Commercial real estate market is not expected to hit bottom for three more years, acording to industry experts. Owners of shopping malls, hotels and offices are defaulting on their loans at an alarming rate.

"The commercial real estate time bomb is ticking," said Rep. Carolyn Maloney, D-N.Y., who heads the congressional Joint Economic Committee.

Small and regional banks are facing the biguest  risk of severe losses from commercial real estate loans. Delinquency rates on commercial loans have doubled in the past year to 7 percent as more companies downsize and retailers close their doors, the Federal Reserve said.

The commercial real estate market's fortunes are tied closely to the economy — especially unemployment, which hit 9.5 percent last month.

As the crisis continues, consumers take fewer trips, which hit hotels. And consumers are cutting their expenses, which hit malls.

 Funding for commercial loans virtually shut down last year as the financial system unraveled. Industry executives say financing still is extremely difficult to obtain — even for financially healthy properties.

New construction projects have come to a virtual standstill — reducing tax revenue for local governments and fewer construction jobs, said Jeffrey DeBoer, chief executive of the industry group Real Estate Roundtable.

The commercial-property industry is "not going to turn around until consumers and businesses start spending money again," he said.

Total losses in securities backed by commercial-property loans could be as high as $90 billion in the coming years, according to Deutsche Bank analyst Richard Parkus Even more losses — up to $140 billion — are expected from construction loans made by regional and local banks, rather than those sold as securities held by investors.

"We believe the bottom is several years away," Parkus told lawmakers.

Earlier this year, the government launched a program intended to spur lending to consumers and small businesses. The program, known as the Term-Asset-Backed Securities Loan Facility, was opened to commercial real estate loans last month.

The effort, however, has struggled to get off the ground. In mid-June, investors passed on their first chance to buy newly issued securities backed by commercial real estate loans. Later this month, the government is expected to make the program available for existing commercial-mortgage securities.

Industry groups are now pushing for the government to extend this program through the end of next year and launch new government programs to support commercial real estate loans.

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