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Mortgage Bankers Association Short Pays own Building, buyer Flips For a Profit

Another slap in the face of the Mortgage Bankers Association.  Back in February 2010 I noted an article in the Wall Street Journal reporting that the Mortgage Bankers Association was selling their new building for a big loss.

Mortgage Bankers Association Sells Headquarters at Big Loss

Well, you guessed it, the buyers of the building have now resold or Flipped it for a nice profit.  This is proof that life is more bizarre than television.  To refresh your memory this was a glaring testimony to the hippocracy of the Mortgage Bankers Association and its President John Corson who just a few months earlier had done his best to guilt trip mortgage owners to keep paying on their mortgages even if they were grossly underwater as this was the right thing to do:

In an interview late last year (2009), 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.

Obviously a clear case of do as I say not as I do.  It disgusts me at the media bites and taking advantage of less knowledgeable home mortgage holders who don’t know or take the time to get educated about the industry.  To intentionally cast dispersions and guilt on their personal integrity, sense of responsibility, personal morals and accountability when you have none yourself is infuriating.  Consumers who are upside down on their mortgages, especially way upside down must educate themselves and make decisions based on reality.   In reality business and corporations approach real estate as it should be viewed – a business decision (“economic interest”).  If the numbers don’t make sense business’ make no qualms of breaking a mortgage in the best interests of its profitability and if publicly held its shareholders.  This is a common practice and often gives them leverage to renegotiate their terms vs. walking away altogether.  I do not advocate playing the victim or not taking any personal responsibility for ones circumstances but you have to make sound decisions based on ALL the FACTS.  Yes there is plenty of blame to go around for this whole banking melt-down however the banks and financial services firms created this themselves.  Consumers played willing victims by taking out the mortgages and re-re-refi’s being tossed around like candy at a parade to anyone who showed up, but no one had a crystal ball to see into the future and what would result.  There absolutely needs to be better regulation and more transparency in the financial industry.  Everyone must educate themselves and not be deceived or taken advantage of (again).  Of course not every consumer was innocent but I suspect the majority didn’t jump into crazy risky loans intentionally expecting to default.  Consumers, like the professional bankers, lenders, underwriters, insurers actually wanted the same thing – the security of their own home and to make a profit be it by leveraging to pay off debts and/or buy additional properties hoping for appreciation and potential rental cash flow.  The American Dream.

OK, I’m getting off my soap box for now.  The moral of the tale is to get educated.  Surround yourself with advisors who can tell you how things really are without all the emotions and know your options.  Talk to the bank, talk to the attorneys, investigate the pro’s and con’s of loan modification, short sales, deed-in-lieu, bankruptcy, etc.  Then once you are armed with knowledge you can ACT in your best interests. As corporations have responsibilities to their shareholders, consumers have an equal if not greater responsibility to their families.  Should one stay in an upside down mortgage for potentially the major term of the loan with little or no equity, paying the mortgages to the bankers so they can enjoy their life and potentially forefit opportunities for your own family such as vacations, college and subjecting your kids to support you because you don’t have anything saved for retirement.  We know what the Mortgage Bankers would, ah did do (not what they’d say).   Guess they make mistakes too.  Read on and see if you can spot the irony had the MBA followed their own advice.

Here’s the rest of the story (sorry Paul Harvey).  Sweet testimony to entrepreneurship and real estate investing.

From the New York Times
FEBRUARY 4, 2011, 10:36 AM

Mortgage Group’s Old Building Flipped For a Profit

When the Mortgage Bankers Association bought a state-of-the-art office building five blocks from the White House in 2007, the industry trade group thought it was a wise investment.

It was — just not for the Mortgage Bankers Association.

Last year, the trade group sold the building at a huge loss. On Thursday, the new owner flipped the property for a hefty profit.

The mortgage group never envisioned such a debacle.

“We came to the inescapable conclusion last year that owning our own building was the smartest long-term investment for the association and it is only right that the national association for the commercial and residential real estate finance industry owns its property,” Jonathan L. Kempner, the former chief executive of the mortgage group, said in 2008 after moving into the 170,000-square-foot building.

Then the real estate market crashed, causing thousands of property owners to sell buildings for less than their mortgage – including the trade group for mortgage lenders. The group, according to news reports, had briefly fallen on difficult times after struggling to find tenants for its building and losing some 600 dues-paying members in the wake of the mortgage meltdown.

At the height of the mortgage bubble in 2007, the mortgage group bought the newly constructed glass tower for $79 million, with the help of $75 million in financing arranged by PNC Bank. Less than three years later, the Mortgage Bankers Association sold the building for $41 million.

It’s more than doubled in value since then. The real estate data firm CoStar, which last year bought the trade group’s building at 1331 L Street, flipped the property on Thursday for $101 million, generating a $60 million profit. CoStar sold the property to GLL Real Estate Partners, a German property-fund manager.

CoStar, which occupies the majority of the office space in the building, is staying put. Unwilling to abandon the 10-story building’s panoramic skyline views or the allure of its Italian marble-floored lobby, CoStar negotiated a long-term lease with GLL.

“The opportunistic acquisition of this building for our headquarters office was part of our larger strategy to create value through our occupancy of the building,” Andrew C. Florance, CoStar’s founder and chief executive, said in a statement. “This sale will enable us to unlock the value of this formerly distressed property and provide an attractive return on our investment.”

The deal is scheduled to close later this month.

As for the mortgage group, they are now among the ranks of the nation’s renters. The group relocated to 1717 Rhode Island Avenue, just a few blocks from its former home.

The move was necessary, the group’s new chief executive, John Courson said, because staying in the building would have been “economically imprudent.”


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