October 31, 2009

U.S regulators on Friday encouraged banks to modify troubled commercial real estate loans, which are seen as a looming danger spot for the banking industry.The regulators issued guidance to financial institutions and said "prudent" loan workouts are often in the best interest of both the borrower and the bank itself.

"The financial regulators recognize that financial institutions face significant challenges when working with commercial real estate (CRE) borrowers that are experiencing diminished operating cash flows, depreciated collateral values, or prolonged sales and rental absorption periods," the policy statement said.The guidance came from the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp and the Office of Thrift Supervision.