Today the New York Times reports that the “Biggest Defaulters on Mortgages are the Rich”:
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 are 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.
I recently heard someone describe the mortgage meltdown the result of Fannie Mae and Freddie Mac insisting that every American should have a home. Implications clear. That boogie man – government policy – giving the undeserving money. And someone else mentioned, hey, we all did things that were unwise.
Really, how do we explain this then?
There is some truth to the above statements. But there are bigger things at play. Banks that don’t want to modify loans because they own collection agencies and other entities (like appraisal firms, cf. recent litigation with Wells Fargo and Rels Valuation) that benefit from foreclosure. The fact that many blacks and Latinos with good credit got shoved until predatory loans anyhow.
Now it turns out that the working and middle classes are more diligent about writing those checks in distress than the wealthy.
struggle to pay.
Next morality lesson?