The Mortgage Bankers Association — the experts on finance and borrowing — are losing their national headquarters due to a poor understanding of finance and imprudent borrowing.
Irvine Home Address … 1 NATIONAL Pl Irvine, CA 92602
Resale Home Price …… $798,000
{book1}
Settle down, raise a family, join the PTA
Buy some sensible shoes and a Chevyrolet
And party 'till you're broke and they drive you away
It's OK, you can dare to be stupid
Take some wooden nickles
Look for Mr. Goodbar
Get your mojo working now
I'll show you how
You can dare to be stupid
Weird Al Yankovic — Dare to Be Stupid
Stupid is as stupid does, observed Forrest Gump; the Mortgage Bankers Association is undeniably stupid.
How does an industry group most attuned to the mortgage markets and the implications of debt on the economy put $90,000,000 into a headquarters building in 2008? Either the Mortgage Bonehead Association completely missed the housing and commercial bubbles, or they are reckless and unconscionably stupid; ignorance or stupidity are the only two options.
I imagine the people who made the decision believe they were victims of circumstance. As David Lereah noted while covering up his own incompetence, "the subprime [mortgage] market blew up, and that has substantially inhibited lending. It was a monkey wrench that was thrown in; no one would have predicted it two years ago, no one." Sure, no one….
Mortgage bankers group sells D.C. offices to Bethesda company
Even the pros are taking a beating. The Mortgage Bankers Association, its membership expert in real estate, sold its $90 million headquarters in downtown Washington on Friday for $41 million.
The three-year-old, 10-story building at 1331 L St. NW — built just before the office market soured — was bought by the CoStar Group, a commercial real estate information firm that plans to move its headquarters from Bethesda to the District. The city, which has been negotiating with CoStar for several months, offered the company a $6 million break on its property taxes to lure it from Maryland.
A greater than 50% decline in price in a little over one year, and it required government assistance. Fail!
The sale comes as commercial real estate troubles are rapidly multiplying in the Washington area. At least 20 percent of commercial properties in the region are worth less than their mortgages, experts say, compared with less than 1 percent before the recession.
The Mortgage Bankers Association moved into the building in 2008 just as the real estate market was crashing, and ended up paying millions of dollars more when interest rates rose. Moreover, the leasing market slowed considerably and the association had trouble getting other tenants into the 168,000-square-foot building.
The industry lobbying group has struggled financially in recent years, as the market collapsed and lending dried up, with members dropping out as they lost their jobs. Its membership fell to 2,500 from 3,000, officials said in 2008.
Did their ARM blow up? There is a striking parallel between the behavior of the Mortgage Bonehead Association and the boneheaded borrowers who they served. Remember Dean Baker from No Housing Market Bottom?
"It's a little bit of irony that in the middle of the mortgage crisis brought on by the bad lending practices of many members of the Mortgage Bankers Association that they got caught up in the same problem," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group.
Irony? Schadenfreude? LOL funny?
Irvine Home Address … 1 NATIONAL Pl Irvine, CA 92602
Resale Home Price … $798,000
Income Requirement ……. $166,176
Down Payment Needed … $159,600
20% Down Conventional
Home Purchase Price … $348,500
Home Purchase Date …. 4/21/1999
Net Gain (Loss) ………. $401,620
Percent Change ………. 129.0%
Annual Appreciation … 7.8%
Mortgage Interest Rate ………. 5.05%
Monthly Mortgage Payment … $3,447
Monthly Cash Outlays …..….… $4,840
Monthly Cost of Ownership … $3,650
Property Details for 1 NATIONAL Pl Irvine, CA 92602
Beds 4
Baths 2 full 1 part baths
Home Size 2,530 sq ft
($315 / sq ft)
Lot Size 7,614 sq ft
Year Built 1999
Days on Market -1
Listing Updated 2/12/2010
MLS Number S605281
Property Type Single Family, Residential
Community West Irvine
Tract Trad
.. .. .. .. . Located at the end of a Cul De Sac with an Extra-large front yard and a pool size Backyard .. .. .. .. Formal Dining Room …. Separate Family Room with Hardwood floors and Fireplace .. .. .. Gourmet Kitchen with Center Island, Corian Countertop, Hardwood Floors and Upgraded stainless Steel Appliances . . . . . . Breakfast Nook . . . . . . 4the Bedroom is being as an office/Den . . . . . . Light and Bright .. . . . . .. Ready to Move in..
I enjoyed the unintentional art of this photograph. Notice how the books and file boxes in bookshelf behind the table incorporates the most striking colors in the van Gogh print on the wall.
In addition to LOL/Schadenfreude I’d add chutzpah to the list…this is from the WSJ article a week or so back on the same story
“John Courson, chief executive officer of the trade group, declined in an interview Saturday to say whether the MBA would pay off the full loan amount. “We’re not going to discuss the financing,” he said. A spokeswoman for the MBA added that the MBA has reached “an agreement with all relevant parties” regarding the outstanding amount on that loan but declined to provide any details.”
In an interview late last year, Mr. 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.
At first this story made me laugh. It also burns me that they did the same thing and are asking other people to tough it out instead. Meanwhile they are about to bail out of the property instead of toughing it out.
I wonder what message this will say to the family, friends, and children of the Mortgage Broker’s Association. Perhaps at this point the public’s opinion of them can’t possibly get lower.
Scott thanks for finding it a week ago. This is a really funny story.
MBA is saying “mail in the keys” and “just walk away”…like that gay dude with the face mask in The Roadwarrior.
“In an interview late last year, Mr. Courson said he believed mortgage borrowers should keep paying their loans even if that (no longer seemed to be in their economic interest).”
