Who will finance the estimated $530 billion in commercial loans maturing nationally in next three years ?
So far the solution has been for borrowers and lenders to agree on short extensions that have been described as “extend-and-pretend” and “kick the can down the road.” In the early 1990s, as commercial real estate values fell, lenders took over many failed projects and discounted rent or sold the failed projects to buyers who discounted rent – all of which only forced down the value of viable competing properties.
To avoid falling values, the feds have got to instruct the banks to be flexible. Otherwise, market values will plummet.
In August, the Obama administration extended a bailout program to help the sector. Lenders are only delaying the inevitable and banks will have no choice but to clean up their books, breaking the impasse between buyers and sellers over values. Read more.