NEW YORK (CNNMoney) -- Five years after the housing bubble burst, America's wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country -- and many of them are doing so voluntarily.
Over 36,000 homes valued at $1 million or more were foreclosed on -- or at least served with a notice of default -- in 2011, according to data compiled by RealtyTrac, which tracks foreclosures. While that's less than 2% of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years.
"These properties are accounting for a bigger piece of the foreclosure pie," said Daren Blomquist, vice president of RealtyTrac.
Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures -- or homes valued at more than $2 million -- jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.
Until recently, many homeowners at the high end of the housing market were able to postpone the foreclosure process, Blomquist explained. With other assets and alternatives, "they had more financial means to hold out against default."
In addition, lenders are typically more amenable to working with homeowners that have other resources, said Ron Shuffield, president of Esslinger-Wooten-Maxwell, a real-estate firm in Miami where homes priced over $1 million represented 9% of all foreclosures last year.
But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a "strategic default." Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.
"In the lower-priced houses you'll see more people defaulting because they can't afford the payments and it's a choice between feeding their family and paying the mortgage on a home that's under water," said Stuart Vener, a national real estate and mortgage expert with the Florida-based Wilshire Holding Group.
"In million-dollar homes, you're looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?" he said. In many cases, it often makes more financial sense to walk away.
0:00 / 2:59 Inside Florida's foreclosure crisis
At least they can take their time packing up all of their belongings. On average, it takes about 348 days for a foreclosure to be completed, Blomquist said. "They may get almost a year of free housing out of the deal."
But don't expect a few depressed mansions to bring down the neighborhood. A single foreclosure in an otherwise wealthy area is unlikely to impact surrounding values, Blomquist said.
"You're not going to see the weeds growing," Vener added. But there will be an opportunity for buyers to snatch up these impressive houses at bargain basement prices, he said, which could provide a much-needed boost to sales overall. "In a good way, this is going to drive turnover," he said.
Thursday, February 23, 2012
Thursday, February 9, 2012
Nailing the Banks
By Jim Puzzanghera This post has been corrected, as indicated below.
February 9, 2012, 7:02 a.m.
Reporting from Washington— Federal and state officials on Thursday announced a landmark $25-billion agreement with the nation’s five largest mortgage servicers to settle investigations involving foreclosure abuses and try to stabilize the housing market.The deal would give $17 billion in relief to current homeowners, mostly by reducing the amount of principal they owe on their mortgages.An additional $5 billion would be paid in cash to California and more than 40 other states as restitution for foreclosure paperwork problems and other improprieties by the servicers in the foreclosure process. Officials said hundreds of thousands of homeowners would probably get $1,700 to $2,000 each under that part of the deal. About $1.5 billion of the $5 billion would be distributed directly to people whose homes were foreclosed on from 2008 through 2011.In addition, the five servicers -- Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. -- agreed to spend about $3 billion to refinance about 1 million existing mortgages, most of those likely to be for homeowners whose properties are worth less than they owe on their loans.The $3 billion is the amount the servicers would lose on the refinancings, not the total amount of principal to be written down, which officials expect will be much larger.And as part of the deal, $1 billion will come from one of the servicers to settle other outstanding claims.Federal and state officials will announce the settlement this morning. Iowa Atty. Gen. Tom Miller, who led the more-than-year-long negotiations will join U.S. Atty. General Eric Holder, Housing and Urban Development Secretary Shaun Donovan and other officials at a Washington news conference.California Atty. Gen. Kamala D. Harris, who was one of the last state holdouts, will announce the state’s participation during a Los Angeles news conference Thursday morning."California families will finally see substantial relief after experiencing so much pain from the mortgage crisis," Harris said in a statement Thursday morning. "Hundreds of thousands of homeowners will directly benefit from this California commitment."Federal and state officials will try to get another nine large mortgage servicers to sign on to the settlement, which could increase the deal to $30 billion.The servicers will get various credits for actions they take as part of the settlement, which could increase the total amount of assistance to homeowners.The complex series of credits are designed to encourage the servicers to make payments over the next year to speed assistance to struggling homeowners and quickly aid the housing market. Under the deal with the five largest servicers, the credits could result in a total of $40 billion in relief to homeowners. If the other nine servicers sign on to the deal, the total relief could reach $45 billion.Harris said Californians could receive up to $18 billion in assistance from the settlement.[For the record, 10:22 a.m. Feb. 9: An earlier version of this post said the mortgage foreclosure settlement totaled $26 billion, based on a figure from the Department of Housing and Urban Development. The department has revised the total to $25 billion.]
Copyright © 2012, Los Angeles Times
February 9, 2012, 7:02 a.m.
Reporting from Washington— Federal and state officials on Thursday announced a landmark $25-billion agreement with the nation’s five largest mortgage servicers to settle investigations involving foreclosure abuses and try to stabilize the housing market.The deal would give $17 billion in relief to current homeowners, mostly by reducing the amount of principal they owe on their mortgages.An additional $5 billion would be paid in cash to California and more than 40 other states as restitution for foreclosure paperwork problems and other improprieties by the servicers in the foreclosure process. Officials said hundreds of thousands of homeowners would probably get $1,700 to $2,000 each under that part of the deal. About $1.5 billion of the $5 billion would be distributed directly to people whose homes were foreclosed on from 2008 through 2011.In addition, the five servicers -- Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. -- agreed to spend about $3 billion to refinance about 1 million existing mortgages, most of those likely to be for homeowners whose properties are worth less than they owe on their loans.The $3 billion is the amount the servicers would lose on the refinancings, not the total amount of principal to be written down, which officials expect will be much larger.And as part of the deal, $1 billion will come from one of the servicers to settle other outstanding claims.Federal and state officials will announce the settlement this morning. Iowa Atty. Gen. Tom Miller, who led the more-than-year-long negotiations will join U.S. Atty. General Eric Holder, Housing and Urban Development Secretary Shaun Donovan and other officials at a Washington news conference.California Atty. Gen. Kamala D. Harris, who was one of the last state holdouts, will announce the state’s participation during a Los Angeles news conference Thursday morning."California families will finally see substantial relief after experiencing so much pain from the mortgage crisis," Harris said in a statement Thursday morning. "Hundreds of thousands of homeowners will directly benefit from this California commitment."Federal and state officials will try to get another nine large mortgage servicers to sign on to the settlement, which could increase the deal to $30 billion.The servicers will get various credits for actions they take as part of the settlement, which could increase the total amount of assistance to homeowners.The complex series of credits are designed to encourage the servicers to make payments over the next year to speed assistance to struggling homeowners and quickly aid the housing market. Under the deal with the five largest servicers, the credits could result in a total of $40 billion in relief to homeowners. If the other nine servicers sign on to the deal, the total relief could reach $45 billion.Harris said Californians could receive up to $18 billion in assistance from the settlement.[For the record, 10:22 a.m. Feb. 9: An earlier version of this post said the mortgage foreclosure settlement totaled $26 billion, based on a figure from the Department of Housing and Urban Development. The department has revised the total to $25 billion.]
Copyright © 2012, Los Angeles Times
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