A group led by Tishman Speyer Properties gave up the 56-building, 11,232-unit Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan, turning the properties over to its creditors after defaulting on some $4.4 billion in debt.   Wall Street Journal. The $5.4 billion acquisition in 2006 was the single biggest residential property purchase in U.S. history. It’s now worth an estimated $1.8 billion.

“We basically walked away from it,” said Clark McKinley, a spokesman for the California Public Employees’ Retirement System [CalPERS],  one of several investors in the venture, wrote off its $500 million investment, McKinley said. “It’s underwater, anyway, so we’ve lost it,” he added. “We took our medicine, and we’re learning from it.”

Sadly lenders are fighting the stay off a mass of foreclosures. If homeowners start walking away from their mortgages en masse, there’s little doubt the housing market will collapse and take the economy with it.  The New York Times has a list of proposals to help home owners reduce their principals. What is critical is that we need to reestablish stability in the market to prevent a second wave of the housing crisis.