It's often said that the rich are different, but maybe not in the way you'd think. They're suffering foreclosures at a faster clip than the rest of the nation, even though more of them can afford to pay their mortgage.
Reuters news agency compiled figures from RealtyTrac and found that 180 homes In tony Beverly Hills, enclave of the rich and famous, have been foreclosed on, scheduled for auction or served with default notices. The majority of delinquent homeowners owe more than $1 million on their homes and only 12 of them are up for sale, leaving a backlog of foreclosures in the pipeline.
Aside from the size of the delinquent mortgage, there's another major difference among wealthy homeowners: The number of strategic defaults, where the owner can afford the mortgage but decides to walk away, is higher in Beverly Hills than in the rest of the country, according to one Los Angeles agent specializing in high-end properties. "It's a business decision, not an emotional one, which it is for normal people," Deborah Bremner, owner of the Bremner Group at Coldwell Banker told Reuters.
There's an extra benefit to support this tactic in California: A primary mortgage is considered non-recourse, which means that it is secured by the property alone. So the owner's wages and other assets are safe if he walks away from a home loan.
Nationwide, Lender Processing Services, Inc. reports that the default rate on jumbo mortgages, those too large to be insured by Fannie Mae and Freddie Mac, is up 579 percent since 2008. And JP Morgan Chase says that homeowners with jumbo mortgages are more likely to strategically fault than any other type of loan holder.
What do you think of the rich walking away from mortgages they can afford to pay?
Keep up with your wealth and mortgages and follow me on Twitter.
Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.