Regulators Ask Lenders to Help Firms With Commercial Real Estate Stress
The NCUA and other regulators recommend FIs grant short-term loan accommodations.
The top US bank regulators are asking lenders to work with credit-worthy borrowers that are facing stress in the commercial real estate market.
Financial firms should “work prudently and constructively” with good clients, the government agencies said in guidance on Thursday. The statement from the Federal Reserve, Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and National Credit Union Administration updates guidance on workouts that the watchdogs issued in 2009.
Property owners have come under pressure as borrowing costs soared, causing companies including Brookfield Corp. and an office landlord managed by Pacific Investment Management Co. funds to default on debt. Office owners are particularly struggling as higher borrowing costs complicate financing and tenants pull back given layoffs and the rise of remote work.
The new guidance recommends that financial institutions grant short-term loan accommodations, which include agreeing to defer payments, accepting partial ones, or providing other assistance. It also deals with accounting changes.
Lenders will have to confront tricky negotiations as nearly $400 billion of debt on commercial real estate matures this year. The amount of distressed commercial property assets climbed to nearly $64 billion in the first quarter of this year, according to MSCI Real Assets.
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