Pretend and Extend

Extracted Attributes

• Key Risks

  Regulatory risk, reputational risk, credit misallocation, and financial fragility

• Definition

  The practice of extending loan maturities or modifying terms to avoid acknowledging underlying credit deterioration or property devaluation.

• Target Market

  Distressed Office Market

• Primary Sector

  Commercial Real Estate (CRE)

• Economic Impact

  4.8% to 5.3% drop in CRE mortgage origination

• Alternative Name

  Extend-and-Pretend

Timeline

• The post-2022 economic environment triggers a resurgence of the strategy due to rapid market shifts and structural changes in property values. (Source: https://fourcv.com/wp-content/uploads/2025/08/01.What-Is-Pretend-and-Extend.pdf)

  2022-01-01

• The All-In Podcast (E165) discusses 'Pretend and Extend' as a primary tactic used by banks to manage the distressed office market during the rolling real estate crisis. (Source: Document fa6f8fa4-15ac-4405-9c29-3a4f4cfa393c)

  2024-02-09

• The Federal Reserve Bank of New York publishes Staff Report Number 1130, 'Extend-and-Pretend in the U.S. CRE Market,' detailing the impact on credit misallocation. (Source: https://www.newyorkfed.org/research/staff_reports/sr1130.html)

  2024-10-01

I'd Rather Pretend

"I'd Rather Pretend" is a song by Bryant Barnes originally released as the fourth track from his debut extended play, Vanity. The song blew up on TikTok and was later released as a remix featuring D4vd.

Web Search Results

• Valued Insights: CHAPTER 01: What Is Pretend and Extend?

  Pretend and extend refers to the practice of extending loan maturities, or modifying loan terms, rather than addressing underlying credit deterioration or property devaluation. The “pretend” component suggests that lenders may avoid acknowledging the full extent of potential losses, while “extend” describes the tactical decision to delay resolution through maturity modifications or workout arrangements. [...] Today’s extend-and-pretend behavior manifests in several forms, each reflecting different degrees of financial stress and strategic intention. The most straightforward approach involves simple maturity extensions, where lenders agree to extend loan terms for six to twelve months while borrowers pursue refinancing or property repositioning strategies. These extensions often include modified interest rates or additional collateral requirements but avoid fundamental restructuring. [...] The implications of widespread extend-and-pretend behavior extend beyond individual lending relationships to affect the broader commercial real estate finance ecosystem. For banks, the practice creates both regulatory and reputational risks that may compound over time. Regulatory examinations increasingly focus on asset quality and loss recognition timing, making it difficult to sustain artificial valuations or probability of default assignments that don’t reflect current market conditions.

• [PDF] VALUED INSIGHTS - Four Corners Valuations

  Defining the Phenomenon Pretend and extend refers to the practice of extending loan maturities, or modifying loan terms, rather than addressing underlying credit deterioration or property devaluation. The “pretend” component suggests that lenders may avoid acknowledging the full extent of potential losses, while “extend” describes the tactical decision to delay resolution through maturity modifications or workout arrangements. [...] However, the post-2022 environment has created new conditions that echo, yet differ from, the crisis era. Today’s pretend and extend discussions occur not in the context of systemic banking failure, but rather in response to rapid market shifts that have left fundamentally sound institutions managing portfolios of loans secured by properties whose values and cash flows have been materially impacted by structural economic changes. [...] Against this backdrop, the term “pretend and extend” has quietly re-entered the vocabulary of lenders, borrowers, and their advisors— not as an accusation, but as a description of an increasingly common response to market stress.

• Four Corners Valuations posted on the topic

  Valued Insights Pretend and Extend: A Deep Dive into Commercial Real Estate Lending's Hidden Crisis. CHAPTER 11. Multifamily: Are We Next? In today’s shifting commercial real estate market, understanding the impact of “pretend and extend” is crucial for accurate valuation and sound lending decisions. Valuation professionals must identify when loan extensions mask underlying distress, assess true asset performance, and provide transparent insights that cut through delay-driven reporting. [...] Valued Insights Pretend and Extend: A Deep Dive into Commercial Real Estate Lending's Hidden Crisis. CHAPTER 11. Multifamily: Are We Next? In today’s shifting commercial real estate market, understanding the impact of “pretend and extend” is crucial for accurate valuation and sound lending decisions. Valuation professionals must identify when loan extensions mask underlying distress, assess true asset performance, and provide transparent insights that cut through delay-driven reporting. [...] Valued Insights Pretend and Extend: A Deep Dive into Commercial Real Estate Lending's Hidden Crisis. CHAPTER 14. The Continuum of Clarity: Why Evaluation and Appraisal Are Not Opposites In today’s shifting commercial real estate market, understanding the impact of “pretend and extend” is crucial for accurate valuation and sound lending decisions. Valuation professionals must identify when loan extensions mask underlying distress, assess true asset performance, and provide transparent insights

• Extend-and-Pretend in the U.S. CRE Market

  We show that banks “extended-and-pretended” their impaired CRE mortgages in the post-pandemic period to avoid writing off their capital, leading to credit misallocation and a buildup of financial fragility. We detect this behavior using loan-level supervisory data on maturity extensions, bank assessment of credit risk, and realized defaults for loans to property owners and REITs. Extend-and-pretend crowds out new credit provision, leading to a 4.8–5.3 percent drop in CRE mortgage origination [...] Full Article Author Disclosure Statement(s) Matteo Crosignani I declare that I have no relevant or material financial interests that relate to the research described in the paper titled “Extend-and-Pretend” – Banks and Distressed CRE. Saketh Prazad The author declares that he has no relevant or material financial interests that relate to the research described in this paper. [...] + Educational Comic Books + Economist Spotlight Series + Lesson Plans and Resources Economic Education Calendar The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry. Staff Reports Extend-and-Pretend in the U.S. CRE Market Number 1130 October 2024 JEL classification: G21, E51, R33 Authors: Matteo Crosignani and Saketh Prazad

• Pretend and Extend, Redux - Bridgepoint Consulting

  # Pretend and Extend, Redux Several months ago I wrote an article about a banking phenomenon which goes by various names, but which I called Pretend and Extend. [...] No more. Many banks are Pretending and Extending “as long as it is good business.” The end result is a continuing virtual overhang of trillions of dollars of toxic assets and other loans that will have to be dealt with eventually. Hopefully, “eventually” will include a more robust economy. So, how goes the banking sector these days, aside from creative balance sheet and capital accounting? [...] We all just leave the loan on our books and pretend it is a good loan. We urge the borrower to take the loan somewhere else, knowing that there is no place to go. We might even threaten calling the loan. But in the end, we extend the loan.