Today, Sen. Christopher Dodd (D-CT), Chairman of the Senate Banking Committee, released letters sent to Federal Reserve Chairman Ben S. Bernanke, FDIC Chairman Sheila C. Bair, OTS Acting Director John E. Bowman, Comptroller of the Currency Johhn C. Dugan, and NCUA Chairman Debbie Matz, requesting a report from each regulator on efforts to stabilize the U.S. commercial real estate market.
The letters noted the following troubling signs in the commercial real estate market:
Delinquency rates for commercial mortgages increased from 4% at the end of the third quarter 2009 to more than 6% in January 2010
Banks’ commercial real estate loan portfolios have deteriorated sharply and that more than $500 billion in commercial real estate loans will mature over the next few years
Nearly half of commercial real estate loans are “underwater” and losses are projected for 2011 and beyond
The letters also noted that these concerns were raised previously in a hearing of the Congressional Oversight Panel last month regarding the projected losses as a result of commercial real estate loan portfolio performance, as well as a speech by Chairman Bernanke regarding the poor fundamentals and the sharp deterioration in the credit quality of commercial real estate loans on banks’ books and of the loans that back commercial mortgage-backed securities.
Chairman Dodd requested an update from each agency on the steps taken to address the stabilization and what additional steps each plans to take.