And here I thought it was immoral to strategically default:
Like millions of American households, the Mortgage Bankers Association found itself stuck with real estate whose market value has plunged far below the amount it owed its lenders.
But the trade group for mortgage lenders is refusing to say exactly how it extracted itself from that predicament.
On Friday, CoStar Group Inc., a provider of commercial real estate data, announced that it had agreed to buy the MBA’s 10-story headquarters building in Washington, D.C., for $41.3 million. The price is far below the $79 million the trade group says it paid for the glass-walled building in 2007, while it was still under construction. The price also is far below the $75 million financing that the MBA received from a group of banks led by PNC Financial Services Group Inc. to finance the purchase.
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.
Indeed, what about the message?
Pretty clear to see what went on here. The MBA was taking a bath on its headquarters, so they short sold it and walked away from the financing. It was a rational decision based on their own economic interest. Nobody could blame them from a business standpoint.
My favorite part of this is the MBA spokesman saying that their membership “concluded that the trade group shouldn’t be in the business of owning real estate.” Well, yes, because they’re so unreliable!