Banks face a “wall” of $2 trillion in real estate debt, according to a US brokerage.
As a result, lenders will have to cut back on commercial property loans that come due over the next three years, Newmark CEO Barry Gosin told the Financial Times on Monday.
“Banks are going to be under pressure,” said Gosin, who oversaw the sale of $50 billion in loans for failed Signature Bank.
Regulations enacted after the financial crisis have forced some banks to “liquidate loans or find other ways to reduce their exposure to real estate”, either by syndicating debt, entering into risk transfer transactions (where other investors assume the risk of loss) or stopping new lending to the sector, the report said.
Real estate consulting and brokerage firm Newmark said an estimated $2 trillion in U.S. commercial real estate debt maturing between this year and 2026 will need to be refinanced at much higher interest rates, according to the report.
According to data from the Mortgage Bankers Association, $929 billion in commercial real estate debt will need to be paid down or refinanced in 2024, the report said.
“We are at the beginning of the impact of this wall of financing,” Gosin said in the report. “A significant portion of it will be completely submerged, a significant portion of it will be snorkeled through, and a significant portion of it will be [will be recapitalized with] “More fair.”
As PYMNTS wrote on Monday, this comes as banks face other headwinds when it comes to card-related activity.
“Of course, new account openings can lead to increased revenue as consumers open accounts for spending purposes,” the report said. “New account openings also lead to increased lending and perhaps the use of ancillary financial services and products.”
This follows the release of Vantage Score's latest Credit Gauge report earlier in the day, which showed delinquency rates increasing across all credit tiers, with early stage delinquency rates rising from less than 1% in January to more than 1% in February.
Meanwhile, new loan account openings in February were down in all categories except auto loans, and credit card openings were down for all generations except the so-called “Silent” generation (1928-1945), who saw a slight increase.
“Overall, the data shows that 3% of holders opened new accounts in February, down from a peak of 3.7% mid-last year,” PYMNTS wrote.
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