Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.Well, yes, of course they are. But they also get better financial advice, free of all the moralizing BS that gets shoved down the throats of everybody who doesn't have accountants and financial advisers to tell them what's actually in their best interests.
More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.
Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.
“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.
The problem here isn't that the wealthy are defaulting, it's that other people aren't. Logically, everybody should have a similar likelihood of walking away from an underwater home. In fact, according to economic doctrine, the poor would be more likely, since they've got less potential cash to lose if their credit goes south and have homes that are worth less. Yet they're essentially indoctrinated to believe otherwise:
The rapper Chamillionaire[...] recently walked away from a $2 million house he bought in Houston in 2006.Was there ever any doubt?
“I just decided to let it go, give it back to the bank,” he told the celebrity gossip TV show “TMZ.” “I just didn’t feel like it was a good investment.”
The rich and successful often come naturally to this sort of attitude, said Brent T. White, a law professor at the University of Arizona who has studied strategic defaults.
“They may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,” Mr. White said.
So, once again, whenever somebody with a crapton of money starts lecturing you on TV about the morality of debt repayment, make sure take it with a gigantic hunk of salt. He probably already has his keys in the mail.