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Dean P
July 09, 2010, 11:28
Stolen from another web site
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Biggest defaulters on mortgages are the rich
Wealthy simply see loss of home as one bad investment and walk away

Peter DaSilva for The New York Times
A home in foreclosure in Los Altos, Calif., a city where the median home price is $1.5 million. by DAVID STREITFELD


LOS ALTOS, Calif. — The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars is seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

Five properties here in Los Altos were scheduled for foreclosure auctions in a recent issue of The Los Altos Town Crier, the weekly newspaper where local legal notices are posted. Four have unpaid mortgage debt of more than $1 million, with the highest amount $2.8 million.


Not so long ago, said Chris Redden, the paper’s advertising services director, “it was a surprise if we had one foreclosure a month.”

The sheriff in Cook County, Ill., is increasingly in demand to evict foreclosed owners in the upscale suburbs to the north and west of Chicago — like Wilmette, La Grange and Glencoe. The occupants are always gone by the time a deputy gets there, a spokesman said, but just barely.

In Las Vegas, Ken Lowman, a longtime agent for luxury properties, said four of the 11 sales he brokered in June were distressed properties.

“I’ve never seen the wealthy hit like this before,” Mr. Lowman said. “They made their plans based on the best of all possible scenarios — that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”

The defaulting owners, he said, often remain as long as they can. “They’re in denial,” he said.

Here in Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the country, several houses scheduled for auction were still occupied this week. The people who answered the door were reluctant to explain their circumstances in any detail.

At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives. At another house, the family said they were renters. A third family, whose mortgage is $1.6 million, said they would be moving this weekend.

At a vacant house with a pool, where the lender was seeking $1.27 million, a raft and a water gun lay abandoned on the entryway floor.

Lenders are fearful that many of the 11 million or so homeowners who owe more than their house is worth will walk away from them, especially if the real estate market begins to weaken again. The so-called strategic defaults have become a matter of intense debate in recent months.

Fannie Mae and Freddie Mac, the two quasi-governmental mortgage finance companies that own most of the mortgages in America with a value of less than $500,000, are alternately pleading with distressed homeowners not to be bad citizens and brandishing a stick at them.

In a recent column on Freddie Mac’s Web site, the company’s executive vice president, Don Bisenius, acknowledged that walking away “might well be a good decision for certain borrowers” but argues that those who do it are trashing their communities.

The CoreLogic data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind, especially when it comes to investment and second homes. Nor do they appear to be particularly worried about being sued by their lender or frozen out of future loans by Fannie Mae, possible consequences of default.

The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23 percent. For cheaper investment homes, it is about 10 percent.

With second homes, the delinquency rate for both types of owners was rising in concert until the stock market crashed in September 2008. That sent the percentage of troubled million-dollar loans spiraling up much faster than the smaller loans.

“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”

Willingly, but not necessarily publicly. The rapper Chamillionaire is a plain-talking exception. He recently walked away from a $2 million house he bought in Houston in 2006.

“I just decided to let it go, give it back to the bank,” he told the celebrity gossip TV show “TMZ.” “I just didn’t feel like it was a good investment.”

The rich and successful often come naturally to this sort of attitude, said Brent T. White, a law professor at the University of Arizona who has studied strategic defaults.

“They may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,” Mr. White said.

The CoreLogic data measures serious delinquencies, which means the borrower has missed at least three payments in a row. At that point, lenders traditionally file a notice of default and the house enters the official foreclosure process.

In the current environment, however, notices of default are down for all types of loans as lenders work with owners in various modification programs. Even so, owners in some of the more expensive neighborhoods in and around San Francisco are beginning to head for the exit, according to data compiled by MDA DataQuick.

In Los Altos, Los Altos Hills and the most expensive neighborhood in adjoining Mountain View, defaults in the first five months of this year edged up to 16, from 15 in the same period in 2009 and four in 2008.

juanni
July 09, 2010, 12:11
Of course, the "rich" are more educated and more financially savvy than the "unrich" and are wisely cutting their losses early in this DEPRESSION.
That is how the got rich.

