battman

With $770B of the $1.4T in commercial mortgages maturing in the next five years currently underwater, FDIC revises its rules (.pdf) to allow banks to keep loans on their books as 'performing' even when the underlying properties no longer cover the outlay.

I think the banks will now ask for an equity injection from the borrower to try and make things more "on side". A $ 10 million loan for a property now worth $ 6 million, would probably need a $ 4 million injection of fresh capital. This could prove problematic and create an even more lucrative mortgage market for 2nd and 3rd "high risk" mortgages (or simply the dreaded default they're trying to avoid). Would the "performing" mortgage be offside now with a new 2nd mortgage at a 3% or 6% higher rate and all its associated fees?
While there is definitely a lucrative 2nd and 3rd mortgage market now, things change when you've bought a property based on a certain pro forma, and that pro forma no longer works with higher interest charges that you hadn't counted on.
One thing I can say for sure, while the banks should be quite happy with the relaxing of the rules, they are certainly not going to do you any favors when their butts are on the line.