Wealthy Homeowners See Uptick in Foreclosures

[Apr 9, 2010.]

 

More houses with mortgage loans of at least $5 million are expected to be foreclosed upon this year, according to a study RealtyTrac did for the Wall Street Journal. Actor Nicolas Cage and Italian film producer Vittorio Cecchi Gori are among the high-profile individuals who recently have lost homes through foreclosure.

More Mortgage Loans in Default

According to the Wall Street Journal article:

In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.

People who own such expensive homes usually have more resources to keep themselves out of foreclosure, such as other properties or investments. But many wealthy homeowners have been high hard by layoffs and other problems related to the economy that have made it more difficult to stay in their homes.

Mortgages Too Much to Handle

In many cases wealthy individuals own more than one house, which can contribute to their inability to keep up with home mortgage payments. Because it is tougher to sell homes with multimillion price tags, many of these people get stuck with multiple mortgages they can't pay.

According to a recent report by credit agency Experian and management consulting firm Oliver Wyman, wealthy homeowners are more likely to strategically default on mortgages, which means they stop paying and walk away. People with smaller mortgage loans may work harder to hold onto their homes.

Fallout from Defaulting on Mortages

One problem with strategic defaults, whether they involve multimillion homes or more modest houses, is that they can further depress housing prices in areas that already hard hit. Another issue is that while some people may truly struggle with making mortgage loan payments and have no other alternative but to walk away, others simply don't want to be bothered anymore when the going gets tough.

Whether you have a mansion or a modest split-level, it's important to seek help with your mortgage woes before they escalate to the point where you can do nothing but end up in foreclosure. People with single-family homes that owe more than $729,750 are not eligible for mortgage loanmodifications or refinancings through the Home Affordable Modification Program (HAMP) . That does not mean, however, that you should avoid talking with directly with your mortgage lender to discuss alternatives to foreclosure if you are faced with that threat.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.