Yesterday, the Congressional Oversight Panel (COP) released its February oversight report, “Commercial Real Estate Losses and the Risks to Financial Stability.” The report warns of an impending wave of commercial mortgage defaults similar to those seen with home mortgages that could overwhelm an already weakened economy and urges the Treasury Department and banking regulators to develop a plan to address the problem before it hits full-force starting next year.

According to the report, between 2010 and 2014, about $1.4 trillion in commercial real estate loans will mature, almost half of which are now under water. While this could affect all banks, the COP is most concerned about community banks because they hold a disproportionate share of commercial real estate assets. The report suggests several ways to address the problem, including injecting more TARP money into some of those banks, creating a government program to buy up some of the bad assets or creating a guarantee fund to absorb losses from the loans, but emphasizes that it is not advocating any single approach.