for underwriting. According to Moody's, the gap between the Moodys Loan to Value ("LTV") and underwritten LTVs reached record in the first quarter of 2007 (nearly 45%). The Moody's estimate of actual LTV also reached a record of 106.5%. Who needs equity when lenders (and investors) would give you more money than the property is worth?

Which brings me to the title of this post. Of course, I was quite pleased with myself over this one, but clever or not, it cuts to the chase: where on earth are we going to find the money to foregive all this recklessness? Borrowers want to be bailed out. Investors want their loans to be repaid. Shareholders are counting on their dividends not to be cut. Those frugal schadenfreudians feel no responsibility, and everybody wants a tax cut. Change? I hope we can.

It's turning into a real problem, and a December 2nd story in the New York Times pretty much sums up our little national dilemma: Fund Investors Sue Countrywide Over Loan Modifications. The plaintiff, Greenwich Financial Services (talk about Range Rovers...), said it and other investors stood to lose money if Countrywide, now part of Bank of America, modified bad home loans under a settlement that it reached with 11 state attorneys general in October. As The New York Times noted, the case signals that more aggressive government and private efforts to "bailout" individual borrowers could face stiff resistance from private investors.

This is not some theoretical legal case, and it is more and more likely to affect CMBS as well as RMBS if a solution is not found before long. Closer to home, as an investor in, say, Anththracite Capital, are you going to be upset if the special servicer modifies a bucket full of CMBS loans to save a bunch of shopping mall owners, but your investment in AHR gets wiped out in the process?

Or, if you've just raised a bunch of money for your distressed debt fund, are you going to plow that all money into AAA CMBS yielding 15% even though there is a chance that the government will force you to take a loss on some of it? If so, is that really a 15% yield, or something else? If not, how do you quantify it? What are the rules, and who is going to pay??