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POP THE BUBBLE! POP THE BUBBLE!
According to S&P more than $2 trillion of commercial real estate mortgages will mature over the next two years. The average interest rate on maturing loans is only 4.3%. The rate today has doubled, making refinancing challenging. Also, roughly $200 billion of these mortgages are on office properties where the underlying value has collapsed. The size of the pool of distressed capital is much larger than the subprime mortgage market at its peak in 2005 at around $625 billion. The “extend and pretend” game that’s being played with the big banks only makes these problems worse because nobody knows where the toxic waste is buried.
No problem we have precedent now
The feds can just buy it
I think the general American public is a whole lot angrier now than in the last financial crash. Between that anger and a Certain Recent Precedent I’m wondering if those in bank boardrooms are a little more nervous than usual about the personal consequences of their inevitable bailout.
The thing is, we never recovered from the last one and their solution was to just make conditions worse
That’s one of the reasons I believe Americans are angrier at Wall Street than they were 15 years ago. All those massive corporate bailouts, no bailouts whatsoever for the working class, and all the “adults in the room” said that it would fix the economy. Bailouts just kicked the can down the road, hundreds of millions suffered and are still suffering, and the promise of a fix was a lie.
And this time around a lot fewer Americans are buying the lie, to the extent that the cold planned murder of a Wall Street bigwig resulted in jubilant rejoicing by hundreds of millions of Americans who knew nothing about the victim other than his job title.
Yup, the reaction to the adjustment is freaking out the upper crust because they know they’re about to push us even further into the mud to enrich themselves, and they’re now seeing that even during the good times right now that people are ready to use extreme violence against them.
They know that when they finally pull the switch and start the next crisis, the Luigi’s of the world are gonna come out in droves. They have no ability to truly control the narrative anymore.
Lots more older americans who had some savings, invested in property as a retirement plan, and are way closer to retirement age now than they were in 2008 has got to have some potentially interesting consequences in the upcoming “worst case scenario.”
President Condominium won’t let the banks foot the bill.
feels bazinga brained to use ML to fill in a missing dataset.
Extensions could provide borrowers some cover in the short-term as well as give lenders time to work out troubled credits and selectively prune their CRE portfolios through strategic sales in the secondary market.
Yeah that shit only works if you have enough assets to “prune” them and everyone else isn’t going to be selling on the secondary market at the same time cause the primary market is going pop.
The random forest model, which estimates the life of each loan in years, had an r-squared of 0.65 and a mean-squared error of 53 years. Given that the test set was roughly 31,900 loans, we think a mean squared error of only 53 is a very favorable result
Bruh, that’s not how this works. Whether or not 53 years of mean square error is acceptable depends entirely on how it affects your estimates for maturity. And that has to be calculated by propagating the error through the formulas until you get an error on credit. It’s not a difficult calculation, I was literally taught this in high-school. And if you can use random forest modles then surely you can propagate the error.
The distributions of the actual and estimated data sets looked similar as well, another encouraging sign.
No it isn’t. You are assuming that loans without maturity should have the same distribution on the time they are paid out as loans with maturity. Why would this be the case? If both types of loans had the same pay out date either way, then why would comercial actors take the one with no maturity?
yeah the analysis there is pretty questionable
Hmm, looking at the article again, it may be that most of these mortgages actually have a maturity date but it is just missing from the records (for some reason). I am honestly not knowledgeable enough about the CRE market to know which is the case. 60% of records are incomplete, or 60% of loans don’t have maturity (pr something in between).
