[vineyardmike]

They won’t all end up underwater, and they’re not necessarily being sold at full price. Banks have additional duties to maintain their portfolio for additional regulatory reasons that don’t apply to other institutions. We saw this play out for First Republic last year.

Other investors clearly think that the loans have some value. Some loans may not go into default, but banks down want depreciated assets on their books, other lenders may prefer to restructure the loans at higher interest etc.

A lot of commercial loans require certain rental rates, which is why you’ll sometimes see large vacancy instead of price reductions. This could be one tool that allows that to change. Maybe with a price cut the tenants will be viable, but the bank would rather offload that risk to someone willing to restructure the loan.

[jojobas]

Yeah, how about someone would buy these loans, combine them into pools based on risk and sell on as a great investment tool suitable for every risk/profit profile?