U.S. commercial real estate problems likely will continue in the first quarter and may lead to more bank failures in the coming year as a result, according to Sheila Bair, chairman of the Federal Deposit Insurance Corp.
Addressing the Commercial Mortgage Securities Association last week, in a widely reported speech, Bair said regulators expect banks to report higher delinquencies and charge-off rates for commercial real estate properties in the first three months of 2010.
Bair added that the commercial real estate woes could be the causes of more banks failing in 2010, whereas residential and commercial loan problems were more of a factor last year. The FDIC already has had to deal with four bank failures this year, after 140 in 2009.
She said commercial real estate-market participants need to help strengthen the financing system, including changes to the securitization process that result in a return to more prudent underwriting. She encouraged lenders to embrace the "lessons learned from this crisis."