Real estate professionals call it “buy and bail,” acquiring a new house before the buyer’s credit rating is ruined by walking away from the old one because it’s “underwater,” or worth less than the mortgage. It’s an attempt to escape payments on a home whose value may never recover while securing a new property, often at a lower price with a more affordable loan.
“Making it possible to pursue people who do this particular kind of default would go a long way to addressing the buy-and-bail problem,” said Jay Brinkmann, chief economist for the Mortgage Bankers Association in Washington.
Sounds good, right? Keep up with your obligations, moral (and ethical) standards demand you do what you can to meet the commitments you made, right?
On Friday, CoStar Group Inc., a provider of commercial real estate data, said it had agreed to buy the MBA’s 10-story headquarters building in Washington, D.C., for $41.3 million. That is well below the $79 million the trade group agreed to pay for the glass-walled building in 2007, near the top of the property bubble, while it was still under construction. The price also falls short of the $75 million of financing that the MBA got from a group of banks led by PNC Financial Services Group Inc. for 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.
Tell ‘ya what John: I’m willing to listen to the Mortgage Bankers Association bleat about morals and ethical commitments when you honor yours, and not one second before.
Until then, here’s a big fat can of shut-the-%#ck-up – these homeowners who are underwater are in fact following the example that your firm VOLUNTARILY set for them.