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Rich are defaulting on mortgages

By Judy Martel · Bankrate.com
Wednesday, July 14, 2010
Posted: 12 pm ET

If only jazz-age author F. Scott Fitzgerald could have foreseen the long and varied life of his now-famous observation, "the rich are different." Here's another, less favorable, differentiator of the wealthy: They're defaulting on their mortgages in greater numbers than the rest of the underwater-mortgage population.

Mortgages on mansions are going into default

Mortgages on mansions like this one are going into default at alarming rates.

A study for The New York Times by CoreLogic reports that more than one in seven homeowners with mortgages higher than $1 million are delinquent, versus one in 12 borrowers of less than $1 million. The delinquency rate on homes with mortgages of more than $1 million is 23 percent, versus 10 percent for cheaper loans.

Do these data suggest, as The New York Times alleges, that the wealthy are treating their homes like investments by "ruthlessly" walking away as if they were worthless stocks? Or is this an example of an "aspirational" wealthy population, who bought mansions above their financial means and couldn't afford a stratospheric mortgage in the first place? We can only speculate.

On the flip side, read Bankrate's own poll, which reveals that homebuyers in general have few regrets about the purchase of their home despite falling real-estate values. Perhaps it can be explained as the difference between buying a home as an investment versus as a place to live.

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