Pretty downbeat economic outlook this month. It seems too pessimistic to me.

But Freddie Mac did find a patch of blue in the subprime market.

While it is difficult to find good news in the subprime market, one recent development holds out some hope of helping keep people in their homes. Lenders reportedly have stepped up efforts to provide loan modifications and forbearance alternatives that would make mortgage payments more affordable, and Federal bank regulators have encouraged such efforts. One sticking point, however, has been the legal difficulty modifying subprime loans in securitized pools.

I was talking to a client today who is an international securities expert and he mentioned the dilemma banks face when modifying loans. They may want to do it but, if I understood him correctly, the banks would have to buy back those loans first before they could modify them and that would be expensive. It is not something banks could do very broadly.