Commercial loan defaults loom

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CNBC reported Wednesday that by the end of 2010, about half of all commercial real estate mortgages will be underwater.

“They are [mostly] concentrated in the midsized banks,” said Elizabeth Warren, chair of the Congressional Oversight Panel. “We now have 2,988 banks, mostly midsized, that have these dangerous concentrations in commercial real estate lending.”

As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normal in 2010.

Sheila Bair, the head of the Federal Deposit Insurance Corp., agreed, adding that losses on commercial real estate loans are expected to be the primary cause of bank failures this year, which are likely to exceed the 140 collapses in 2009.