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Friday, July 09, 2010

It isn't just the newly-loathed unemployed middle class walking away from mortgages
Posted by Jill | 5:23 AM
If you read only the comments in places like the NJ Real Estate blog, you'd think that the only people walking away from underwater mortgages are Obama-lovin' socialist welfare-cravin' deadbeats; people with $20,000 incomes who bought $300,000 houses they could never possibly afford. These are people who seem to think that everyone who has money has it because they are sober, responsible citizens who worked hard and were smart about their money, instead of largely phenomenally lucky gamblers in the big Wall Street casino over the last thirty years. But the myth of the financially responsible wealthy falls apart when it comes to being a mortgage deadbeat. Because it turns out that defaulted million-dollar mortgages are yet another example of the privatization of profit and socialization of loss:
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.


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.

I keep having this nasty suspicion that when the next wave of bank failures comes, and the Federal government has to bail them out yet again, Americans still won't be looking at the guy with the MBA walking away from his $2 million home. They'll still be pointing at the guy, perhaps with the Spanish last name who was born here and worked his way into a job as an assistant manager of a K-Mart, who was hornswoggled into taking multiple mortgages to buy a two-bedroom, one-bath ranch on his $28,000 income simply because he dared to want a part of the American Dream. And while they're spitting on that guy, the one with the MBA who thinks the rules don't apply to him is lifting the last four bucks out of his wallet from behind.

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