Rich Are Biggest Mortgage Defaulters By Far: NYT Study

New York Times:

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.

Read the whole story: New York Times

Comments

[mrcontinental]

04:21 PM on 07/12/2010

How many times has Donald Trump filed bankruptcy?

These people will be fine because they still have money and will move on to the next investment.

[NHCandCenter]

10:56 AM on 07/12/2010

Over on our blog, we've been talking a lot about the "Ring of Death" hitting more expensive, usually suburban neighborhoods. Most folks don't realize that the highest proportion of foreclosures in the last few years are happening in the distant suburbs. On top of foreclosures, the higher rate of intentional defaults on expensive homes shows us the situation in the burbs is even worse than we thought.

The Ring of Death is burning brighter: http://bit.ly/aXUhm7

[pj-smith]

09:24 AM on 07/12/2010

the wealthy often get that way by being unethical, ruthless, greedy, and selfish.
this story does not surprise me.

[vippy]

09:03 AM on 07/12/2010

Where are all those people who condemned me for saying that one should just walk away preaching ethics LOL? Now that it mostly applies to the rich I guess it is okay? After all they deserve their big bonuses, honestly earned through hard work, etc.

[elimenez]

07:44 PM on 07/11/2010

I bet if parallel studies were performed for tax evasion, stealing, mortgage fraud, and insider trading the extremely rich would also be the worst as well.

[anotheRedherring]

12:30 AM on 07/13/2010

for every dollar stolen by petty crime, 11 are stolen by white collared elites.

[GetAbike]

04:29 PM on 07/11/2010

I love this story. I guess the rich really are smarter than the rest of us. It is the poor and middle class, brought up on values of integrity that make them try and hang on to their obligations til H freezes over or they get foreclosed.
Note to all:
We don't have to own a home to live with dignity.

[vippy]

09:03 AM on 07/12/2010

my point exactly, can we say "stupid?"

[Martha Fair]

07:53 PM on 07/10/2010

New Program.......Lifestyles of the Rich and Delinquent!

[hobo62]

08:23 PM on 07/10/2010

Lovely, simply lovely.

[pebblewriter]

11:24 PM on 07/09/2010

The Times writer leaves out several salient facts.

A $1.5MM house in Los Altos does not constitute "rich." Homes there average 2,100 sf -- comparable to a $250,000 home in a nice suburb of Dallas, Denver or Detroit.

No one forced banks to make these loans. Thoughtful underwriting would have properly accounted for the risks (borrower's ability to pay, future prices, economic forecasts.)

There's adequate relief for banks who didn't heed the above point: take back the collateral. In most states, banks are also entitled to a deficiency judgment if a foreclosure doesn't pay off the loan. (In states that don't allow such judgments, loans carry a higher interest rate.)

When the market began deteriorating, banks that didn't want to foreclose had the opportunity to deal with the building default problem by offering modifications. Mostly, they didn't. I know of applications that are into their 20th month, and "3 month trial" modifications approaching 10 months.

Feeble government attempts to encourage modifications have explicitly excluded loans greater than $729K. Most banks took that as an explicit invitation to deny bigger borrowers in trouble the help they need. An ongoing flood of campaign contributions virtually guarantees no meaningful changes are forthcoming for borrowers of any amount.

Given banks' unwillingness to work with troubled borrowers, is it any wonder borrowers finally said "enough"? Is it "ruthless" to put money into groceries instead of an upside-down mortgage? Would sending their last few dimes to BofA make them better citizens?

[Carolab]

01:49 AM on 07/10/2010

Congratulations. You missed the point of the entire article.

[pebblewriter]

01:28 AM on 07/11/2010

I believe the point was to demonize "the rich": "The CoreLogic data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind...they're ruthless...they're [going delinquent] willingly." These conclusions might be more compelling if accompanied by actual data.

These are opinions of CoreLogic which, by the way, makes its money serving bankers. Bankers, few of whom are losing their homes in this debacle, are doing their very best to demonize those unwilling to spend every last dime servicing upside-down loans.

Most of the"rich" people I know borrowed what they could qualify for, just like those of more modest means. Thanks to the ingenuity of the mortgage industry, they were more frequently offered low or no-doc loans -- meaning they probably stretched more than the average Joe. But, Chamillionaire aside, they had every intention of making their mortgage payments.

I don't like that property values are dropping. But, I blame banks more than borrowers. They should have known better. (Some, like Goldman Sachs, did -- and managed to profit from the meltdown.) When the equal-opportunity meltdown started, they punted rather than trying to help people seriously in need. Now, we're all suffering.

Modifications are generally unavailable to those with $1MM+ loans -- a point that the author and CoreLogic fail to mention. If they're unemployed, running out of money and their bank won't work with them, what choice do they have? What would we have them do?

[NativeSonII]

11:23 PM on 07/09/2010

Even the wealthy are getting burned. This recession is an equal opportunity disaster.

[PHILVflorida]

11:15 PM on 07/09/2010

I'll bet you that most of these loans were alt a, no doc loans, they were all over in Florida, and people were buying $200K homes and condo's, but they were paying a million for them. As in any Ponzi scam, last in wins the prize. So I guess the lesson learned is it's not just the poor that don't honor their contracts.

[olivia]

08:53 PM on 07/09/2010

Not surprising.

A gas company employee told me the vast majority of his service shut-offs (due to unpaid bills) are in the wealthiest neighborhood.

[floodberg]

07:52 PM on 07/09/2010

WHAT THE ARTICLE FAILS TO POINT OUT...

Is that most of these people still have credit lines they are paying on, and a decent income, so overcoming a foreclosure on a credit check will be far easier for them. Try doing that with an employee's salary of $50K/year, with a family, and it's a very different story.

Wall Street will always take a chance on a rich guy first. And if we poor guys default and lose our equity, we probably won't get another chance.

Wall Street set us up for maximum profit...they got their employees in both parties to do the 'deficit' debate so that they 'couldn't' extend unemployment 'for our own good.' Both sides take their money and insider information greedily. The difference comes in the industries they legislate for - but everyone works for the Street.

This is the system that both parties created over decades. If you don't like it, let them know in November. A majority of Americans intend to send their incumbents home even if it means a short Republican period.

I object to our unemployed starving, being homeless and dying early while Congress gleefully funds a War for Profit and passes new tax breaks, but I take a hard line when it comes to death for profit.

H*ll, we might even scare them a little. They might extend unemployment and make public option free for the lower classes because that's the only way we can afford it.

[ThePeacemakers]

07:35 PM on 07/09/2010

And the homes they're walking away from are still overpriced.

[Social Construct]

05:53 PM on 07/09/2010

Amoral, apolitical, .... aholes.

One could shout from the mountain tops this absolute truth and, still, politically conservative, economically disadvantaged people will ignore the message. Or worse, kill the messenger. And they call progressives dangerous and sheep-like.

[sabela]

05:13 PM on 07/09/2010

This morning on Morning Joe Chrystia Freeland was defending the rich while alternatly trashing Fannie & Freddy Mac. Now, I do believe that fannie and freddy need reform but dear god, most of the people I knew that lost homes were speculators. Us working class, we are doing what it takes to keep our homes. When I bought my place in 2000, the one thing I made sure of with my FHA loan was that I could keep it if I were unemployed for a while. Now, I never thought I would be unemployed as long as I have been but I have picked up some temp work here and there and am hanging on and keeping up to date on my mortgage at least. The car was repossessed but that was because I was a idiot and co-signed on a loan for someone I thought of as a daughter and got reamed. But I will try and work with Toyota and hopefully they will work with me so I can make good on the remainder I owe them. Unlike rich people, I like to keep my word.