December 13, 2016
A group of traders in JPMorgan’s investment bank is underwriting real estate loans that might be too risky for JPMorgan Chase & Co.’s commercial bank group, or even unsuitable for bonds. The underwriting is financing large construction projects, with beneficiaries including Manhattan condominiums, and the American Dream mega-mall in New Jersey.
Traditional lenders have been pulling back from construction loans, as they carry larger risks. They also provide higher yields than a standard mortgage for an occupied building. JPMorgan traders are taking part in potentially lucrative projects, even as the commercial bank is being much more cautious about riskier property financing.
The activity is coming amid increased scrutiny of U.S. commercial real estate. Bank regulators have been warning of a potential bubble following property price surges past their 2007 peak.
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