Falling real estate values will soon leave many businesses struggling to refinance mortgages, according to a report released Thursday by the Congressional Oversight Panel.
The February report pointed to $1.4 trillion in commercial real estate loans that will reach the end of their terms between 2010 and 2014. These cover retail properties, office space, industrial facilities, hotels and apartments and were issued during the previous decade under.
About half of these mortgagesare "underwater," meaning that borrowers owe more than their property is worth. Consequently, a significant wave of mortgage defaults may hit small- and mid-sized banks when the loan terms end. The results could affect every American, according to the report.
"Empty office complexes, hotels, and retail stores could lead directly to lost jobs," the report said. "Foreclosures on apartment complexes could push families out of their residences, even if they had never missed a rent payment."
While there are no easy solutions, the panel suggests that banks and the U.S. Department of the Treasury address this threat to the commercial real estate market, which could cause banks to lose $200 to $300 billion for 2011 and beyond, according to the report.