Nationwide, at least $1.4 trillion in commercial real estate debt is expected to roll over during the next three years. Warren said that half of commercial real estate mortgages will be underwater by the beginning of 2011. A fifth of residential mortgages are underwater now, she said.
Unlike residential mortgages, which often can be paid over 30 years, commercial real estate mortgages typically must be paid off or refinanced within five years. Commercial properties mortgaged in 2005, 2006 and 2007, at the height of the boom, are reaching their maturity date. "Do the math on this," Warren said. "This is a significant problem."
Do The Math Indeed
There is a strong potential to see a thousand commercial real estate bank failures in the next couple of years unless Congress acts to bail them out. Bernanke is unlikely to lift a finger as his concern is for the big boys, who he will support at any and all costs.
Of course no banks should be bailed out, and two wrongs do not make a right. Thus, the correct decision is to let failed banks fail. The last thing we need is further bank zombification.
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