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Fearing losses, banks are quietly dumping real estate loans

nytimes.com

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Re: Fearing losses, banks are quietly dumping real estate loans

#91
post #63

> It’s an early but telling sign of the broader distress brewing in the commercial real estate market, which is hurting from the twin punches of high interest rates, which make it harder to refinance loans, and low occupancy rates for office buildings — an outcome of the pandemic. And that's what I think is behind much of the push for RTO. While a lot (if not most) office space is rented, corporate executives are the…

> corporate executives are the kind of people who could have a lot of money invested in commercial real estate Sure, many of them do. But there's something else they are far more invested in: their company (through huge pay and even larger stock option grants). I don't buy this meme that CxOs are willing to hurt company efficiency just to protect personal real estate investments, when for nearly all executive (I'm su…

>I don't buy this meme that CxOs are willing to hurt company efficiency just to protect personal real estate investments

I do. Think of all the inefficiencies you've seen reported (or reported yourself) and nothing is done. On the grand scale companies have abandoned the idea of retaining talent altogether, with best performers leaving over the refusal for some 10% CoL raise and hiring/training a new person for 20% more.

I think the most dangerous part is that these aren't rational actors fully focused on maximizing long term profits. So they aren't making seemingly rational decisions.

As an alternative viewpoint, there are probably a lot of peer pressure from people we never see nor hear about that can influence these CxO's as well. They are still people at the end of the day (85% of the time or so). if their friends or [company they admire] do something they will follow suit, no matter how incompatible it is with their company.

Re: Fearing losses, banks are quietly dumping real estate loans

#92
post #63

Earlier quoted context omitted.

> corporate executives are the kind of people who could have a lot of money invested in commercial real estate Sure, many of them do. But there's something else they are far more invested in: their company (through huge pay and even larger stock option grants). I don't buy this meme that CxOs are willing to hurt company efficiency just to protect personal real estate investments, when for nearly all executive (I'm su…

>I don't buy this meme that CxOs are willing to hurt company efficiency just to protect personal real estate investments I do. Think of all the inefficiencies you've seen reported (or reported yourself) and nothing is done. On the grand scale companies have abandoned the idea of retaining talent altogether, with best performers leaving over the refusal for some 10% CoL raise and hiring/training a new person for 20% m…

I asked the CTO/R&D manager at a company I worked for once why he didn't bother getting talent or retaining talent, he said (paraphrasing): "Because I can't scale talent I might as well don't bother with it"

Many large corps are fine with being on the thick part of the Bell curve, their managers can easily scale if the board says they should output more, they are essentially linearizing their whole company around a point and they can scale up/down around it.

It works until someone else innovates and beats them, and then the loop repeats.

It's in some sense good that CxO's behave like this, because it leaves opportunities for smaller companies all the time.

Re: Fearing losses, banks are quietly dumping real estate loans

#93
post #36

I live in perpetual wonder that here in the US I have locked in a 30 year 2.3% mortgage, which I use for leverage, whereas back home in the UK people have to refinance every 2-5 years and so their mortgages trend roughly over the prevailing base rate for the term of the mortgage. Yes this article is about commercial real estate but it shows something is actually very broken from a credit market perspective - my loan…

You can get a fixed 30 year mortgage in the UK. Most people choose not to. There's nothing intrinsicly different about mortgages in the UK compared to the US.

At that rate? lolno. When interest rates were low you would pay more than that for a 10 year fix. Now with high interest rates one bank is bragging about having the longest fixed rate mortgage at 15 years. The US government strongly incentivizes long-term low-rate mortgages in a way the UK government does not.

Re: Fearing losses, banks are quietly dumping real estate loans

#94
post #93

Earlier quoted context omitted.

You can get a fixed 30 year mortgage in the UK. Most people choose not to. There's nothing intrinsicly different about mortgages in the UK compared to the US.

At that rate? lolno. When interest rates were low you would pay more than that for a 10 year fix. Now with high interest rates one bank is bragging about having the longest fixed rate mortgage at 15 years. The US government strongly incentivizes long-term low-rate mortgages in a way the UK government does not.

You guys are moving the goal posts. He said you can't do it, now you say it's not as cheap. That's with hindsight of where the interest rates went. If they had gone up it would have been a good deal.

Re: Fearing losses, banks are quietly dumping real estate loans

#95

> It’s an early but telling sign of the broader distress brewing in the commercial real estate market, which is hurting from the twin punches of high interest rates, which make it harder to refinance loans, and low occupancy rates for office buildings — an outcome of the pandemic. And that's what I think is behind much of the push for RTO. While a lot (if not most) office space is rented, corporate executives are the…

I’ve seen this conspiracy theory so many times, and it just doesn’t hold water for me. Let’s see some actual evidence, not baseless speculation.

Re: Fearing losses, banks are quietly dumping real estate loans

#96
post #93

Earlier quoted context omitted.

At that rate? lolno. When interest rates were low you would pay more than that for a 10 year fix. Now with high interest rates one bank is bragging about having the longest fixed rate mortgage at 15 years. The US government strongly incentivizes long-term low-rate mortgages in a way the UK government does not.

You guys are moving the goal posts. He said you can't do it, now you say it's not as cheap. That's with hindsight of where the interest rates went. If they had gone up it would have been a good deal.

The cost is the whole point. Any 30-year mortgage that might be on offer in the UK (turns out, actually none at all available to the average homebuyer) would be a far worse deal, even given the interest rate changes we've seen.

Re: Fearing losses, banks are quietly dumping real estate loans

#97
post #85

Earlier quoted context omitted.

You can get a fixed 30 year mortgage in the UK. Most people choose not to. There's nothing intrinsicly different about mortgages in the UK compared to the US.

Was there any point when you could get a 30 year fixed loan at 3% in the UK? It makes sense that some banks might be offering them now at 7% since they have little to lose but I don’t think low interest longterm fixed mortgages are really possible without significant government interference (like in the US).

All this is true. The US government does significantly subsidize home loans. However they do this for all lengths of mortgages, not just the long ones.

Re: Fearing losses, banks are quietly dumping real estate loans

#98

Earlier quoted context omitted.

To be clear, I owned a big bank risk platform for about 10 years and this is an ever reoccurring story and nothing I read in the article you linked feels concerning or abnormal. Particularly on the living wills, stress testing, and capital reserves it’s a bit of a game of chicken between regulators and the regulated. The reality is things are considerably better than they were in 2007.

> I owned a big bank risk platform for about 10 years Have you written about this anywhere? I can’t decide if it was mindnumbingly boring or the ride of a lifetime (leaning towards the latter).

The ride of a life time :-) maybe some day. I still have substantial equity LOL

Re: Fearing losses, banks are quietly dumping real estate loans

#99

Earlier quoted context omitted.

> I owned a big bank risk platform for about 10 years Have you written about this anywhere? I can’t decide if it was mindnumbingly boring or the ride of a lifetime (leaning towards the latter).

The ride of a life time :-) maybe some day. I still have substantial equity LOL

Hahah well once that equity pays out, post the stories to HN please!

Re: Fearing losses, banks are quietly dumping real estate loans

#100

Earlier quoted context omitted.

Agreed. The de-risking of the housing market has been disastrous for The de-risking has come in the form of artificial scarcity caused by zoning gatekeeping and outdated fire code, amongst other things. It’s time North America took a hard look at the root causes and fixes them before there is a crisis of confidence in leadership (which is already happened to me - I’m moving out instead of buying in to the insanity.)

Voting with your feet is the most practical option.

That’s what our family did.
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