Commercial lending

Major efforts are underway to eliminate discriminatory practices in property valuations.

In a policy proposal published Tuesday, Fed staffers called for supervisory changes to accommodate banks with commercial real estate loans still reeling from COVID.

Banks including Wells Fargo, Bank of America and JPMorgan Chase have pulled back on financing for offices and other commercial real estate following a record burst of lending in the first half of this year. 

A new group called MoreThanFair aims to establish the lines between fair and unfair lending, to set best practices for the use of AI in lending and to lessen the stigma of fintech lenders.

BofA has launched two programs, one focused on increasing homeownership for Black and Hispanic Americans, and the other on small businesses owned by women and minorities that buy commercial real estate in federal opportunity zones.

Bank lending activity grew at a strong clip in the second quarter and continues to expand. Yet rising interest rates and recession concerns could hamper future growth.

The agency acknowledged that loan performance in the sector has been strong, but cited several reasons to think that might change, including rising interest rates, the effects of inflation and uncertainty about the future of work and commerce.

Most banks’ interest income will rise following the Fed policy shift. But the rate increase also boosts the likelihood of a recession that could hurt borrowers and drive up loan losses.

The American Bankers Association’s credit conditions index fell sharply, as economists foresaw dampening loan demand. The weaker outlook lines up with major bank CEOs’ increased worries over a possible recession.

As inflation increases, more companies are shifting to remote and hybrid work to get their costs under control. Landlords could face rising vacancies and tumbling revenue, leaving them behind on loan payments.