Relations between office landlords and lenders are facing tension, but federal regulators are keen to get the two sides to sort it out.
Regulators issued new guidance last week calling on financial firms to “work cautiously and constructively” with creditworthy borrowers in the commercial real estate sector, according to Bloomberg. report. The guidance, issued by the Federal Reserve, the FDIC and others, updates proposals for solutions issued during the financial crisis.
The banking regulator requires financial institutions to facilitate short-term loans to struggling borrowers. Some of these ways may include deferring payments, accepting partial payments, or providing assistance through other means.
The guidance comes at a time when a large amount of commercial real estate debt is maturing during a downsizing of office tenants across the country. Nearly $400 billion in commercial real estate debt is coming due this year.While the bulk of that is for office building owners, other real estate sectors are also struggling, including facing multifamily owners Great impact in autumn.
Commercial real estate debt to hit $1.4 trillion by 2027 will matureAccording to Trepp.Banks account for more than half of commercial real estate loans, according to Citigroup analysis Reuters.
Fitness experts have picked up wind of a shift in attitude from banks, which have long favored fitness. Extend and pretend approach, hoping that the troubled asset will turn around.these days they tear off the bandage Instead, the goal is to reduce losses rather than face larger writedowns later.
Banks tend to avoid defaults because it forces them to mark loans to market, which hits profits. But they are beginning to acknowledge that the office market may never recover.
But guidance from regulators is just that: guidance. They cannot force banks to treat lenders favorably.
— holden walter warner