Extend-and-Pretend in the U.S. CRE Market

Matteo Crosignani and Saketh Prazad ()

No 1130, Staff Reports from Federal Reserve Bank of New York

Abstract: We show that in the post-pandemic period, weakly capitalized banks provided maturity extensions and granted payment relief to distressed commercial real estate (CRE) borrowers to preserve capital, leading to credit misallocation and a buildup of financial fragility. Using supervisory data, we detect this “extend-and- pretend” behavior in CRE mortgage lending and in bank lending to REITs exposed to distressed CRE. These maturity extensions increased the stock of CRE mortgages maturing in the near term, raising the risk of large losses materializing over a short period. Extend-and-pretend is also associated with reduced origination of new CRE mortgages and C&I credit to firms.

Keywords: commercial real estate; credit misallocation; financial stability (search for similar items in EconPapers)
JEL-codes: E51 G21 R33 (search for similar items in EconPapers)
Pages: 59
Date: 2024-10-01
New Economics Papers: this item is included in nep-ban and nep-ure
Note: Revised June 2026.
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Citations: View citations in EconPapers (1)

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DOI: 10.59576/sr.1130

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