For most people a home is their most important and largest long-term investment, but for the rich, often home ownership is just one of many financial investments. With so many wealthy homeowners making the decision to foreclose, it begs the question: Are Lenders Easier on the Rich?
The trends show there are an increasingly large number of U.S. foreclosures among the wealthy. In 2011, RealtyTrac reported that over 30,000 homes with values above $1 million were foreclosed on, and although these foreclosures constitute only 2% of the total U.S. foreclosures, this number is much higher than in years past. So why do the rich seem to be so “foreclosure happy”?
Unlike most distressed homeowners, many wealthy homeowners are not only agreeing to foreclosure, they are also making a very calculated business decision called “strategic default”. Typically these homeowners have been able to delay foreclosures because they either have the financial wherewithal to delay the foreclosure process. What it ultimately comes down to is that wealthy homeowners that can still pay their mortgages have resulted in making cost-benefit decisions with their properties, opting to walk out on their mortgages and essentially live rent free.
Whereas poor families are defaulting because they can’t afford their mortgages, the rich are simply pocketing those payments and preparing for a sunny future albeit post-foreclosure. 98% of distressed homeowners are foreclosed upon more rapidly whereas the remaining far wealthier 2% are strategically defaulting on their loans and are given more than 340 days to live rent free before they are ever evicted.
Ultimately, it would appear that this is just another case in which the “rich get richer” however it may have more to do with the fact that these multi-million dollar homes are
If you are struggling to pay your mortgage and feel like you are left to your own devices, contact a FAIR agent to help you find a solution that is best for you and your family. FAIR Counselors offer free services for homeowners in distress no matter your income bracket and provide effective advice on avoiding foreclosure.
Contact a FAIR Counselor today at (310) 321-1234.