Skip to comments.Banks Get New Rules on Property (allow underwater loans to be marked as performing)
Posted on 10/31/2009 4:10:00 AM PDT by TigerLikesRooster
Banks Get New Rules on Property
By LINGLING WEI
Federal bank regulators issued guidelines allowing banks to keep loans on their books as "performing" even if the value of the underlying properties have fallen below the loan amount.
The volume of troubled commercial real-estate loans is skyrocketing. Regulators said that the rules were designed to encourage banks to restructure problem commercial mortgages with borrowers rather than foreclose on them. But the move has prompted criticism that regulators are simply prolonging the financial crisis by not forcing borrowers and lenders to confront, rather than delay, inevitable problems.
(Excerpt) Read more at online.wsj.com ...
The banks were insolvent then and they’re insolvent now.
Casino accounting still applies in this country and watching the dollar’s slide confirms that at least the rest of world is in on the fact the US Empire has no clothes.
I'm not sure I see the problem here... The bank doesn't own the property, you (or the buyer) does. The bank owns a payment schedule, and can enforce a lien on the property if you fall behind, but the fact you bought an item for more than it's worth isn't a hit on the bank. So I'm not sure I see the problem...
This was all created and executed for one end: social engineering. Devalue homes and sell back to lower class people to socially integrate affluent areas.
Myself, I don’t see a problem with calling a loan “performing” if it’s underwater, as long as the payments are being made per the loan agreement, and the publicly-available portion of the article gives no indication otherwise.
If “underwater” becomes synonymous with “non-performing”, then most car loans would have to be considered “non-performing” for the first several years of their existence.
Fail to see how this will change the behavior of a holder of real estate that is worth significantly less than what’s owed on the property. It will still be “under water” until the value rises. This will only be delayed by this policy.
Most Freepers know that the commercial real estate market is going to crash just like the housing market.
There are lots of loans against inflated values. Businesses are also having difficulty making payments because of the current economic conditions.
This is a means of kicking the ball (collapse) down the road.....hopefully after 2012, so it does not affect Obama’s majority.
Well, that is no longer guaranteed and banks may have to foreclose on the properties. Hence, this new rule to put off the disaster.
It’s a postponement of what is to come, anyway.
But if they can hold it off until after the congressional elections.........they will.
Commercial real estate isn't like residential... typically you can only borrow for 3-7 years ... most often it is a interest only balloon ... the property owners (think of a mall) are not really ever interested in eventually owning the property ,, they just want low payments and bank the difference in cash flow from rents.
So what we are seeing here is that every policy from Obama is working to prolong the economic crisis ,, that bad loans are NOT being cleaned up on the residential side (because there are too many and the banks can't afford for real pricing on their assetts,, it'll shut them down) and now they are left hanging on the commercial side... The property owners and banks will renew and extend the existing leases/mortgages while pretending that the property isn't upside down.. Many properties are cash flow negative and have been for 1 or 2 years now... I see a government program (read OWNERSHIP) in the near future...
But will the remaining G-20 members drink this Kool-Aid?
This is already the case and we are living on the vapors of lies past, long past.
The number one thing I hear from both business owners, investors and individuals is that they lack trust in anything. Obama is not restoring trust, nor will any politician.
This will take a statesman or a revolution to repair.
I’m with you, Neidermeyer. You nailed it.
The$550 trillion global derivative Ponzi scheme is prof pudding and now the goobermint and the fed are publicaly telling the banks to lie on their books........the shoe has dropped and the hammer has fell.
There ya go! Nailed it.
The old “extend and pretend” policy that allows the pols to kick the can down the road, once again.
9 more bank closings on Friday (10/30) for a total of 115 y.t.d. and only about 400 more to go. The MSM and most of the sheeple that elect these bums seem to be whistling through the graveyard.
Just about all mortgage loans, made in the last ten years are under water, if the down payment was less than 30%.
This is just more accounting voodoo, in not writing down the assets of the bank.
Karl Denninger on the topic:
One of the definitions of "prudent lending" is not to lend beyond the current value of a given asset, with any such "excess amount" requiring a dollar-for-dollar reserve of the bank's own capital.
Are you surprised? They have been doing this all along ;-)
Didn't they say a few months ago they were going to try to do that?