The Have-Nots or the Rather-Nots?

For all the attention being paid to the so-called “strategic default” option for troubled borrowers, the one group actively choosing to stop payments most often are the healthy, wealthy American rich.

 
 

Whether they’re asking to borrow your Grey Poupon to save a buck or walking away from a multimillion dollar commitment they could actually pay, the wealthiest American’ tend to think about money differently than the rest of the population, at least according to The New York Times article “Biggest Defaulters on Mortgages Are the Rich.”

“The rich are different: they are more ruthless,” says Sam Khater, CoreLogic’s senior economist in the article. He’s referring to a trend revealed by CoreLogic’s data that shows higher levels of delinquency for houses that cost more than$1 million; nearly 1 in 7 are significantly delinquent compared to just 1 in 12 for houses that cost less $1 million.

One argument for this discrepency is there is less of a market for these homes and the wealthy face job losses and tumbling home equity just like the rest of America. An accompanying graph indicates the lowest levels of non-performance are found among primary residences (albeit these are still at higher levels than their small-mortgage counterparts). Non-performance among secondary homes rose sharply among the wealthy following the hits to the stock market.

However, many of these homes are one of multiple residences, which represent more investment than homestead in the mind of the owner. Among investors, homes worth more than $1 million were delinquent at more than twice the rate of their smaller scale counterparts. “I just decided to let it go, give it back to the bank,” rapper Chamellionaire was quoted regarding the multimillion-dollar property he walked away from. “I just didn’t feel like it was a good investment.”

Would you walk away from homes likes these voluntarily? (Image Source: CNBC.com)

 
 

Aug. 3, 2010


Comments

 
 
 
  • Getting financial plans seems like the wisest concept there is. Planning for the future and becoming attentive to points for example our children’s education, retirement plans together with real estate. These may possibly sound plain, but in the long run, even our youngsters will benefit from it.

    http://www.losangelesroofingexpert.com
    Joseph - Expert Roofer Los Angeles
     
     
     
  • Time was when a persons word was their bond, but not any more. Lender beware. I see it every day...no investment from the borrower equals a high risk of walking away.
    Gerald Shepherd
     
     
     
  • Do you really think a 'rapper' walked away from his so called bad investment? or is he just ignorant of being responsibile?

    (“I just decided to let it go, give it back to the bank,” rapper Chamellionaire was quoted regarding a multimillion dollar property he recently walked away from. “I just didn’t feel like it was a good investment.”) what kind of example is that to his fans or family? Further these 'rich' people walking away are probably not wealthy or old money - they have gotten 'rich' in ways that may be questionable to begin with. It would not be hard to walk away from something when it wasn't really your money...(clearly these homeowners don't have any real equity or they wouldn't dream or 'walking away'!!!) Maybe as a reporter you could have written an article that was not just trendy - but truth-filled and newsworthy. too bad you didn't invest more in this story!
    Kate Mest
     
     
     
  • I would have liked to have seen some additional reporting on this topic rather than just a summary of a New York Times article.
    M. Consolini