假装还是修改？论商业房地产中的常青贷款

Federal Reserve Board, Washington, D.C.ISSN 1936-2854 (Print)ISSN 2767-3898 (Online) Pretend or Amend? On Evergreening in CRE David Glancy 2026-025 NOTE: Staff working papers in the Finance and Economics Discussion Series (FEDS) are preliminarymaterials circulated to stimulate discussion and critical comment.The analysis and conclusions set forthare those of the authors and do not indicate concurrence by other members of the research staff or theBoard of Governors. References in publications to the Finance and Economics Discussion Series (other thanacknowledgement) should be cleared with the author(s) to protect the tentative character of these papers. Pretend or Amend? On Evergreening in CRE* David Glancy†Federal Reserve Board May 4, 2026 Abstract Loan modifications can either amplify or mitigate credit losses depending on the strategylenders employ. Using detailed supervisory data and a model incorporating various frictionsthat could encourage modifications (liquidity constraints, foreclosure costs, and loss recogni-tion costs), I assess why banks extend CRE loans. I find that extensions predominantly addresstemporary payment frictions, both in normal times and following the Spring 2023 bank stressepisode. Contrary to concerns about banks “extending-and-pretending” following that episode,banks increased income and principal paydown requirements for extensions, contributing tostrong ex-post performance for extended loans. Keywords:commercial real estate, banks, evergreening JEL Classification:E44, G21, R33 1.INTRODUCTION In many models of financial intermediation, the defining feature of bank credit is greater flexibil-ity to renegotiate loan terms (see, for example, Rajan, 1992 and Hackbarth et al., 2007).Loanmodifications can reduce banks’ credit losses by replacing more costly resolution methods (Boltonand Scharfstein, 1996).1However, this flexibility can be a double-edged sword; bank actions tohide impairment can produce credit misallocation (Peek and Rosengren, 2005; Caballero et al.,2008), financial stability risks (Bruche and Llobet, 2014), and economic sclerosis (Acharya et al.,2021). Deciphering why banks modify CRE loans has become particularly important in recent years, asCRE market strains have created a need for loss-mitigating modifications at the same time thatbanking sector strains potentially motivated loss-obscuring ones.While communications fromregulators have emphasized the benefits of working proactively with stressed borrowers (FederalReserve System et al., 2023), others have noted the risk of extend-and-pretend behavior that couldharm banks down the road (Jiang et al., 2025; Crosignani and Prazad, 2024). In this paper, I investigate whether extension practices are more consistent with banks restructur-ing loans to have favorable future repayment prospects or merely extending them to delay lossrecognition. I begin by presenting a model of maturity extensions that incorporates various mo-tivations banks might have for providing extensions.In the model, banks may extend loans todelay loss recognition (Crosignani and Prazad, 2024), avoid deadweight insolvency costs (Faria-eCastro et al., 2024), or give borrowers more time to find a suitable buyer (Sagi, 2021).In de-ciding the extension terms to offer, banks weigh these benefits against debt overhang costs fromundercapitalized borrowers failing to maintain the property (Myers, 1977). The model demonstrates that lenders’ motivation for providing extensions can be inferred by therelationship between a loan’s debt yield—net operating income (NOI) as a share of the loan balance—and the principal paydown required for an extension.Lenders looking to delay lossrecognition need to provide subsidized terms to highly stressed borrowers to motivate those bor-rowers to extend rather than default. Borrowers with weak incomes therefore receiveforbearancefrom required payments. In contrast, borrowers’ participation constraints are not binding for exten-sions that remedy frictions in selling or refinancing a financially viable property. Those extensionterms are determined by lenders’ desired credit enhancements rather than borrowers’ willingnessto extend, meaning that weak income loans requirelarger paydownsto mitigate repayment risks.In short, risky extensions to avoid default costs entail subsidized terms and low debt yields, whilesafer extensions to remedy temporary strains entail either stringent terms or high debt yields. I use detailed supervisory data on bank CRE loan holdings to test which motivation for extendingloans can best explain observed extension patterns. I find that extension patterns in normal times(before the pandemic) are consistent with banks addressing temporary payment strains. Namely,the probability of principal repayment declines monotonically in debt yield, meaning the lowestincome borrowers are most likely to repay principal. Moreover, banks provide maturity extensionsthroughout the debt yield distribution, n