James Lockhart, who stepped down as head of the Federal Housing
Finance Agency in August, advocated more aggressive mortgage
modifications in a Tuesday CNBC
interview, arguing that principal reductions are necessary in addition
to lowering monthly payments. Lockhart, who is now vice chairman of WL
Ross & Co., the distressed investment firm run by billionaire Wilbur
Ross, said he predicts another spike in foreclosures this year, as
well as an increase in strategic defaults because “the stigma is not
there anymore.” He added that “the odd marriage” between the public
and private sector in the housing market “isn’t working and we need a
divorce.”

Miami Lakes-based BankUnited is on the verge of a major transaction, CEO John Kanas told members of the Greater Miami Chamber of Commerce. Kanas joined New York private equity firms to set up BankUnited in May, on the ruins of BankUnited FSB, which was closed and auctioned off by the Federal Deposit Insurance Corp. Kanas said it had $921 million in equity as of June 30 and could draw on more capital from the consortium of private equity firms that backed its formation. They include WL Ross & Company, the investment firm led by the vulture investor Wilbur Ross, the Carlyle Group, the Blackstone Group, Centerbridge Partners, the LeFrak Organization, the Wellcome Trust, Greenaap Investments and East Rock Endowment Fund. Kanas said he expects to strike a deal within the next week. [SFBJ]

A massive U.S. commercial real estate crash is in its beginning stages, billionaire Wilbur Ross said today. The WL Ross & Co. CEO, who is also working on a government program to rid banks of their toxic assets, said he is practicing extreme caution on the commercial real estate investments front, especially with regard to office spaces, which are rapidly shedding tenants. Though the Public-Private Investment Program has made $1.5 billion in pooled government and private funds available to his company for purchasing banks’ distressed assets, Ross said he had used less than $100 million of those funds by Oct. 15, and that the money he spent went toward residential mortgage-backed securities rather than commercial properties. Earlier this month, WL Ross, along with several other firms led by Starwood Capital Group and TPG, agreed to buy $4.5 billion in real estate from the seized Corus Bankshares, after the bank’s investments in construction loans for condominiums went sour. [Bloomberg]

An investment group headed by Starwood Capital Group beat out the Related Companies, Lone Star Funds and Colony Capital to win a 40 percent stake in a company created by bank regulators to contain the assets of Corus Bank. The bank was seized last month by the Federal Deposit Insurance Corporation, and has a $4.5 billion loan portfolio that includes many failed South Florida condominium projects. The winning consortium includes TPG Capital (formerly Texas Pacific Group), Perry Capital and WLR LeFrak, a venture that involves investor Wilbur Ross and real estate company the LeFrak Organization. The winning bidder got the assets for a roughly 40 percent discount in a cash and debt deal.