The wealthy foreclose at higher rates than average

[eridani]

http://www.doctorhousingbubble.com/foreclosure-millionaire-style-5-mls-beverly-hills-foreclosure-149-million-dollar-foreclosures-beverly-hills-real-estate/

“The rich are different than you and me,” said F. Scott Fitzgerald. To that Hemingway was quoted as saying, “yes, they have more money.” If we were to ask that question again today we would find out that they foreclose in higher rates than the average home owner. One in seven homeowners with loans over $1 million are now seriously delinquent versus one out of twelve for the overall population. The rich are foreclosing in spectacular fashion. Most of those living in Southern California are fooled by the leased European luxury cars or the expensive homes that carry a substantial mortgage behind the scenes. These statistics only verify what most of us already know. Appearances are big in many markets especially in the land of Hollywood. Make no mistake that there are many rich people in California. Yet there are more phony imposters that merely bought all the trappings of wealth by leveraging their balance sheet to the hilt. Today we are going to dig deep into the Beverly Hills foreclosure market.

[TwilightGardener]

1. They have reserves, don't worry as much about credit scores, perhaps.

They're just cutting losses--but the average working class Joe needs to prove himself creditworthy for every loan.

[Sonoman]

2. Mybe in L.A.

In Wine Country, the only person I have known to go into foreclosure is an flight attendant.

Sonoman

[KansDem]

3. I believe it's called, "Strategic Default."

Some Wealthy People Choose Strategic Default on Mortgages

On behalf of Law Offices of Michael H. Johnson, P.A. posted in Stop Foreclosure on Wednesday, February 2, 2011

If you were wealthy, you would never have to worry about making your mortgage payment. That may be true, but many wealthy homeowners are deciding not to pay their mortgages, and allowing the banks to foreclose.

The most galling part of this is that many of the wealthy homeowners stay in their homes, pay nothing, and the banks takes months or years before moving to foreclose. The homeowners call it "strategic default."

Fort Lauderdale "stop foreclosure" attorneys note that many wealthy homeowners go into strategic default when their properties lose hundreds of thousands - or millions - of dollars in value.

One in twelve mortgage debtors is seriously delinquent on their payments. Among wealthy homeowners with loans over a million dollars, that delinquency rate rises to one in seven.

One man who bought an ocean-view home for $1.385 million five years ago, now has a home worth less than $800,000. He decided, as a business decision, to stop paying the mortgage two years ago. The payments were $10,000 a month.

Ironically, the more you owe, the lesser the consequences. The man is still in his home. The reason is that banks are reluctant to foreclose on million-dollar homes. They are hard to sell, and they come with heavy costs for upkeep.

--more--
http://www.ftlauderdale-bankruptcyattorney.com/2011/02/some-wealthy-people-choose-strategic-default-on-mortgages.shtml

[kcass1954]

4. In the late 80s, I did loan servicing for a bank in Miami. We held a $250K second mortgage

on a home on Star Island. The borrower went 60-90 days delinquent a couple of times a year. He was a self-employed architect who occasionally ran into cash-flow problems. He told me on more than one occasion that it was cheaper for him to pay my late charges and attorney's fees than to liquidate something to make his payments on time.

[Statistical]

5. Strategic default.

If the cost to rent for 3 or 4 years and then buy another home is cheaper than the cost to pay mortgage on an underwater property from a financial srtandpoint it makes more sense to intentionally default.