The fools will be those that foolishly believe the economy will somehow be getting better, and they will somehow do OK on their underwater home. :sad:



.............juanni

Enquiring Minds
July 09, 2010, 12:12
The rich and successful... may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,”


LOL... translation: You can't escape sheeple-dom and live high on the hog by drinking the M-I-Bankster-COmplex Kool-Aid. :tongue:

olgier
July 09, 2010, 13:22
We looked at a house up here. It cost them over $600,000.00 to build. Def. a mini mansion. We could have bought it for slightly over $200,000.00 as it has been sitting vacant for almost 2 years and the bank has been sitting on it.

Only three problems kept us from buying it.

#1= Vacant that long, needed some work.... including the indoor pool. $$$$

#2= Upkeep on a house that size would be something I wouldn't want to deal with. $$$$$

#3= Taxes are over $6k year. No way in hell I'm paying over $500.00 month just for taxes. :uhoh:

Besides....... who the hell needs a house that big unless you have 8+ kids???

juanni
July 09, 2010, 14:30
Originally posted by olgier
We looked at a house up here. It cost them over $600,000.00 to build. Def. a mini mansion. We could have bought it for slightly over $200,000.00 as it has been sitting vacant for almost 2 years and the bank has been sitting on it.

Besides....... who the hell needs a house that big unless you have 8+ kids???

Wise move!
Wait til they crank up the property taxes to pay for the failing public pensions and muni bonds.
Plus higher energy costs and of course the taxes on that.

Low profile wealth is the smart move in this economic meltdown and the inevitable assault on taxpayers of ANY visible means. :uhoh:



juanni.............. living in a cardboard box,,, under the bridge

XHardrock
July 09, 2010, 16:18
The bottom line is people with $ are not worried in the least about a bad credit rating.

Dean P
July 09, 2010, 19:54
The bottom line is you are better off & learn to pay cash or do without.

XHardrock
July 09, 2010, 20:28
Originally posted by Dean P
The bottom line is you are better off too work for cash.

It's fixed.
You don't seem to understand the entitlement programs,,,,,,I work my ass off and don't have as many toys as most living in sect 8, and they don't have as many gray hairs.

Dean P
July 09, 2010, 20:46
I understand you will never be missed in the grand scheme of things, good or bad credit.

So live it according, worry only about things you can change never about anything you have no control of.

gates
July 09, 2010, 23:30
hmm... and so it continues... the majority are not high net worth folks they WERE high income folks with INFLATED balance sheets - all hat no cattle types - true high net worth people dont really sweat being underwater a few million on their houses when they have 100+ mil in the bank - yes the are pissed about it but they dont walk away. Yes I know some of them, they absolutely are more ruthless, but the dont walk.

Dean P
July 10, 2010, 09:27
One thing to look at, the poor really did not alone cause the downturn in this housing crash.

juanni
July 10, 2010, 09:59
Originally posted by Dean P
One thing to look at, the poor really did not alone cause the downturn in this housing crash.

No, it was the liberal Community Reinvestment Act which caused the massive bubble to inflate in US housing and then it was the key piece grain of sand that failed first causing a monumental avalanche in defaults which has now brought down even the rich.




....................well at least according to Jokker ;)



..............juanni

chrsdwns
July 12, 2010, 15:50
Credit ratings no longer matter. It used to be axiomatic that when the market hit rock bottom, only those with enough cash not to need a loan could actually qualify for one

Now, if you are financially stable enough to have enough funds to pay full cash for real estate you will not qualify for a loan.

However, the same people who cannot pay back their sub prime have no problem swinging 3.9 15 year fixted rate loans which they will eventually default on.

Income redistribution at it's finest.

As a country we so deserve the beating we are about to take