A plaque remaining from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem.

Above, a 1934 plaque from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem. Discarded as trash in 2006.

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Entry from April 04, 2010
Extend-and-Pretend

"Extend and pretend” is what a lender might do with a “toxic” asset, such as a mortgage. A bank doesn’t want to foreclose and take possession of the property, so it often applies an “extend and pretend” strategy with the homeowner, pretending that smaller or late (extended) payments are better than none. “Extend and pretend” (E&P) has been used in the financial community since at least July 2009.

A similar term (also from mid-2009) is “delay and pray”


Decline and Fall of Western Civilization
Wednesday, June 24, 2009
CRE: “pretend and extend”
via david bodamer at clusterstock:

Aside from the discussions of government policy, there was a consensus that banks largely are trying to delay the days of reckoning when they will have to recognize losses and writedowns by extending loans as much as they can. The phrase “pretend and extend” came up more than once, as in, banks are pretending that borrowers can pay off their loans and therefore granting extensions to them. However, no one thinks that can go on forever. As Barone described the process with dealing with troubled borrowers, “Banks are granting extensions at low rates and hoping the economy recovers quickly enough to get the loans performing. But things have gotten worse instead of better.” Lynn agreed that banks “are playing for time” and waiting for a value floor. But right now no one really knows what commercial real estate values are because the volume of investment sales transactions is too low to truly draw conclusions. All anyone knows is that cap rates are much higher than they were at the peak of the market in 2007–perhaps as much as 300 to 350 basis points. But by not foreclosing on troubled loans, all this process is doing is keeping values of commercial mortgages at “unsustainable levels.” At some point, the losses need to be realized. So panelists expected the long awaited boom in distress to materialize in 2010.

Retail Traffic
Wary Of Realizing Losses, Lenders “Pretend and Extend” (7/14)
Jul 14, 2009 1:02 PM, By Elaine Misonzhnik
Two new phrases have entered the commercial real estate industry lexicon in recent months: “Pretend and extend” and “A rolling loan gathers no loss.” Both witticisms describe an ongoing phenomenon in commercial real estate finance: as the level of distress mounts, lenders have been loath to seize properties from troubled borrowers.

Instead, in many cases banks are generously granting extensions or other modifications even in situations where it appears unlikely that borrowers will be able to pay back the loans.

Leveraged Finance News
Investors Fume as Banks “Extend and Pretend”
By Richard Kellerhals
July 16, 2009
As they attempt to recover from excessive losses, banks are finding it easier to buttress struggling companies they’ve underwritten deals for rather than allowing those companies to pursue other options, options that could benefit investors but result in further bank losses. This has created tension between the banks and investors, which some market participants say could boil over and result in lawsuits.
(...)
“We are going to call this phase the ‘extend and pretend’ phase in our economy,” said Bryan Marsal, co-founder of Alvarez & Marsal, a law firm specializing in bankruptcy and restructurings. This, he said, is when “you extend a company’s maturity—because it is going to default—and you pretend that business will come back or that leverage is going to come back.” Both banks and companies are trying to buy time rater than deal with the leverage, said Marsal, who was hired in September as the CEO of Lehman Brothers Holdings.

Dubuque (IA) Telegraph Herald
Sunday, July 19, 2009
‘Extend and pretend’ a bad banking trend
BY RACHEL BECK THE ASSOCIATED PRESS
NEW YORK—Japan’s economy was paralyzed for a decade as banks failed to deal with their troubled loans. That’s why it’s nothing short of stunning to discover some U.S. banks are doing the same thing now.

Despite all the tough talk out of Washington and Wall Street about how the U.S. can’t repeat what happened in Japan, the reality is that banks are granting extensions to borrowers in one key category, commercial real-estate loans, so they don’t default. It’s a bet that economic conditions will improve before the loans come due.

“They are kicking the can down the road, hoping things will be better soon,” said Barry Ritholtz, head of the financial research firm FusionIQ and author of the new book “Bailout Nation.”

This maneuvering is being called “extend and pretend” in financial circles, reflecting banks’ willingness to extend loan maturities because they believe—or hope-- rental rates and building values could come back to levels seen during the peak of the real-estate market in 2007.

