Fearing Losses, Banks Are Quietly Dumping Real Estate Loans
Wall Street banks are selling commercial real estate loan portfolios amid concerns over repayment. High interest rates and low occupancy rates post-pandemic drive distress. Banks seek investors for discounted loans to mitigate losses.
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Some Wall Street banks are selling off their commercial real estate loan portfolios due to concerns about landlords' ability to repay mortgages on struggling office buildings. This trend reflects broader distress in the commercial real estate market, impacted by high interest rates and low office occupancy rates following the pandemic. While the troubled loans being offloaded represent a small portion of the total commercial real estate loans in the U.S., banks are acknowledging the limitations of their previous strategies and preparing for inevitable losses. Banks are discreetly seeking investors to buy discounted loans, aiming to reduce their exposure and potential future losses. Investors are attracted to these discounted loans in hopes of future industry recovery or acquiring properties at reduced prices through foreclosure. The commercial real estate loan market is facing challenges, but the situation has not yet reached crisis levels. Banks are under pressure from regulators and investors to reduce their exposure, especially after the collapse of major commercial real estate lenders.
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8 commentsAnd that's what I think is behind much of the push for RTO. While a lot (if not most) office space is rented, corporate executives are the kind of people who could have a lot of money invested in commercial real estate. They see this large threat to their portfolios, so they're trying to keep their assets from depreciating.
https://www.reuters.com/business/finance/us-bank-regulators-...
Yes this article is about commercial real estate but it shows something is actually very broken from a credit market perspective - my loan is probably going to be underwater for the financier (JPMC assumed from FRB) for the rest of the term (just on the fed rate, but then I'm also making a margin on the leveraged capital. And tax deductions on the interest.).
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