Not completely true. Some mortgage loans are NOT non-recourse loans which means that borrowers are STILL stuck/responsible with the residual loan amount. It all depends on the state which the mortgage was originated from and what kind of mortgage loans (i.e. primary, secondary, HELOC).
Telling people to walk away without disclosing this is just purely irresponsible. It’s as irresponsible as those that tout Alt-A and subprime loans to unsuspecting fools/knife-catchers/etc.
The buyers probably got some sweetheart shared loss kickback deal from the gub’ment too.
The featured house made me chuckle:
Bought in 1999 for 349K
11 years later, it’s a “steal” at 798K
Please God, let this nightmare end!
I feel like going nuts. I am seeing listings for homes that were recently purchased, where the listing price is less than the recently closed price. These homes are REO, but I don’t understand what the circumstances are that result in tis. Does anyone have a good explanation why this would be?
I know that these homes are not in Irvine, but here are two examples:
http://www.redfin.com/CA/Rancho-Santa-Margarita/57-Paseo-Primero-92688/home/5657407
http://www.redfin.com/CA/Aliso-Viejo/89-Vellisimo-Dr-92656/home/5796893
I agree Dirk. I am seeing the same when I place an offer on a REO or foreclosure house they are telling me to be at List Price or higher because there are multiple offers. I don’t know whether to believe them or not. My cynical side says they are fictitious offers attempting to keep the price offers higher.
So it might not be ethical, but if they don’t get multiple bids and the offer they want, they could in theory pull the listing and relist later?
If the house is an REO, it is quite likely that the price of the last “sale” is complete fiction. That is, the act of foreclosing is technically considered a “sale”, and a price needs to be recorded for all sales. The sale price for such is fairly random and can be wildly high or wildly low. A frequent figure is the amount owed on one of the loans. This could be below market value if the house had multiple loans, or above market value if it was the primary loan. Frequently, but not always, these “sales figures” have non-round numbers, like $496,377 as opposed to something like $496,000. Redfin has recently tried to remove those “sales” from their listings completely, although I would prefer that they would keep them and mark them clearly as the bank taking the property back.
Huge win for CoStar
Not only do they steal the building from MBA at half price but score a $6M break on property taxes.
@ Dirk I think the whole thing is nothing more than a scam on the american people. There are no safeguards, where are the LAWS protecting the people? Where are the laws that require full disclosure? Instead, you are getting sweetheart deals for multiple properties for chump change. This is after the banksters kick the loan mod can through the federal welfare line in order to bilk the taxpayers of money while they foreclose on Joe 6-Pack.
The shadow inventory itself is indicative of the flat out fraud going on. People bitch, whine, and complain that a PERSON might get a principal reduction, so instead, the banksters kick FAMILIES out of homes, foreclose, keep everything sealed, and then sell the home at a 30-40% discount to their “business partners”. Most of these loans are covered by the TREASURY which re-imburse 80-95% of the “loss”.
People, WE are getting screwed and everyone is so worried about their “neighbor” getting a principal reduction, they would rather have FRAUD going on that rewards the few and corrupt, which feed and control the bubble AND make YOU AND I pay for it.
See why I’m pretty negative towards the intelligence of most of our country? I’ve seen it happening for a while now.
I have an idea on principal forgiveness/reduction.
Only the principal loan (1st) should be reduced to the current value of what the bankster could sell it for.
HELOCS, 2nd’s should only be wiped if the owner can PROVE 100% (receipts/bank/business transactions) that all the money went directly into the house. If any of the money was used for other puprose, you would be required to continue to pay the debt or surrender the home.
The prudent and hard working should be protected. The foolish and greedy should suffer the normal consequences of forfeiture and even collection.
So much for the ‘ownership society’.
Not at all! It’s just that we weren’t told the real meaning of “ownership society.” It means, once you buy a home, the banks own your ass.
Infuriating!! IR, once again, thank you for finding this and posting it. It’s just frustrating beyond belief that these types of deals go on and no one in Congress, no Attorney General, nobody in any position of power does anything about it. It just says to me that our “leaders” either don’t know what’s going on, or don’t care. Either way, they are NOT doing their jobs.
Oh, and BTW, for me, your entry yesterday was the most illuminating post in a long time. I understood intuitively that the price of land is quite sensitive to home values, for the reasons you described, but when you put the numbers in there, OMG, it took my breath away. I feel like I now understand an important driving force for home values in Irvine to stay up in the stratosphere.
IR,
“Either the Mortgage Bonehead Association completely missed the housing and commercial bubbles, or they are reckless and unconscionably stupid; ignorance or stupidity are the only two options.”
You’ve left out a fourth option, walk away and leave the taxpayer holding the bill. They’re not so stupid and short-sighted after all.
Then the banksters and RE developers are getting principle reductions, they’re called essential. When the Joe 6-Pack get one, it called a moral hazard.
End the welfare for the banksters. The schemes of the federal govt and FEDS are repeats of the Great Depression. Time to bend over for another round.
“How does an industry group most attuned to the mortgage markets and the implications of debt on the economy put $90,000,000 into a headquarters building in 2008?”
I expect to see very complicated deal with a lot of money transfers, fees and cashbacks. In other words, pure and simple embezzlement.
Wow thank you for this post!
Gulp gulp gulp – drinking the Kool Aid…
Drunk on their own Kool Aid.
Don’t worry, the taxpayer will be on the hook for their rehab proram. Like was said above, why are there no investigations, inditements, charges pending for all this fraud? People really couln’t have been this stupid.
Thanks IR. Sweet post, good to see they are not doing hwat they consider the “moral good” that they tried to push on us.