GlobeSt.com
Last updated: July 20, 2009 12:21pm
Extend, Amend and Pretend
By Mark Scott
The underlying crisis in commercial real estate is growing below the radar. The new mantra for lenders is extend, amend and pretend. Why extend and pretend? Let’s look at recent history. In 2007, the Commercial Mortgage Backed Securities Market generated over $270 billion in loans. In 2008, the commercial real estate securitization market was less than $30 billion (11% of the previous year). In 2009, activity as of July is just $21.8 billion (Source: Commercial Mortgage Alert). Life insurance companies have also slashed their funding allocations to less that 20% of their 2006/2007 levels.

Google Groups: alt.gathering.rainbow
Newsgroups: alt.gathering.rainbow
From: rumpelstiltskin
Date: Sat, 01 Aug 2009 09:55:46 -0700
Local: Sat, Aug 1 2009 11:55 am
Subject: Extend and Pretend - real estate games by the banks

“Pretend and Extend” is the new buzzword. Here are a bunch of articles talking about it. Banks cooking the books in attempt to CYA.

The Real Deal
Lenders get more help with “extending and pretending” commercial mortgages
How long will banks be able to delay dealing with troubled loans?

November 01, 2009 12:00AM
By Catherine Curan
The new tax rules handed down by the Treasury Department in mid-September are prompting more lenders to employ already-popular “extend and pretend” and “delay and pray” strategies.

These darkly comic catchphrases, of course, are used to describe the practice of extending the maturity on troubled loans rather than working out a deal that would reveal just how little the debt is now worth. Those who follow commercial real estate say the federal government’s new regulations—which were designed to help facilitate the modification process for troubled securitized loans—give loan servicers greater leeway to extend loans.

Llenrock Blog
A New Meaning to “Extend and Pretend”
November 16th, 2009 | Author: Dave Jacobs
In the commercial real estate space, you likely by this time have heard the phrase “extend and pretend,” usually in reference to what a bank will do when faced with a non-performing loan coming due on their books.  Rather than foreclose and ending up owning an asset, which banks are not in the business of (nor do they have the proper asset and property management staff requisite to keep the asset from devaluing further over time), they would rather extend the term of the loan and allow the borrower to continue to try and turn the asset around. In the mean time, they will sit on there collective hands and pretend there is no impending doom in relation to the asset, or their portfolio full of similar problem properties.  After all, it is likely the borrower is more of an expert in how to fix the asset’s issues than the bank.

But after attending a brokerage conference last week that was full of investors of the four major food groups (multi-family, retail, office and industrial product), I think perhaps that there is a new phenomenon.  Banks may be extending and pretending, but investors are doing the opposite: Pretending and extending….as in their hopes and expectations for their assets, and the markets for them.

Seeking Alpha
‘Pretend and Extend’ Meet Brick Wall
by: Economic Disconnect February 23, 2010 | about: KME
(...)
Case in point; US States themselves have played “Extend and Pretend” (E&P) in regards to public finances for some time.

Gold Versus Paper
Thursday, March 11, 2010
Extend and Pretend in Action - California Dreamin’
Governments don’t want to tighten their belts like the private sector. They want to raise taxes and thus maintain the ability to keep their power, pay and benefits strong. The parasites are getting desperate and are preparing to squeeze too much blood out of their hosts. This will prolong our current economic depression and is a repeat out of the old cyclical play book. If you still have a private sector job, you are rich and should be punished severely.
(...)
America, as the world’s new deadbeat, has got “extend and pretend” down to a science it seems. Ignore the problems, keep borrowing more, and keep on spending no matter what. Because we all know that the economy is about to start booming again any second. And we all know that real estate tax revenues are about to skyrocket because home prices are about to shoot thru the roof and make new all-time highs. And we all know that consumers are about to go on mad spending sprees with money and credit they don’t have and can’t get any more. And we all know that China and Japan are just going to keep lending us an unlimited amount of money because we’re America, gosh darnit! 

Posted by Barry Popik
New York CityBanking/Finance/Insurance • (1) Comments • Sunday, April 04, 2010 • Permalink


"extend and pretend” what an interesting phrase. As an employee for a company that provides business loans, this term just hits the spot. Extending and pretending even if it has become gloomy that the borrowers will be able to pay back the loans.

Posted by dominic  on  04/29  at  02:48 PM

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