The NY Times is reporting that wealthy homeowners are quickly becoming the most common homeowners to go into default and foreclosure. The article stated that homeowners with mortgages over $1 million are much more likely to stop paying, with 1 in 7 of these wealthy homeowners currently seriously delinquent, compared to 1 in 12 for homeowners with mortgages below the million dollar level who are currently seriously delinquent.
The article stated:
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.
This is consistent with what I have seen throughout San Francisco and the Bay Area. In my experience advising clients on various real estate and land use issues, I have seen numerous wealthy homeowners with properties and mortgages far north of $1 million who have fallen upon hard times. For many of these homeowners, their own option is to stop paying their mortgages. Sometimes homeowners are fortunate to have many years of ownership and equity built up, so they have options such as selling the property.
When they don’t have equity, then they need to consider attempting a short sale or a loan modification. Unfortunately, due to the passage of SB 94 this past fall, homeowners attempting a loan modification are very unlikely to be able to hire an attorney to advise them on how to accomplish a modification. That leaves a short sale or simply walking away as the most likely option.
Read the full article here.
John Corcoran is an Associate with Plastiras & Terrizzi law firm in San Rafael, California (Marin County). He advises clients on real estate matters, small business issues, estate planning, and general civil litigation. He may be reached at firstname.lastname@example.org or (415) 472-8100 x211.