Commercial real estate mortgages face problems

Commercial real estate market faces gloomy predictionsPredictions of an imploding commercial real estate market in the U.S. are hardly new. But almost all the previous gloomy predictions came from analysts or folks in the commercial real estate business. So, when the government's own watchdog for the Troubled Asset Relief Program says things could get a lot worse -- and I mean a lot worse -- in the commercial real estate market, you just have to sit up and take notice.

Speaking on CNBC, Elizabeth Warren said that 50% of ALL commercial real estate mortgages in this country could be "under water" by the end of this year. In what amounts to what is surely a model for understatement, she called this prospect a "serious problem."How serious? Well, besides half of all commercial real estate potentially being worth less than their mortgages in just a few months, Warren points out that something like 3,000 mid-size banks have what she calls "dangerous concentrations" of these ticking, toxic, time-bomb commercial mortgages.

Yep, she sure is right: This is a "serious problem."

Meantime, Treasury Secretary Timothy Geithner seemed to agree with Warren -- at least to the point of admitting that
"commercial real estate's still going to be a problem for the country."

But he went on to say, according to the A.P., that "we can manage the process."

Warren claimed that it might take three years to save commercial real estate from itself.

Absent from most of these discussions is exactly how this "serious problem" will effectively be dealt with.

Also, we've learned (or should have) from experience, that when government officials predict bad things, when they do happen they tend to be a lot worse than originally predicted. Remember the Obama administration's original prediction of where the nation's unemployment rate would be about now? The prediction was a lot lower than reality.

Which banks are most in danger?

Recently, asked the potentially provocative question: Which banks will have the biggest problems in what some estimate to be a $1.4 trillion crisis?

Using data from Audit Integrity, the website identified the following 10 banks -- which it says have "the most commercial real estate loans relative to available capital." In other words, the banks that may have the most to loose as the commercial market flips and flops like a dying fish.

They are, according to

Comerica with a CRE (Commercial Real Estate) loan value of $14.3 Billion
UMB Bank with a CRE loan value of $1.25 Billion
Regions Financial Corp with a CRE loan value of $28.3 Billion
Zions Bancorporation with a CRE loan value of $13.4 Billion
Marshall & IIsley Corp with a CRE loan value of $13.8 Billion
Wilmington Trust with a CRE loan value of $4.03 Billion
Synovus with a CRE loan value of $11.2 Billion
M&T Bank with a CRE loan value of $20.8 Billion
Wintrust Financial Corp with a CRE loan value of $3.39 Billion
New York Community Bank with a CRE loan value of $22.0 Billion

Yes, indeed: a "serious problem" is upon us---soon.

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years.
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