Filed under: Economic data, Housing, Federal Reserve
The Washington Post reports that the Mortgage Bankers Association (MBA) is getting what it feels is a raw deal on a mortgage for its Washington headquarters. Boo hoo! The MBA is buying a building there for $100 million, but is paying a higher interest rate on its mortgage as its income declines and the leasing market is slow leaving it with no tenants for the building.
This couldn’t have happened to a nicer association. After all, the MBA encouraged people to take out subprime mortgages — many of which went bad. Despite the Fed’s rate cuts from 5.25% to 2.25% mortgage interest rates are up thanks to bankers’ fear of lending. And the resulting economic slowdown is making it harder for the MBA to find tenants for its building.
Let’s survey the damage to the MBA. First, its membership has declined 17% in the last year and it predicts a 10% to 15% decline in revenue as a result. Bankers are making the MBA put up about 10% more of a down payment than it had planned and the lack of tenants has moved its lender to increase the financing costs slightly. Perhaps there’s justice in the universe. If not, at least MBA’s predicament is giving it a taste of its own medicine.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
Entries (RSS)