Friday, February 12, 2010

Imminent Wave of Commercial Foreclosures?

As part of the 2008 Troubled Asset Relief Program (TARP) Congress created the Congressional Oversight Panel to “review the current state of the financial markets and the regulatory system.” Yesterday, the COP (which is chaired by Elizabeth Warren) released its February report, “Commercial Real Estate Losses and the Risk to Financial Stability.”

In the report, the Panel expresses its concern “that a wave of commercial real estate losses over the next for yours could jeopardize the stability of many bank, particularly community banks, and prolong an already painful recession.” Commercial real estate loans include retail properties, office space, industrial facilities, hotels and apartments. A total of $1.4 trillion in such loans will require refinancing between 2011 and 2014, yet many of them are underwater and will have difficulty obtaining new loans. The report goes on to observe that the foreclosure of commercial properties creates “a downward spiral” of economic problems such as job losses, office and retail vacancies and local bank failures.

The report is here.

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