Mortgage crunch hits churches

Many of the churches involved share one of two characteristics.

1. They're nondenominational churches, so they're on their own when the mortgage becomes past due.
2. Like subprime home buyers, they had exotic mortgages either thrust on them, or dangled before them. (And, like many subprime buyers, they didn't read the fine print when they should have.)

You thought the housing bubble was bad?

Commercial real estate prices are already further off their peak than housing values, and pwith a turnaround even further out of sight.

Unlike housing, it wasn’t overbuilding, but too much money sloshing around the system, spiking prices in commercial real estate as investment.

Full recovery could be a decade away, in part because commercial real estate deals were sliced and diced and repackaged even worse than home mortgages.

More mall buildings to stay empty next year

Many retailers are retrenching for 2009, even if not extremely close to bankruptcy, especially if they have large outstanding lines of credit, I’m guessing.

That means some older malls where tenants have been vacating may have spots remaining vacant.

It also probably means that brand-new places, like Uptown Village here in Cedar Hill, suburban Dallas, where not all the store sights have been filled yet, may well also have sites remain vacant throughout the coming year.

Oh, and the 2005 bankruptcy law changes that got so many consumer activists riled? They affected the ease with which retailers can file, too, especially regarding real estate holdings. Per the Journal, bankruptcy attorney Lawrence Gottlieb saidonly two retailers have successfully emerged from bankruptcy proceedings since the 2005 changes.

For more and more retailers, like Linens 'N Things formerly here in Cedar Hill, that means liquidation instead of bankruptcy restart.

Xmas shop until you drop – and mall forecloses

And, you thought that bursting real estate bubble was limited to just subprime home loans?

Think again.

And, think again that this isn’t a Texas problem. Texas is listed as one of the top four at-risk states.

Defaults on mall mortgage payments could double or triple by the end of 2009. A number of hotels around the country could be in trouble, too.

“We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

As the story notes, that then means less in local property tax revenue, among other fallout.

And, as with home loans, who knows where the mortgages are actually at today. So, you could have malls being shut down, but with nobody to repo them, nobody to possibly buy notes and re-open the tenant stores, etc.

And, the bankruptcy of mini-mall/strip mall tenants like Circuit City and Linens ’n Things certainly doesn’t help matters.