Times Report: Wealthiest Homeowners Are Most Likely To Walk Away From Mortgages
Another dispatch from the front lines of the class war informs us that the rich are more ruthless than the rest of us. And in other news, dog bites man:
LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.
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 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.
The rich can also afford lawyers. In some states, despite your mortgage being a secured debt, the mortgage holder can still come after you. So if you're going to walk away, by all means, do so. But don't do it until you check your legal status.
Cole said it best:
http://www.balloon-juice.com/2010/07/08/i-can...
"I mean Romney is the most conservative on illegal immigration and I don't think Ronald Reagan could get elected in California today."
Ann "Clipped" Coulter
I won't give up my master suite until they pry it from my cold dead hands.
Say what you mean. Mean what you say. But don't say it mean.
...I would dump it too!
audit-prosecute-incarcerate
They were hornswaggled into buying those mansions because they certainly couldn't afford the time it would take to read the fine print!
I'm sure we can lay some blame at the feet of ACORN if we try real hard. Let's get Beck and his chalk board to work on this.
Say what you mean. Mean what you say. But don't say it mean.
those suburban Russian spies. They were clearly involved and are linked directly to Obama!
Yes indeed. If you recall they just recently "walked away from their homes" never to return. Hell, just today they moved to Russia.
Say what you mean. Mean what you say. But don't say it mean.
Keep it up and we're going to get you your own chalk board.
I had one but it was under water so I just walked away from it. I got it when Beck made them popular but as soon as Obama walked into the oval office, it lost all its value. I should have bought gold instead because gold never losses its value. G. Gordon Liddy told me so and I didn't listen.
Say what you mean. Mean what you say. But don't say it mean.
I thought it was the unemployed and the lower class who don't pay taxes dragging down the economy.
is intended to be a factual statement
...the rich will be taking over tent cities anytime soon?
audit-prosecute-incarcerate
Chances are, the mortgages they're walking away from are vacation homes.
is intended to be a factual statement
...for rich people.
http://www.willowroseproperties.com/photo_gal...
audit-prosecute-incarcerate
In some states, despite your mortgage being a secured debt, the mortgage holder can still come after you.
I have no doubt this is true and it shows what a scam mortgage lending has become in America. America's system is definitely broken.
This items was reported on Morning Joe with the usual moralism coming from Natasha (or is it Mika) and the rest.
Would it be helpful to do a little math to try to understand the situation?
Take a house with a purchase price of $1 million. Assume an $800,000 mortgage at 6% (that's $4,000 a month), property taxes (assume another $1,000 a month), insurance ($2000 a year). You're looking at upward of $5,000 a month, not including utilities, maintenance.
Contrast that with a house with a $200,000 mortgage at 6% which has a monthly payment of $1200 and property taxes (say) $250 per month.
Do you think it's a little easier to come up with $1500 a month than $5000 for a place to live?
Why don't we put all the moralism aside and start to look at these problems factually?
in an infinite-growth economy.
Because it is precisely the assholes who bought these types of houses that love to blame the people with less. These assholes like to disparage people with less money and less sophistication for doing the EXACT same thing they are doing. Have you heard of Rick Santelli?????????
Let's see. If you been unemployed for 6 months there is no real difference between $1500 and $5000 because you can't come up with either number. As pointed out in the NY Times article:
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.
So it's just a business decision to them and they believe that defaulting won't keep them from getting loans in the future. It should be obvious that the rich are rich because they don't give a shit, although they are more than willing to use moralism to shame other people into trying to make their payments. I guess they have already put THEIR moralism aside.
A number of lending institutions have said that they are going to go after people that they believe walk away from houses with the resources to pay the mortgage. So will they go after people who walk away from million dollar homes?
I hav to wonder what the different legal ramifications are if one walks instead of fights or is foreclosed on.
