Scott Williams discusses what the end of troubled debt restructuring (TDR) suspension for COVID impairment means for commercial real estate property owners in an article published by GlobeSt.com. The article discusses that TDRs have been a way for lenders to modify a loan’s terms because of a borrower’s financial or legal difficulties and account for an impairment of value. While this requirement was temporarily postponed under the initial CARES Act as part of pandemic relief, and that relief was extended by Congress through January 1, 2022, institutions that were still required to generate TDRs for modified loans will now have to catch up, which could cause a problem.

“In talking to bankers and lawyers, there has been a whole lot of kicking the can down the road,” explains Williams. “They didn’t have to report it. Kick the can down the road and keep the credit. Banks are going to have to start reporting it and being more active about their bad loans.”

Williams further explains that “I think real estate is someplace where you’re going to see some of this. There are two things that have taken place. Number one, there is a lot of money sloshing around the system. If I’ve got a bad loan, maybe I can refinance with a different lender.” A bank might be “willing to take a small haircut because they have a TDR at the beginning of the year, and they want to get it off their books and onto someone else.”

Read article on GlobeSt.com (subscription may be required)