Pretend or Amend? On Evergreening in CRE

David Glancy

No 2026-025, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Loan modifications can either amplify or mitigate credit losses depending on the strategy lenders employ. Using detailed supervisory data and a model accounting for competing extension motivations (temporary repayment difficulties, foreclosure costs, and loss recognition costs), I assess why banks extend CRE loans. I find that extensions predominantly address temporary payment frictions, both in normal times and following the Spring 2023 bank stress episode. Contrary to banks "extending-and-pretending" during that episode, banks increased income and principal paydown requirements for extensions, contributing to strong ex-post performance for extended loans.

Keywords: nonresidential real estate; loan delinquency; foreclosures; credit risk; commercial lending (search for similar items in EconPapers)
JEL-codes: E44 G21 R33 (search for similar items in EconPapers)
Pages: 73 p.
Date: 2026-05-04
New Economics Papers: this item is included in nep-cob and nep-hre
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:103198

DOI: 10.17016/FEDS.2026.025

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