That makes no sense. there is not math to determine relative wealth and one's ability to pay or not. That is not the point being discussed, and again I would have to say that it is more probable that a wealthier homeowner would have more access to liquid assets, whereas a homeowner at the entry level tends to be marginally floating. Fiduciary responsibility and ethical behavior are not reserved or determined by status or wealth. The trend being pointed out is that a lot of the wealthier homeowners are taking the fiscal position that a strategic walkaway is smarter then a prolonged foreclosure and attendant credit damage. They are cutting their losses and unfortunately damaging the overall market values. There is no moralism issue here. The only real fiscally imprudent and immoral actions I see thematically are the banks and lending institutions we bailed out who were morally charged with a reduction in profit margin and a specific utilization of taxpayer $$$'s to stabilize situations by restructuring existing bad debt. This is not happening, in fact the opposite where firesale and predatory strategy is being invoked to steal fiscally prudent homewoner's homes away from people who are stressed by the essentially depression, not recession, economic downturn.
You're telling me that a house that costs 5 times as much has something like 5 times the monthly payment? Wait, let me wrap my brain around that . . .
Okay, I got it. Now what is your point, exactly? That a more expensive house costs more?
would paint a more compelling picture. Luxury items are very inelastic and so in a recession the demand for them goes down a lot faster than for regular items. It's a lot easier to trade down form $5000 a month home to $1500 than it is to go from a $1500 to $300... and the savings wouldn't be as much, either.
I wonder what Rick Santelli has to say about this. Hey Rick, FUCK YOU.
Let's go to Los Altos - it looks like there are some nice digs available!
if the bailout had never happened, if banks were tapped out, would not the banks be more willing to renegotiate these loans? any loans?
if the bailout had not happened, wouldn't home prices have dropped even more than they have? would not then poor people (like myself) then be able to possibly afford to buy a home? that is if a bank would be willing to lend? seems like this country is just as tilted towards those with property as ever, maybe more so.
But just look at the name - Troubled Asset Relief. The banks hold those assets and are getting all the relief. Why would poor people like yourself need any relief?? /snark off
I wonder how many of these homeowners took out big home equity loans at the peak of the housing bubble? I also wonder when they bought the homes they are walking away from?
Say what you mean. Mean what you say. But don't say it mean.
Well said Captain.
This same thing also happened in the Bay Area after the dotcom bubble busted. There was a downturn in middle class neighborhoods and such, but it was more a blip in the big picture than a bust.
High end properties scooped up by new money assholes dropped like flies.
Where I live in San Diego, we've had a few foreclosures in our area of older homes, but there are none now. There was just a sale across the street in a couple weeks on the market for 350 and another a couple streets over for 600 something. Others in the last 6 months have sold fairly quick.
People in the far-flung burbs, however.. that's another story. But I wouldn't live in the burbs with a gun held to my head..
The wealthy have options that the middle class don't have, as well as liquidity. remember that most of the problematic mortgages have been bought at pennies on the dollar and then the institutions we as taxpayers rescued are not helping the homeowners and are actively forcing defaults to acquire vast holdings. Thousands of stories exist, look at shamethebanks.org. This is just another strategic re-alignment of the inequitable distribution of wealth.
http://www.youtube.com/watch?v=77gKSp8WoRg
My extremely limited experience with the upper middle and lower upper class is that they tend toward maybe not immorality but amorality. In other words, the rules don't apply to them.
Be as you wish to seem
Perhaps it's not that the upper middle and lower upper classes are so amoral with respect to mortgage debt as much as the lower middle and upper lower classes (!) are too moral. A mortgage is business relationship, after all. Pretending that it's a moral issue is a burden that the less-well-off subject themselves to (with the encouragement of the wealthier). Your bank doesn't have a conscience, it doesn't consider lending you money to be a moral issue. It is, of course, quite happy to not disabuse you of that notion . . .
however hypocritical this makes some elements of the rich, strategic default can be a smart financial move on their part. afterall, when corporations do it its consider a prudent investment decision...
"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." --- So they have this data, but they can't confirm it??? Am I missing something here?
... you can certainly say what is happening.
You can't say why it's happening, though, until you actually talk to somebody about their motivations. I doubt that anyone at CoreLogic it scouring the neighborhoods, asking "why?".
ah ok.. makes sense.
The laws are written to favor those with higher incomes or with multiple properties.
