As handy phrases go, extend-and-pretend is hard to beat. It’s ashorthand that is easy to understand and summarizes, whether fairlyor not, the approach that lenders have taken to coping with thehuge volume of distressed assets produced by the recession andfalling real estate values.

Whether the phrase is fair or not is subject to debate, saysMark Grinis, partner and global real estate fund leader at Ernst& Young, and a member of the DAI editorial advisory board. WhenI asked Grinis if extend-and-pretend has helped or hurt therecovery, he pointed out that the form is not an orthodox, formalpolicy of lenders but is a phrase that has been coined to bothdescribe, and to some extent deride, the practice of extending andmodifying loans.

“It’s really a policy of extend-and-wait until the dustsettles,” Grinis says, adding that the “pretend” part of the phrasein many cases is unwarranted. “This industry is vulnerable to verydramatic cyclical swings, and anyone who has been in the businessfor the past couple of cycles recognizes that selling at theabsolute bottom of the market, when there is no liquidity, oftenmaximizes writeoffs and minimizes recovery.”