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New Rules! Banks Can Lie About Commercial Real Estate Loans

The commercial real-estate crisis is taking a while to play out, and the new rules will ensure that it takes even longer.  Instead of having to foreclose and take writeoffs, the new rules encourage banks to modify existing commercial real-estate loans, even when the value of the asset has fallen below the value of the loan. Because interest rates are so low, many commercial real-estate owners, especially those with long-term leases, are not having trouble making payments, even when the value of their buildings is well below the amount they owe.  These property owners would not be able to refinance the loans because of the loan-to-value problem, so when the loans come due, they might be screwed. via: Business Insider

If this isn’t a case of whistling pass the graveyard I don’t know what is. You just can’t hope time is on your side. Besides the rules that allow banks to over state the value of assets will continue to be a ticking time bomb regardless of the health of the market.

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