Report

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

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.

JEL Classification: E51; G21; R33;

https://doi.org/10.59576/sr.1130

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2024-10-01

Number: 1130

Note: Revised June 2026.