When it comes to walking away from a house and mortgage, wealthy homeowners are doing their part. Not only are those with a $1 million net worth or above more likely to stop payments, but they are also more likely to see their home as an investment and cut their losses.
Of homeowners with a high net worth, more than 1 out of 7 are delinquent with their mortgage payments. Only 1 out of 12 homeowners with a lower net worth are late. These statistics are the result of a survey by CoreLogic. Here is some analysis from the New York Times:
The CoreLogic data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind, especially when it comes to investment and second homes. Nor do they appear to be particularly worried about being sued by their lender or frozen out of future loans by Fannie Mae, possible consequences of default…
“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”
For most people, a house isn’t a good investment, but these rules don’t apply to the rich who own multiple properties and expect their own personal brand adds to the value of the house in a way that increases property value at a rate higher than the rest of the real estate market. Some people benefit from viewing their homes as an investment, particularly with today’s low mortgage interest rates.
In addition, many among the super-rich purchase properties through trusts, so their personal wealth is further protected if they decide to abandon their mortgages. For a typical individual, abandoning a mortgage could have drastic repercussions on his or her ability to buy a house in the future.
Biggest Defaulters on Mortgages Are the Rich, David Streitfeld, New York Times, July 8, 2010
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