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Just as the end of the housing crisis is far from sight, a new crisis begins. Commercial establishments are now beginning to enter the foreclosure situation. Malls in Georgia and Michigan are among the first to experience these foreclosures. Next in line are hotels in California and Arizona.
Analysts say that numbers are expected to double by the end of 2009. Commercial mortgages are paid over a period of only five to ten years, unlike residential loans where payments are not due until thirty years. The bigger amounts are due at the latter years for commercial establishments, that translates to the next couple of months for those which paid little amount at the start of their loans.
The commercial crisis has big repercussions. With businesses giving in to foreclosure, operations would stop, employees would be unemployed, taxes from employment would go down, and budget for government services would eventually decrease.
Adding to the dilemma is that investors are no longer interested in acquiring commercial foreclosures. Hence, banks refuse to provide these corporations with refinancing options.
Also, some banks have already sold mortgages to investors over the past few years which brings the situation out of their control.
Even worse, one of the last pieces of hope for these foreclosure-threatened commercial establishments has vanished. The US was supposed to shell out part of the $700 billion financial guarantee to redeem unsound assets from banks.
A recent announcement by Treasury Secretary Henry Paulson, however, declares otherwise. He said that the government does not anymore plan to buy problematic investments.
At the moment, the only piece of hope remaining for these businesses is a stable economy. They should start to expand and earn the trust of investors once again. Otherwise, there will be no seeing to an end to these foreclosure cases any time soon.
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