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I have heard that, but I am skeptical. Who (... with money to lend) would be stupid enough to extend credit based on that? There has to be more to the story, if

• tejohnso 4y ago
  Maybe I'm missing something but weren't there plenty of people "stupid" enough to invest in junk mortgage loans? So many that it ended up causing a crisis?
  • lotsofpulp 4y ago
    In that situation, everyone knew they were junk, but the ratings agencies gave them safe ratings when mixed in with others, and so “people” had plausible deniability to pass them off onto buyers who would not know betters
• tapland 4y ago
  I’ve heard of a few buildings around herein Scandinavia (almost empty with businesses downsizing space as contracts lapse) who supposedly have this, and they can’t reduce rents because valuation would drop too much.
• htag 4y ago
  Yeah, they is risk in this type of lending. There's also risk in all lending, and managing risks is what banks do. This is less risky than many think on the surface. The major risk has to do with the asset class as a whole losing value, but that would be the same for any commercial property mortgage. 1. The asking rent has to close to actual market value. These small and medium sized banks have the local expertise to know what properties are actually renting for. 2. Tenets in commercial properties tend to stay around much longer than residential, and often a commercial property will stay vacant longer than residential property. The bank will want to see you have enough cash reserves to cover the loan payment for longer then they expect it to be vacant.
  • dllthomas 4y ago
    Ah, yeah, that (quasi?) price fixing function might be the extra piece of it.