If your a middle class blue collar American and getting screwed over by the bank/mortgage company you have 3 choices - Abandon your property, Try to sell it or try to keep it thru so-called bankruptcy protection. I say so-called because the law is written to protect the banks interest and not the home owners.
In 2005 as a senator from a state with few if any usury laws and while his son made millions as a bank lobbyist, Joe 'Bite-Me' Biden wrote the laws governing chapter 13 bankruptcy's.
Last year the messiah in chief after promising to overturn the law and help millions of Americans suffering, for various reasons, under these laws turned the whole program over the one person he felt could best handle it - Joe himself, you know because he so earthy and tells funny stories about how 'clean' the president is - And the chances of him overturning or amending the laws he wrote are what zero to negative nothing.
Here in IL property taxes exploded and mortgage carriers took full advantage of the law and forced escrow accounts on millions of homeowners, basically forcing them into foreclosure and then bankruptcy, that is if they wanted to try and keep their homes.
In case you didn't know, you don't walk away from debt in chapter 13 it's actually increased. Now, again under the new law, creditors are allowed to add additional fees and expenses unlike prior to the 2005 law. And it has to be paid in a shorter period.
Most of us in bankruptcy now wear our scarlet B with pride but we don't want to be there. We don't want to erase our debt, it's ours we'll pay it. We didn't over extend ourselves - We fell into a cycle of banking hell that the government is unwilling to address and help with.
Last year the house passed HR1106 Helping Families Save Their Homes - Twice.
And both times it was voted down by the dinosaurs in the senate. The temporary fix would allow a reduction in the monthly payment not the principal owed. But as my home senator Dick the Lap-Dog Durbin told me "...the bank don't like it". So FU American.
So your on your own. Do what you can or lose the equity you've earned. Personally I work 3 jobs, my entire check from my 9 to 5 job - which I have no taxes taken out of, goes to pay the mortgage. The 2 other jobs I need to by food and pay basic utilities for a home I'm never in and is basically worth nothing.
I'd be happy to walk away from it but then what? Lose 90K in equity? Lose the money already sitting in said escrow account?
Try to find a place to rent with no credit or savings?
I expected nothing for the perpetrators of HOPE and CHANGE and I haven't been disappointed.
"I'd be happy to walk away from it but then what? Lose 90K in equity? Lose the money already sitting in said escrow account?
Try to find a place to rent with no credit or savings?"
The wealthy are more dispassionate about these things than you and me. But still try to be -- think like a rich person. ("Ya, right," you say, "why don't you just make your panics go away mr robbie!" OK, point taken.)
But if you're underwater in the house more than the 90k equity (and make sure you still have 90k in it after devalutation), then it might be worth it. Now is a good time to dust off the calculator, sharpen the pencil and fire up the ol' spreadsheet.
No matter what, make sure you have a clear picture of your assets and liabilities here. You don't want to throw away your equity, but also don't want to throw good money after bad.
As far as getting a new house or rental -- secure that before walking away. Again, easier said than done. But easier done before walking away than after.
And above all, remember it's business. You don't have a moral obligation here, so don't let them trick you into thinking that. Banks are not moral creatures, they're in it for the money. When dealing with their likes, it's business for you too. (Except the house is your home and all that emotional attachment that comes with being human).
"I expected nothing for the perpetrators of HOPE and CHANGE and I haven't been disappointed."
I did and I am. :(
"Last year the house passed HR1106 Helping Families Save Their Homes - Twice.
And both times it was voted down by the dinosaurs in the senate. The temporary fix would allow a reduction in the monthly payment not the principal owed. But as my home senator Dick the Lap-Dog Durbin told me "...the bank don't like it". So FU American."
Reminds me of that old Eddie Cochran song -- changes mine --
"I'd like to help ya son, but you're too poor to vote!"
It hurts to hear that so often. Millions of Americans can't afford decent legal help. We need to nationalize the legal industry. We need change.
There are lawyers that aren't in it for the money. They're happy to represent the non-wealthy. Trick is finding them, since they probably don't pull in enough to buy the ad on the back of the yellow pages. Ask around.
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