By DAMIAN PALETTA in The Wall Street Journal
WASHINGTON — Federal bank regulators are close to issuing guidelines that would encourage lenders to rework troubled commercial real-estate loans, a sector of the economy they expect to topple scores of additional financial institutions.
Federal Deposit Insurance Corp. Chairman Sheila Bair told a Senate subcommittee that reworking the terms of these loans could help banks avoid larger losses. She likened it to the push regulators made last year for banks to rework troubled residential mortgages.
Reworked commercial real estate loans “should be encouraged, not criticized,” she said. “We are encouraging banks to restructure these loans.”
BLOGGER COMMENT: This gives hope to mortgagors with performing loans that go in technical default due to loan maturity. With CMBS securitization volume down 99.99% – did it ever make sense to send a default letter to a borrower that was paying as agreed? Here’s hoping that common-sense business practices will prevail and lenders will be able to restructure loans in a win-win fashion for both borrowers and lenders rather than blindly following strict, illogical guidelines imposed by regulators.