The Treasury Department has adopted rules allowing lenders to revise commercial real estate loans without triggering tax penalties in an effort to stem a rise in defaults.
The regulations, urged by trade associations such as the Real Estate Roundtable, would ease requirements for collateral and other guarantees in many cases.
Borrowers in investor pools known as real estate mortgage investment conduits and real estate investment trusts would not be subject to tax penalties.
"Changes to the regulations are necessary to better accommodate evolving practices in the commercial mortgage industry," the regulations say. "These changes will affect lenders, borrowers, servicers and sponsors of securitizations of mortgages" in real estate mortgage investment conduits.
The regulations were issued as Wall Street braces for a refinancing crisis in commercial real estate. The default rate on commercial mortgages held by U.S. banks more than doubled in the second quarter, to 2.88%, according to New York-based Real Estate Econometrics. It may reach 4.1 % by yearend, which would be its highest since 1993.
Deutsche Bank said in an April report that more than $1 trillion in commercial loans that are scheduled to mature during the next decade will raise refinancing difficulties.
The regulations are to take effect today.
