The Coupon Mortgage: A Luxury Construction Lender’s End Run

Cronig, Steven C. J.D., LL.M; Keenan, Jesse M. J.D., LL.M.

The Coupon Mortgage: A Luxury Construction Lender’s End Run

Abstract

[Excerpt] The impact of the market failure that has befallen the residential real estate market during the past two years is well-known and self-evident, even if the underlying causes and remedies remain in controversy. Whether the market failure was caused by “predatory lenders,” whose only interest was in “churning product” to generate fees; “speculative developers,” who saw endless demand; “greedy securitizers,” who built a financial house of cards using over-leveraged derivative insurance contracts; “clueless speculators,” who thought the market values of real estate could only increase; or “hapless regulators,” who were under-funded and held in thrall to the industries they oversaw – the bottom line is that there is plenty of blame to go around. As a result of this market failure, primary and secondary market liquidity has slowed to a trickle, significantly reducing institutional and consumer credit for the first time since the late 1940s.

Journal / Series

Cornell Real Estate Review

Volume & Issue

Vol. 8

Date Issued

2010-07-01

Keywords

Cornell; real estate; market failure; residential market; predatory lenders; primary and secondary market; liquidity; construction lenders; Department of Housing and Urban Development (HUD); Government Sponsored Entities (GSEs); Federal Housing Administration (FHA); spot loans; condominium units; ad valorem taxes; project maintenance costs; equity; debt; lender; Coupon Mortgage Structure; coupon mortgage workout; underwriting; FHA; Fannie Mae and Freddie Mac; condominium associations; solvency; principal

Rights

Types

article