A year ago, the Mortgage Bankers Association was thrilled to sign a contract to buy a fancy new headquarters building in downtown Washington. Interest rates were low, the group’s revenues were steady and the prospects for quickly renting out part of the structure were strong.
But since then, the association has fallen on tough times as many of the subprime mortgages dispensed by some of its members proved dicey. Borrowers discovered the loans were more costly than they had anticipated. Foreclosures soared, and cheap, inexpensive credit dried up, slowing the economy.
The result: The trade group is about to find it harder than it imagined to pay its own mortgage.
Scheduled to close on the building in the coming weeks, the association will have to pay millions of dollars more than it would have a year ago when it contracted to buy the 160,000-square-foot structure — millions of dollars it is now less able to afford.
The brokers who engineered this mess earned my sympathy like Enron traders who yukked it up about shutting off granny’s electricity. If the association gets foreclosed and faces bankruptcy then an angel somewhere will get its wings.
I can spare a bit more for owners and sunny-day real estate agents because, though their behavior perfectly illustrates the defects among even educated consumers that fed the poisonous bubble (that’s why the NYT Magazine gave 5 pages to a chat in a taco chain), these guys seemed to think that they were doing, well, if not the right thing then at least only risking themselves. Reading them talk about interest-only ARMs the way I talk about an ATM withdrawal is like getting dispatches from another world – I understand that people somewhere think that way, but I’d never seen them in their natural environment before. It’s sad.