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by Nevermark
5 days ago
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> They did though. It was a $20M building and they only loaned out $16M, providing a $4M buffer The problem is the bank is regulated to only maintain loans at 80% of property value or lower. If they give a loan at the maximum allowable level, they don't have a (legal) buffer. Thus the strong incentive to perform creative bookkeeping, to avoid having to repossess property they don't want. Instead of simply recognizing the falling property value in their accounting, which without a forced call, is the property owners loss, not theirs. |
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