Luxury mortgages ravaging homeowners in downturn
We’ve all heard about Nic Cage’s lost millions and Warren Buffett’s dwindling fortune, but the recession’s impact on the wealthy has been tough to pinpoint.
New info on the alarming state of luxury home mortgage rates, however, might provide that missing link.
According to Bloomberg News, American homeowners of US$1 million-plus mortgages are defaulting at nearly twice the country’s rate, forcing many borrowers to unload their properties at a fraction of the market value.
Things aren’t great anywhere in this arena, sure, but the 6.3 per cent loan default on “regular” mortgages (less than US$250,000) was to be expected this downturn.
It’s come as more of a surprise that payments on a whopping 12 per cent of US$1 million-plus mortgages were late by 90 days or more last September, a sharp rise over the 4.7 per cent default rate on the same loans a year earlier.
“The rich aren’t as rich as they used to be,” a real estate source tells Bloomberg. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”
While it’s tough to sell the wealthy as a sob story with the economy ravaging Average Joe homeowners like this, but this rate of default has also given way to a disturbing trend.
Bloomberg reports borrowers falling behind on their US$1 million-plus loans are turning to short sales, where the lender agrees to accept less than the full payoff on a mortgage to speed up moving the property to a new owner.
Consider the case of NFL linebacker Mike Peterson, who bought a Tampa, Florida, mansion for US$1.1 million four months ago – almost half the amount of the mortgage taken out by the sellers three years earlier.
That’s a great deal for Peterson, but a tough sign for the home’s previous owners.
Was that an instance of people getting in over their head with a house they likely shouldn’t have had? Yes, probably. But keep in mind that – irresponsible spending aside – these are families being ripped from their homes here.
And with no end in sight.
“You are just starting to see the tip of the iceberg with luxury short sales,” a Scottsdale, Arizona, broker told Bloomberg. “A lot of wealthy people are upside down in their mortgages.”
By Jason Buckland, MSN Money
Posted by: SP | Dec 22, 2021 2:46:06 PM
One might assume that a person with a higher than average income would also have a higher than average financial awareness. This article would appear not to support this premise. Thankfully, we know that the highly paid bankers gambling with peoples life savings fully understand the repercussions of all of their actions. They are different, they are *special*
Posted by: Chinook Man | Dec 23, 2021 11:12:40 AM
I took a quick pulse reading... nope... my heart didn't miss a beat. Nope, that story just did not do anything for me. Let the "rich" lose their homes! LMAO!