Back in 2007, we all thought there might be a real estate bubble about to pop. But most of America was still stupid and buying up real estate thinking prices would go up forever. Home ownership was the American dream, and we all wanted to own our own home. Even I was looking at properties (casually) and checking out interest rates in my area.
The Mortgage B
ankers Association (MBA), which is the trade group for scuba divers mortgage bankers, would have been perhaps the most optimistic about the future of real estate. They very much had a vested interest in you buying a home with a loan, and having you pay your bills on time. John Courson is the CEO of the MBA. The WSJ highlights the MBA’s stance on paying your mortgage:
(Courson) said he believed mortgage borrowers should keep paying their loans even if that no longer seemed to be in their economic interest. He said paying off a mortgage isn’t only a matter of personal interest. Defaults hurt neighborhoods by lowering property values, Mr. Courson said. “What about the message they will send to their family and their kids and their friends?” he asked.
Ouch. No questioning how he feels. But that’s how he feels about you, not how he feels about the MBA. See, in 2007, the MBA got into real estate themselves. They bought a $79 million building in Washington DC. They put just $4 million down, or 5% of the value, and financed the rest using a 30 year variable rate.
They planned to occupy 40% of the space and lease out the rest to businesses. Turns out real estate isn’t as easy as HGTV made it out to be. They only ever got to 50% capacity, including their office space. That just doesn’t pay the bills. So even though Courson told YOU to pay your mortgage even if it doesn’t make sense so as to keep property values up, the MBA will not be doing that.
They are hardcore underwater on this property. It’s so bad they had to sell for just over half the price they payed, $41.3 million. So much for keeping property values up right Courson?
A commercial real estate data house has purchased the building from the MBA. The MBA meanwhile has decided their interests would be best served by leasing. That’s right, the Mortgage Bankers Association can’t afford, and plans to avoid, getting a mortgage.
I really wish this development received more attention than it has. It’s perhaps the ultimate irony of the recession. Please pass this along, share it with loved ones. It’s a civic duty.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
