Delinquency Management.

Now is an appropriate time to review how well prepared you are for the next downturn in commercial - and residential - real estate markets. After all, that downturn may be right around the corner. We hope the economic consensus, which seems to be that the economy is poised to regain some strength later this year, turns out to be correct.

We fear it may be overly optimistic. Corporate earnings reports continue to disappoint. Layoffs are mounting. In their second quarter releases, few companies gave much indication that they expect the third quarter to be much better.

So far, housing markets have held up remarkably well. Price appreciation has slowed nationally, but home values continue to trend upward.

Only a few small markets, mostly places where dot-com fever pushed up high-end prices are seeing home prices drop.

On the commercial side, some ominous signs have popped up. The rating agencies warn that markets are softening, and perhaps more quickly than had been anticipated at this stage of an economic slowdown. Hotels and office properties seem particularly vulnerable. Can retail be far behind?

There is no telling whether today's economic slowdown will morph into a recession. But it's clear that lenders need to be prepared for the worst. ...