Mark to Market makes no sense for real estate holdings.
Mark to Market doesn’t value the assets on todays value - it values them on todays LIQUIDATION value which is essentially the foreclosure price.
It’s irrational and it is forcing banks to horde money to avoid being illiquid and having the short sellers start another feeding frenzy.
Mark To Market needs to be decoupled from real estate assets. It’s current interpretation is killing real estate and preventing recoveries in markets which could be going up right now if not for stupid lending policies.
The value of assets varies from moment to moment. Mark to market seems a reasonable basis for evaluation but it is not.
The revelation is that there is not adequate means to manipulate all the variables instantaneously arrive at a meaningful value.
In a declining market, there is the appearance of disaster when in actuality there is none.
The asset value is only real at the moment of sale.
BS
One regional bank is demanding fresh real estate values every six months. It’s a race to the bottom or zero which ever comes first.
” it values them on todays LIQUIDATION value which is essentially the foreclosure price.”
That’s all they are worth, they will keep going down for at least 2 more years.
Is the loan performing, or not? Is the borrower capable of servicing the loan until maturity without selling any of the real estate?
For commercial real estate, the answer to one or both of those questions is usually 'no', so then the loan is worth what the collateral is worth (minus liquidation and carrying costs).