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While hundreds of thousands of residential mortgage defaults are leading to inevitable foreclosures and resulting in the demise of households across the United States, an equally devastating wave of destruction is now hitting commercial property owners as well.

In rough numbers, there are just over a trillion dollars in commercial mortgages owed to banks in the U.S. Recent predictions by several firms, reported by Bloomberg, say that defaults will soon rise to the highest levels since the savings and loan crisis of the early 1990's.

One basic, common denominator between residential and commercial defaults is the fact that the defaulted mortgage loans were based on inflated property values.

Who was more responsible for these over-valuations of the collateral backing all these defaulted mortgage loans? Was is the borrower, or was it the bank that was in control?

While the powers-to-be are quick to blame the borrowers for being in default, they are not so quick to call the banks on the carpet for their dominant role in hiring appraisers and approving the appraisals made.

But the banks, not the borrowers, are the ones getting the billions in bailout funds; despite the fact that their mistakes and bad decisions were just as bad, if not worse, than those of the borrowers.

In this manner, the banks are being awarded the opportunity to make money off the defaulted loans that go into foreclosure; as evidenced by the growing inventory of REO properties.

The borrowers (the American consumers and taxpayers), on the other hand, lose their property and their money - and maybe their families and businesses, too.

- Ed Smith, Publisher
The EHS Letter Manual