A recent article in the New York Times was rather surprising, even to me, someone who practices foreclosure defense litigation. As you may have read in our previous post, Fannie Mae's plan to prevent strategic defaults seems designed to punish all homeowners who find themselves seriously underwater on their mortgages.However, the New York Times indicates that the wealthy are engaging in strategic defaults than any other group.
More analysis after the jump.
In Cook County, the Sheriff's Department is seeing more foreclosure-related evictions in Wilmette, Glencoe and La Grange. This trend seems to be related to both investment properties and primary residences. However, the NYT reports that the delinquency rate on investment homes worth more than $1 million is now up to 23 percent. One in seven of these loans is delinquent when you factor in primary residences as well.
Why could this be? Those who can afford expensive investment properties probably have money to survive default judgments and can afford legal help to minimize their risks in such a situation. This trend is being seen nationwide. While Fannie and Freddie indicate that strategic defaults hurt neighborhoods, it seems a bit odd to assert that these defaults do that much damage to high-price areas.
On the other hand, one in twelve mortgages below the $1 million price point are delinquent. This smaller rate of delinquency is likely based on the fact that many people don't want to give up their homes, and are fighting harder to keep them.
It will be interesting to see more numbers on this as the year progresses and groups like the Woodstock Institute publish their recap for 2010.
Leave a comment