The Next Mortgage Problem

The Next Mortgage Problem

motherjones.com

Could the mortgage on the building that once housed your local Circuit City be Ground Zero for the next financial crisis? A new report by Elizabeth Warren's Congressional Oversight Panel, which is in charge of monitoring the bank bailouts, says "maybe."

Warren's panel warns that a rapidly approaching "wave" of loan losses on commercial real estate (CRE) "could jeopardize the stability of many banks." That's because $1.4 trillion in CRE loans need to be refinanced between 2011 and 2014, and according to the panel "nearly half" of them are "underwater"—that is, the mortgage-holders owe more than the underlying property is worth. If the owners can't refinance, they'll probably default. That's bad:

When commercial properties fail, it creates a downward spiral of economic contraction: job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities.

(visit the link for the full news article)

[edit on 2/11/2010 by iMacFanatic]

I know some of you will dismiss this because it comes from Mother Jones but that is mighty short sighted...they go good work...better than many of the mainstream media do...besides they are merely reporting this and I would put money down that you will not hear about from faux or any of the other news outlets.

The housing crisis is far from over or should I use the term of the article...the mortgage crisis.

The first to go were the bad loans...now thanks to the connected economic crisis and recession many good loans are going bad...and it is spreading into the commercial real estate sector...and since much of commercial real estate is locally financed it will eventually start dragging down the only good banks remaining...the community banks...

We are far from out of the woods yet. You would be fools to think that Wall street has an answer...but you would also be fools to think that either party has an answer either...

The leadership of both parties as well as the White House are over their heads in this...neither of them have any answers partly because both parties are part of the problem and partly because in all honesty the intellectual capacity simply is not there.

That light at the end of the tunnel is the headlamp of an oncoming train and before all is said and done it will make the great depression seem like a bump in the road.

motherjones.com
(visit the link for the full news article)

[edit on 2/11/2010 by iMacFanatic]

Too bad no one is interested in this...unlike illuminiti or aliens this is real and it is affecting us all and will do so for years to come.

sadly, this is being kept quiet by the banks and the media and the general public is so fed up and their senses so dulled by all the banking issues that, I fear, they don't realize the severity of this.

This problem dwarfs the last mortgage crisis as it will put an even bigger strain on the banks and the federal government might not have the means to bail them out.


again.

reply to post by Crakeur

It is things like this that makes a tight regulation of banks and financial institutions an absolute necessity.

What I fear is that this economy is going to continue staggering for the next few years and that along with a refusal to do either anything about banking or health care costs will dovetail into the pending social security/medicare/medicaid disaster...and well...

the whole damned house of cards will collapse and the end result will make the great depression will look like cupcakes.

reply to post by iMacFanatic


we're certainly moving along that path.

there's little that can be done to stop the impending commercial real estate crisis. the banks lent money they didn't have on properties that were way over valued. they packaged the crappy loans and sold them, just like they did with the home loans.



karma is about to kick the banks in the stones, yet again

60 Minutes did an episode on this issue months ago, warning of the looming crisis set to hit the beginning of '10. I wonder how many people paid any attention? We are about to see the second wave. Wild ride isn't over yet, hang on...

reply to post by Crakeur

Its not the banks I am worried about...they have made their bed...let they lay in it...its the rest of us who will end up getting screwed...and to add insult on top of injury...without even so much as a kiss first.

Before all is said and done we will see the elderly, our parents and grandparents...sleeping in the streets. AND we won't be able to help them because we won't be far behind them.

[edit on 2/11/2010 by iMacFanatic]

reply to post by Crakeur


You're absolutely right and it makes sense. There are massive numbers of commercial real estate that is based on the residential marketplace. Hardware, lumber, plumbing supply, ect. When the residential marketplace dumps, these folks can't make the payments on their commercial property, much of which was greatly expanded during the residential boom.

Ancilliary commercial places, e.g. retail geared to the residential marketplace are in a similar position.

When you're selling your house for less than the loan amount and significantly under what you paid for it, you don't fancy it up. You sell it as is to get out from under it and those kinds of businesses take a beating.

Revolution is coming to this country and I expect it before I die.

BUT it won't be what the hard right or the tea party is rooting for...no it will be a French or Russian revolution style uprising that will tear down the entire old order.

It will get bloody.

