Mortgages Over $1 Million Now Defaulting at TWICE the National Average


Like I’ve been saying for over a year now… the water is rising.  Do you feel it?  It’s tickling your tootsies, no matter who you are.  If you’ve been watching the foreclosure crisis from afar, don’t worry… it’s a motion picture that’s coming soon to a theater near you.

Those words hold true whether you’re living in a three bedroom, two baths in Stockton, or a 7,500 square foot palace overlooking the ocean in Newport Beach.  In fact, Bloomberg reported yesterday that mortgages over $1 million are now defaulting at twice the national average.  And if that doesn’t concern you… well, I just don’t know what to say.  You should be afraid… very afraid.

You see why, right?  Two main reasons:

1. Picture this: You live on a block with $2 million homes that have decreased in value by 40%.  One is foreclosed upon and sells as an REO for $900,000.  Uh oh.  Next house is a strategic default.  The owner drops it like it’s hot.  No financing is available at those amounts.  Another one bites the dust.  Before you know it you’ve got a neighborhood of half a million dollar homes.

2. Now picture the bank’s losses on a $3 million home, compared with the losses on a $250,000 home.  Enough said?  Thought so.  (Bye, bye Wells Fargo… but thank you for playing.)

Folks, I don’t care what the National Association of Cheerleaders… I mean Realtors, is saying this week.  This thing is just getting started.  So, all you Richie Rich types that have been coyly watching from the sidelines… come on in… the water’s fine!


According to Bloomberg, “Payments on about 12 percent of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages, according to data from First American Core Logic, a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7 percent a year earlier.”

It’s worth mentioning that, while the $8,000 first-time buyer program helped to push sales higher this year, and even though President Obama extended that program to include “replacement buyers,” which means everyone else… the program only applies to homes under $800,000.

But, if you’re underwater in a more expensive property, there’s no refinance market, and no buyer incentives… you’re on your own.

Again as quoted by Bloomberg:

“The reason the low end stopped falling is because the government stepped in with affordable loans,” said Scott Simon, managing director at Pacific Investment Management Co., a Newport Beach-based investment firm that runs the world’s largest bond fund. “There is no political will to bail out a million-dollar house.”

Of course not.  Those people bought jet skis and flat screens and Hummers… how irresponsible of them.


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