To be clear, it looks like we're talking about commercial real estate here.
Just moments ago I read that regulators are raising flags about banks' plans for unwinding their derivatives portfolios. Then I come here to read this. Likely happenstance. Maybe no connection. But a little jarring. Then again, they say there are no coincidences!
https://www.reuters.com/business/finance/us-bank-regulators-...
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 is probably going to be underwater for the financier (JPMC assumed from FRB) for the rest of the term (just on the fed rate, but then I'm also making a margin on the leveraged capital. And tax deductions on the interest.).
They're doing it so quietly it ends up in the new york times.
This triggers sub prime deja vu.
These articles don’t provide the complete picture. Who are the buyers of these loans and what is their motivation knowing full well these are future underwater loans.
> 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 kind of people who could have a lot of money invested in commercial real estate. They see this large threat to their portfolios, so they're trying to keep their assets from depreciating.