[edit on 2/11/2010 by iMacFanatic]

the funny thing is, these banks are also defaulting on loans.

morgan stanley is abandoning some massive office space on the west coast and walking away from the hundreds of millions in debt they owe on it. meanwhile, our wonderful president is telling homeowners that the moral thing to do is suffer thru the payments if they can, not walk away.

if a person owes more on his home than it's worth, the smart move is to walk away but the banks and our government are tellings the opposite.

if a business deal is bad and the debt isn't equal to, or less than, the value of the property, they walk away.

what's good for the goose is not good for the gander.

Well, we know the banks are 'too big to fail'. The government doesn't have the funds to bail them out again. QE must be on the cards or more debt will have to be sold to SA and China. The question is will they buy them?

Any yes, iMacFanatic, your point about illuminati, aliens and body scanners really does show just how little even the supposed 'informed' people really know.

Quite true, I've been following the CRE market for months now. Pretty much all the indicators are bad. the housing mortgages that reset in the next few months will drage down a lot of banks because these are the "good" mortgages gone bad due to job loss.

www.allbusiness.com...

Real estate industry experts expect financial and real estate markets in the United States to bottom in 2009 and then flounder for much of 2010, with ongoing drops in property values, more foreclosures and delinquencies, and a limping economy that will continue to crimp property cash flows, according to the Emerging Trends in Real Estate[R] 2009 report, released last week by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP.

"Commercial real estate faces its worst year since the wrenching 19911992 industry' depression," conclude industry experts interviewed for the report, which projects losses of 15 percent to 20 percent in real estate values from the mid-2007 peak. "Only when property financing gets restructured will pricing recorrect so we can find the floor; and this transition could wipe out companies and people," says one respondent interviewed for the report.

Now in its 30th year, Emerging Trends is the oldest, most highly regarded annual industry outlook for the real estate and land use industry and includes interviews and survey responses from more than 600 leading real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants.

The G7 meeting last weekend was supposed to result in plan for regulating banks.

Didn't happen.

But suddenly, the G7 countries are all moving to regulate and control the internet.

The Internet is the new Press - and we have a right to Freedom of the Press, and to Freedom of Speech on the net. But that's being taken away through controls and regulations? But the banks are not being controlled and regulated, even though they ripped us off big time in full public view?




As Crakeur pointed out - banks are just walking away and defaulting on their loans, but ordinary people are being told not to do it. ...What's with that?

I saw that 60 Minutes show and I have been waiting for the rest of the mainstream media to pick up on it but they haven't....the only places I have seen it are on progressive/liberal and left websites like Mother Jones...

The conservative/right wing and GOP websites that I have seen are more concerned with blaming Obama for everything from erectile dysfunction to bad breath to flatulence.

Originally posted by iMacFanatic
Revolution is coming to this country and I expect it before I die.

BUT it won't be what the hard right or the tea party is rooting for...no it will be a French or Russian revolution style uprising they will tear down the entire old order.

It will get bloody.

I wish I could say this post was complete nonsense. I don't know if I find this disturbing or exciting.

As US banks are very good in spreading their wisdom... This will be felt all over the world. Now if you ever think why anyone would like to start a war, or fake an alien invasion. A question that realy comes to my mind.
But some more hits like that mite collapse not only banks.
All our economies world wide are based upon one thing money equals a value...
And if that is not true in big deals small deals go absurd as well.
That then leads to a new start, throw the old currencies away and start over. But who would trust that? same old same old. Here in Germany banks do the same stuff they did before. and I fail to see an end to all that greed. and without that.
boom, question is just when will it happen?
In ex Russia most of the loans where taken out in Euro and are now unpayable in the local currency, there goes the next one.
Thinking about that we would need a new world order, but are those not the guys who earned most on this one?
but really how do we go about when there is no worth in money?

Is a reason why banks will keep the real state bad news on commercial properties quiet, is due to the increasing anger and dissatisfaction going on with the working class and tax payer, people are tired of bad news.

Polls are showing that people are just too fed up with the way the government is trying to fix the financial crisis and job loses.

reply to post by marg6043


If this cycle continues there will be no job growth....and just when the government will need to be spending money...it won't be there and everyone will be crying why won't the government won't do anything totally ignorant of the fact that the failure of to both raise taxes and curb spending has left it hamstrung.

You can only cut taxes for so long before the whole system breaks down...

and if you think taxes don't figure into this you are blind.

Understand this...if banks are collapsing and not lending and businesses aren't growing then the only one left to spend any money to try and stimulate growth is the government and if they can't

You are screwed.

I've read several articles on the second mortgage meltdown and it's pretty scary.

All those strip malls that got built but now can't keep tenants.

All those office buildings that have vacancies.

Mortgages still need to be paid and when one of those items goes belly up it's bad for whoever is holding the paper.