According to the Financial Times, in an effort to reduce their exposure to the unstable commercial real estate market, some US banks are preparing to sell mortgages at discounted prices, even when borrowers are committed to making their payments.
After numerous warnings that the asset sector is the sector to let go, in the context of the recent turmoil in the US regional banking industry, some lenders are now willing to accept losses, in so-called executed mortgages.
“The fact that banks want to sell loans comes up in a lot of conversations,” said a research firm focused on commercial real estate, noting that HSBC USA is in the process of selling hundreds of millions of dollars in commercial real estate loans, possibly with discounts, as part of an effort to end lending directly to US real estate developers, according to people familiar with the matter.
While the practice of offloading executed loans isn’t as prevalent as it was during the 2008 crisis, many market participants expect higher deal volumes this year and next.
In turn, David Aviram, director of Maverick Real Estate Partners, a private fund that specializes in commercial real estate loans, said that as banks prepare to close the second quarter of business this year, they are very focused on maintaining a clean loan book, adding, “The banks don’t want to raise the concerns of regulators or investors”.
The moves by banks to offload loans come as executives and regulators sound alarm bells about the stability of the commercial real estate sector.
Early last month, Bloomberg indicated that savers in banks that recently collapsed are looking for alternatives in order to keep their surplus money and obtain a better interest rate, stressing that the transformation caused by the collapse of those banks poses risks to the American financial system.
On the tenth of this month, the US authorities announced the closure of the Silicon Valley Bank, which is close to the technology community, and which suddenly found itself in a state of severe insolvency, and entrusted the management of its deposits to the Federal Deposit Insurance Corporation in the United States “FDIC”.
Some financial executives and investors have grown increasingly concerned that the collapse of Silicon Valley Bank (SVB) could have a domino effect on other banks in the United States unless regulators find a buyer early this week to protect uninsured deposits.