The New York Times: Fearing Losses, Banks Are Quietly Dumping Real Estate Loans

A number of banks are offloading their portfolios of commercial real estate due to fear of property owners not being able to afford mortgages. Investors see this as an acquisitional opportunity because discounted commercial real estate loans could be worth more if the industry recovers in the coming years. Michael Hamilton, chair of O’Melveny’s Project Development & Real Estate Practice, said he has been involved with deals in which banks are giving borrowers a year to find a buyer for a property, further noting that banks are interested in avoiding a foreclosure while borrowers benefit by walking away from a mortgage without financial liability. “What I have been seeing is the cockroaches are starting to come out,” said Hamilton. “The general public does not have a sense of the severity of the problem.”

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