Commercial lending

Banking and credit union regulators encouraged compassionate treatment of customers in Hawaii communities hit by wildfires. They also vowed to grant expedited approvals of temporary banking facilities, be flexible in compliance matters and provide other support to financial institutions.

Moody's said higher funding costs, a potential decline in bank capital and growing risk in the commercial real-estate industry prompted many of the downgrades.

Lenders including Goldman Sachs Group Inc. and JPMorgan Chase & Co. have been trying to sell debt backed by offices, hotels and even apartments in recent months, but many are finding that tidying up loan books is no easy feat when concerns about commercial real estate have surged.

The Federal Reserve said that banks reported tighter standards and continued weak demand for loans in the second quarter, extending a trend that began before recent stresses in the banking sector emerged.

The companies have requested an extension of the floating-rate loan, which matured in July, according to a servicer report.

Several community banks noted an uptick in problem loans in second-quarter earnings reports. Small lenders should brace for more of this, industry observers noted.

The Wall Street giant has more than $14 billion of real estate investments, and it took a $1.15 billion hit during the second quarter from writedowns of those bets.

While multifamily late payments were flat, hotel properties continued to improve but office performance deteriorated significantly from the first quarter, the Mortgage Bankers Association said.

The bank's allowance for losses on commercial real estate loans jumped to $3.6 billion in the second quarter — up 64% from a year earlier. The negative forecast could portend trouble for smaller banks that have bigger exposure to the office sector.

Mayor Michelle Wu is offering hefty tax breaks to companies to turn offices into housing, the latest example of a city seeking to address the challenges of remote work hitting downtowns and a lack of affordable residences.