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> When this happens, the landlord stops paying the mortgage on the office building or declines to refinance it. The bank or investors who made the loan then rep

• rictic 3y ago
  Epistemic status: just some guy, override this if you get specialist info. Lenders are going to take this into account. I imagine that commercial real estate lenders are realists though, and expect their debtors to exercise their right to walk away from deals that go south. So lenders may consider it primarily a reflection of the state of commercial real estate, and secondarily a reflection of those companies' ability to operate in a bad market, and a fairly minor update on how the debtor will behave in future deals (because they already expect this behavior). Home mortgage borrowers defaulting is more unusual and may say more about the person, given that a high proportion of the population will hold onto their home even if the value of the home drops and the mortgage gets underwater. This expectation gets priced into the terms of the home loan. So an individual who's shown that they're willing to exercise the default option if the market turns has a different risk profile.
• ikiris 3y ago
  You can always just spin up a new entity if that's a problem, provided you have enough collateral to secure a loan. Credit rating really only is a people thing.