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Wealthy Owners Defaulting at Higher Rate Than Middle Class
The new buzz phrase in distressed real estate is “strategic default”, or purposely walking away from an upside down mortgage. Apparently, wealthy homeowners are handing the keys back to the bank at a higher rate than their middle-class counterparts.
The NY Times reports that homeowners with mortgages in excess of $1 million are defaulting at a 1 out of 7 pace.
From the NY Times article:
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.
“They may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,” Mr. White said.
Photo courtesy of Corvair Owner, used under Creative Commons license.
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