Biggest Defaulters on Mortgages Are the Rich

[groovedaddy]

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.

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.

http://www.nytimes.com/2010/07/09/business/economy/09rich.html?_r=1&th&emc=th

[Vincardog]

1. What? Do you mean to tell me that the rich act like BUSINESSES? When they are upside down in a loan

they WALK AWAY?

[Jackpine Radical]

2. That is hardly a surprise.

I think it is in large measure due to the custom among the rich of calculating and acting upon whatever moves might be in their best financial interest. Where ordinary people might ask themselves whether defaulting, breaking a promise, is the right thing to do, the rich simple ask themselves what action is most to their benefit, and whether they can get away with it.

[BridgeTheGap]

3. I once read somewhere that the average self-made millionaire has filed bankruptcy at least

twice (on average). It gets me that these people are more than likely republican and that so many republicans act so moral on this issue. They feed on each other!

[Warpy]

4. Poor people know what homelessness is, even

if they haven't experienced it, personally. They've seen people they know fall into it. Poor people will go without food and other necessities to keep that roof over their heads.

Entitled upper class people don't think it could ever happen to them, so they consider losing the roof over their heads a sound financial decision.

Around here, the trophy house areas are the hardest hit by foreclosure and blight. Some places are being razed after vandals have gotten through with them, completely unsalvageable after torn out plumbing has left them flooded.

Don't expect much media attention to this stuff, though. Demonizing the poor is what their corporate masters demand.

[Kweli4Real]

5. I wish the media would stop perpetuating the lie ...

That this mortgage melt-down "began among the working class in remote subdivisions", when the truth is the melt-down started with middle-income/wealthy investors that walked away from their 2nd, 3rd or 4th investment property when they found they couldn't sell it once it was built.

[Igel]

6. Of course the biggest defaulters are the rich.

Few poor people have multi-million dollar mortgages to default on.

Then again, the mass/count distinction (as in "fewer" vs. "less") is waning in American English so "big" might mean "numerous" here. Not my social dialect.

I've cursorily tried to get actual numbers on this because reporting things by rates is sometimes used to hide the truth that the numbers tell, sometimes it's used to make the trends clearer. Unless you know the numbers, you can't tell which is which.

Think about it: 2000 multimillion dollar mortages out of 10k go bad, you have a 20% default rate; 200,000 mortages under $250k go south out of 2,000,000 you have a 10% default rate. Which is of greater import? So you report the numbers as rates, not actual numbers. (It works the same with corporate profits, comparing a quarter with almost no corporate profits vs. a year when they've rebounded--good for rhetoric, not for understanding. Had the recession been sufficiently bad, corporate profits of $50 for the country could be a 1000% increase. One year our income increased something like 270% over the previous year, but we wound up merely near the upper end of one standard deviation from median income for the US that year).

Another bit of logical legerdemain is the "walk away" meme. When a poor or middle class person defaults because s/he can't find a buyer, well, what do you expect? Responsibility? To what? When a rich person defaults because s/he can't find a buyer, obviously the person's irresponsible. Not necessarily. Perhaps. Hard to know, esp. because in both cases the numbers reflect a mix of people walking away and people who just can't pay. (Esp. because in a lot of areas "multimillion dollar mortgages" aren't held by "millionaires" any more than the $130k mortgages where I live mean all the mortgage holders have hundreds of thousands of dollars in the bank.) Numbers would be nice, not an inference based on an assumption. Most reporters are only marginally less innumerate than their readers, so I guess I can't be too exacting.

[Paper Roses]

7. Years ago, my friendly local banker said to me:

The worst customers of the bank are the very wealthy who seem to feel that a loan due date or minimum balance for the privilege of no fee, does not apply to them.

Meantime the rest of us "plain folk" sweat it out and hope that our paycheck gets to the bank before the automatic withdrawal. That is, if we have a job.

Years ago, when I was told this, there was no such thing as automatic withdrawal. You had to send the check on time. Now it seems that some do not pay attention to due dates. Penalties do not matter on the scale of things. What's $30.00 to a millionaire?

Guess what? I found a quarter on the sidewalk today! Yippee!!