Comment by trukledeitz

Has anyone here considered the cost of capital reserves required by the bank for holding this loan? Commercial loans used to be a 100% capital holding requirement, while HVCRE (High Volatility Commercial Real Estate) Loans carry 150% capital holding. So if a bank loans a building owner 100% of a 20 million dollar facility and it meets HVCRE requirements, the bank has to keep 30 million of capital in reserve for the chance of default. Even if the loan receives enough buyer downpayment or for some other reason becomes normal Commercial loan the bank has to hold 20 million in reserve capital for the loan. So you have to net the incentive of the cost of the capital held in reserve against the interest payment on the bank's balance sheet as an economic forcing against continuing to float the loan forever...